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Interim Report Q2 2020

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30	2020				2019				2020				2019
TOTAL (MILLIONS)
Revenues	$	12,829			$	16,924			$	29,415			$	32,132
Net (loss) income	(1,493		)		704				(1,650		)		1,960
Funds from operations1	1,161				1,108				2,045				2,159
PER SHARE2
Net (loss) income	$	(0.43	)		$	0.24			$	(0.63	)		$	0.63
Funds from operations1	0.73				0.73				1.28				1.42
Dividends3
Cash	0.12				0.11				0.24				0.21
AS AT JUN. 30, 2020 AND DEC. 31, 2019									2020				2019
TOTAL (MILLIONS, EXCEPT PER SHARE AMOUNTS)
Assets under management1,4									$	545,250			$	544,896
Consolidated results
Balance sheet assets									316,435				323,969
Equity									111,066				116,846
Common equity									27,925				30,868
Diluted number of common shares outstanding2									1,572				1,579
Market trading price – NYSE2									$	32.90			$	38.53

1.	See definition in the MD&A Glossary of Terms beginning on page 57.

2.	Adjusted to reflect the three-for-two stock split effective April 1, 2020.

3.	See Corporate Dividends on page 27.

4.	Including private fund capital raised up to August 13, 2020.

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•	Investment focus – Real estate, infrastructure, renewable power, private equity and credit

•	Diverse product offering – Core, value-add, opportunistic and credit strategies in both closed-end and perpetual vehicles

•	Focused investment strategies – We invest where we have a competitive advantage, such as our strong capabilities as an owner-operator, our large scale capital and our global reach

•	Disciplined financing approach – Debt is carefully employed to enhance returns while preserving capital throughout business cycles

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AS AT AND FOR THE TWELVE MONTHS ENDED JUNE 30 (MILLIONS, EXCEPT PER SHARE AMOUNTS)	2016			2017			2018			2019			2020			CAGR
Cash available for reinvestment or distribution    to BAM shareholders per share (CAFDR)	$	1.11		$	1.30		$	1.57		$	1.76		$	1.69		11%
Total assets under management1	$	243,479		$	257,538		$	287,025		$	388,327		$	545,250		22%
Fee-related earnings (before performance fees)	639			707			783			954			1,345			20%
Gross annual run rate of fees plus target carry	1,950			2,150			2,590			3,435			5,637			30%

1.	Including private fund capital raised up to August 13, 2020.

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Q2 2020 INTERIM REPORT 9

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Management’s Discussion and Analysis

ORGANIZATION OF THE MANAGEMENT’S DISCUSSION AND ANALYSIS (“MD&A”)

PART 1 – OUR BUSINESS AND STRATEGY		Renewable Power	38
Overview	13	Infrastructure	40
PART 2 – REVIEW OF CONSOLIDATED		Private Equity	42
FINANCIAL RESULTS		Residential Development	44
Overview	15	Corporate Activities	45
Income Statement Analysis	16	PART 4 – CAPITALIZATION AND LIQUIDITY
Balance Sheet Analysis	22	Capitalization	46
Foreign Currency Translation	25	Liquidity	49
Corporate Dividends	27	Review of Consolidated Statement of Cash Flows	53
Summary of Quarterly Results	28	PART 5 – ACCOUNTING POLICIES AND INTERNAL
PART 3 – OPERATING SEGMENT RESULTS		CONTROLS
Basis of Presentation	30	Accounting Policies, Estimates and Judgments	54
Summary of Results by Operating Segment	31	Management Representations and Internal Controls	56
Asset Management	32	GLOSSARY OF TERMS	57
Real Estate	36

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ü	Investment focus

ü	Diverse products offering

ü	Focused investment strategies

ü	Disciplined financing approach

1.	Large-scale capital

2.	Operating expertise

3.	Global presence

1.	See definition in Glossary of Terms beginning on page 57.

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1.	Diversified and long-term base management fees1 on capital that is typically committed for 10 years with two one-year extension options.

2.	Carried interest1, which enables us to receive a portion of overall fund profits provided that investors receive a minimum prescribed preferred return. Carried interest is recognized once it is no longer subject to clawback.

1.	Long-term perpetual base management fees, which are based on total capitalization for our listed affiliates and net asset value for our perpetual private funds.

2.	Stable incentive distribution1 fees which are linked to cash distributions from listed affiliates (BPY, BEP and BIP) that exceed pre-determined thresholds. These cash distributions have a historical track record of growing annually and each of these listed affiliates target annual distribution growth rates within a range of 5-9%.

3.	Performance fees1 based on unit price performance (BBU) and carried interest on our perpetual private funds.

•	Transparent – approximately 79% of our invested capital is in our listed affiliates (BPY, BEP, BIP, BBU) and other smaller publicly traded investments. The remaining is primarily held in a residential homebuilding business, and a few other directly held investments.

•	Diversified, long-term, stable cash flows – received from our underlying public investments. These cash flows are underpinned by investments in real assets which should provide inflation protection and less volatility compared to traditional equities, and higher yields compared to fixed income.

•	Strong alignment of interests – the Corporation is the largest investor into each of our listed affiliates, and in turn, the listed affiliates are typically the largest investor in each of our private funds.

1.	See definition in Glossary of Terms beginning on page 57.

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•	a decrease of equity accounted income of $1.6 billion, primarily due to valuation losses across our equity accounted investment properties which were partially offset by income from newly acquired assets since the prior year quarter;

•	a decrease to other income and gains, due to gains on two asset sales that we recorded through net income in the prior year quarter;

•	higher depreciation expense primarily as a result of recent acquisitions;

•	same-store1 decreases in income at some of our operating businesses, particularly within our Real Estate and Private Equity segments due to the economic shutdown; and

•	valuation losses at our retail and office properties; partially offset by

•	lower interest expense on our borrowings due to a decrease in interest rates partially offset by debts issued for recent acquisitions;

•	an income tax expense of $5 million compared to $239 million in the prior year quarter due to lower taxable income earned in the quarter;

•	one-time transaction gains from a debt restructuring in the Private Equity segment; and

•	contributions from acquisitions over the last twelve months.

1.	See definition in Glossary of Terms beginning on page 57.

Q2 2020 INTERIM REPORT 15

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INCOME STATEMENT ANALYSIS

The following table summarizes the financial results of the company for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended												Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS, EXCEPT PER SHARE AMOUNTS)	2020				2019				Change				2020				2019				Change
Revenues	$	12,829			$	16,924			$	(4,095	)		$	29,415			$	32,132			$	(2,717	)
Direct costs	(9,446		)		(13,385		)		3,939				(22,155		)		(24,970		)		2,815
	3,383				3,539				(156		)		7,260				7,162				98
Other income and gains	29				889				(860		)		270				921				(651		)
Equity accounted income	(631		)		1,003				(1,634		)		(843		)		1,347				(2,190		)
Expenses
Interest	(1,715		)		(1,833		)		118				(3,567		)		(3,449		)		(118		)
Corporate costs	(25		)		(23		)		(2		)		(49		)		(49		)		—
Fair value changes	(1,153		)		(1,398		)		245				(1,567		)		(1,229		)		(338		)
Depreciation and amortization	(1,376		)		(1,234		)		(142		)		(2,785		)		(2,268		)		(517		)
Income tax expense	(5		)		(239		)		234				(369		)		(475		)		106
Net (loss) income	(1,493		)		704				(2,197		)		(1,650		)		1,960				(3,610		)
Non-controlling interests	837				(305		)		1,142				701				(946		)		1,647
Net (loss) income attributable to shareholders	$	(656	)		$	399			$	(1,055	)		$	(949	)		$	1,014			$	(1,963	)
Net (loss) income per share1	$	(0.43	)		$	0.24			$	(0.67	)		$	(0.63	)		$	0.63			$	(1.26	)

1.	Adjusted to reflect the three-for-two split effective April 1, 2020.

•	lower volumes from the impact of the global economic shutdown, particularly at Greenergy Fuels Holding Limited (“Greenergy”)1, a road fuel distribution business;

•	lower revenues at our hospitality assets in our Real Estate segment due to decreased demand as a result of the shutdown; and

•	negative impact of foreign currency due to the strengthening of the U.S. dollar; partially offset by

•	$1.1 billion of additional revenues from acquisitions during the last twelve months, net of the absence of revenues from businesses sold during the same period.

•	cost saving initiatives across a number of our businesses; and

•	the aforementioned government mandated global economic shutdown on our businesses; partially offset by

•	higher operating costs related to recent acquisitions, net of dispositions and additional costs associated with organic growth initiatives.

1.	See definition in Glossary of Terms beginning on page 57.

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•	valuation losses at our equity accounted core retail properties as we adjusted certain rental assumptions in light of the economic shutdown; and

•	higher amortization and depreciation in our Infrastructure and Private Equity segments as a result of acquisitions in the last twelve months; partially offset by

•	contributions from Oaktree.

•	valuation losses in our core retail, core office and hospitality portfolios in our Real Estate segment resulting from revised near-term valuation assumptions, as well as provisions within our private equity operations due to the global economic shutdown;

•	other fair value losses comprised of various charges within our infrastructure, renewable power, real estate, and private equity operations; and

•	unrealized losses on financial contracts, primarily attributable to mark-to-market fair value changes on our general market and currency hedges, as well as interest rate and cross-currency swaps; partially offset by

•	a transaction-related gain from a debt restructuring at Cardone Industries, Inc. (“Cardone”)1, an automotive aftermarket replacement part manufacturer within our Private Equity segment.

1.	See definition in Glossary of Terms beginning on page 57.

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1.	See definition in Glossary of Terms beginning on page 57.

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	Three Months Ended												Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				Change				2020				2019				Change
Investment properties	$	(797	)		$	(624	)		$	(173	)		$	(679	)		$	(99	)		$	(580	)
Transaction related gains (losses), net of expenses	224				(174		)		398				—				(246		)		246
Financial contracts	(64		)		(180		)		116				94				(225		)		319
Impairment and provisions	(325		)		(333		)		8				(550		)		(364		)		(186		)
Other fair value changes	(191		)		(87		)		(104		)		(432		)		(295		)		(137		)
Total fair value changes	$	(1,153	)		$	(1,398	)		$	245			$	(1,567	)		$	(1,229	)		$	(338	)

•	near-term decrease to rental growth assumptions and a reduction in speculative leasing and longer downtime between leases; and

•	delayed capital expenditures and tenant-specific credit loss assumptions; partially offset by

•	a gain attributed to a decrease in capitalization rates in the U.K. market to align with recent market comparables.

1.	See definition in Glossary of Terms beginning on page 57.

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•	updated assumptions on our opportunistic retail assets and office assets to reflect the lower near-term cash flow assumptions as a result of the economic shutdown; partially offset by

•	a valuation gain at certain assets within our Fairfield multifamily business.

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	Three Months Ended									Six Months Ended
FOR THE PERIODS ENDED JUN. 30	2020			2019			Change			2020			2019			Change
Statutory income tax rate	26	%		26	%		—	%		26	%		26	%		—	%
Increase (reduction) in rate resulting from:
Portion of gains subject to different tax rates	—			(8	)		8			(5	)		(6	)		1
Change in tax rates and new legislation	—			(3	)		3			(13	)		(1	)		(12	)
Taxable income attributed to non-controlling interests	(3	)		(12	)		9			4			(5	)		9
International operations subject to different tax rates	(25	)		2			(27	)		(41	)		—			(41	)
Recognition of deferred tax assets	8			4			4			10			(1	)		11
Non-recognition of the benefit of current year’s tax losses	(3	)		10			(13	)		(6	)		5			(11	)
Other	(3	)		6			(9	)		(4	)		2			(6	)
Effective income tax rate	—	%		25	%		(25	)%		(29	)%		20	%		(49	)%

Q2 2020 INTERIM REPORT 21

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BALANCE SHEET ANALYSIS

The following table summarizes the statement of financial position of the company as at June 30, 2020 and December 31, 2019:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	2020				2019				Change
Assets
Investment properties	$	96,887			$	96,686			$	201
Property, plant and equipment	86,067				89,264				(3,197		)
Equity accounted investments	39,213				40,698				(1,485		)
Cash and cash equivalents	9,523				6,778				2,745
Accounts receivable and other	17,140				18,469				(1,329		)
Intangible assets	25,117				27,710				(2,593		)
Goodwill	13,816				14,550				(734		)
Other assets	28,672				29,814				(1,142		)
Total assets	$	316,435			$	323,969			$	(7,534	)
Liabilities
Corporate borrowings	$	8,051			$	7,083			$	968
Non-recourse borrowings of managed entities	136,362				136,292				70
Other non-current financial liabilities	24,528				23,997				531
Other liabilities	36,428				39,751				(3,323		)
Equity
Preferred equity	4,145				4,145				—
Non-controlling interests	78,996				81,833				(2,837		)
Common equity	27,925				30,868				(2,943		)
Total equity	111,066				116,846				(5,780		)
	$	316,435			$	323,969			$	(7,534	)

•	additions of $2.9 billion, mainly through enhancement or expansion of properties through capital expenditures and the purchase of investment properties; partially offset by

•	the negative impact of foreign currency translation of $1.5 billion;

•	asset sales and reclassifications to assets held for sale of $535 million, including multiple investment properties held within our flagship funds and a North American office property; and

•	net valuation losses of $679 million, driven by revaluations of our retail and office portfolios.

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•	the negative impact of foreign currency translation of $3.8 billion across all our businesses; and

•	depreciation and valuation changes of $2.7 billion for the six months; partially offset by

•	net additions and acquisitions of $3.2 billion primarily related to capital expenditures across our operating segments and the acquisition of European solar assets within our Renewable Power segment.

•	the negative impact of $1.7 billion in foreign currency translation due to the strength of the U.S. dollar relative to all of our major foreign currencies;

•	our proportionate share of $1.2 billion of comprehensive loss, primarily as a result of valuations on our real estate investments; and

•	distributions and return of capital received of $525 million; partially offset by

•	net additions of $1.9 billion, particularly our $1.3 billion acquisition of BrandSafway in the prior quarter in our Private Equity segment.

•	a decrease in assets held for sale of $3.0 billion, primarily due to the sale of G&W’s Australian assets and Empresa de Energia de Boyaca S.A. (“EBSA”)1, our Colombian regulated distribution operation, within our Infrastructure segment in the prior quarter; and

•	the sale of investment properties and reclassification of an investment property back into equity accounted investments within our Real Estate segment; partially offset by

•	a $1.9 billion increase in other financial assets primarily due to toehold and credit-related investments in our Real Estate and Infrastructure segments.

•	an increase in subsidiary borrowings in our Private Equity, Infrastructure, Real Estate, and Residential segments; and

•	net draws on the BSREP III subscription facility to fund new acquisitions.

1.	See definition in Glossary of Terms beginning on page 57.

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AS AT AND FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)
Common equity, beginning of period	$	30,868
Changes in period
Net loss attributable to shareholders	(949		)
Common dividends	(363		)
Preferred dividends	(71		)
Other comprehensive loss	(1,484		)
Share repurchases, net of issuances	(190		)
Ownership changes and other	114
	(2,943		)
Common equity, end of period	$	27,925

•

other comprehensive loss of $1.5 billion due to our foreign investments being impacted by foreign currency translation, as most currencies that we operate in depreciated against the U.S. dollar since the fourth quarter of last year, in particular the Brazilian real and the Colombian peso. These losses were partially offset by our hedging activity. However, we typically do not hedge our exposure to the Brazilian real and the Colombian peso. As a result, foreign currency loss, net of hedges, resulted in a $1.3 billion loss within our other comprehensive income. The remaining $213 million of losses primarily relates to mark-to-market movement on cash flow hedges held in our Real Estate, Infrastructure and Private Equity segments;

•	net loss attributable to shareholders of $949 million;

•	distributions of $434 million to shareholders as common and preferred share dividends; and

•	share repurchases, net of issuances and vesting, of $190 million, primarily related to the repurchase of 5.5 million Class A Limited Voting Shares (“Class A shares”) for the first six months of the year; partially offset by

•	ownership changes and other of $114 million, primarily relate to dilution gains from partial sales of businesses, in which we continue to consolidate in our financial results. These gains were partially offset by an accretion loss on the privatization of Altera Infrastructure L.P. (“Altera”)1, a global service provider to the offshore oil production industry.

1.	See definition in Glossary of Terms beginning on page 57.

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AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	2020				2019
Brookfield Property Partners L.P.	$	27,156			$	29,165
Brookfield Renewable Partners L.P.	12,307				13,321
Brookfield Infrastructure Partners L.P.	16,948				20,036
Brookfield Business Partners L.P.	7,866				8,664
Other participating interests	14,719				10,647
	$	78,996			$	81,833

•	comprehensive loss attributable to non-controlling interests which totaled $5.0 billion; this is inclusive of foreign currency translation losses as average foreign currency rates in the jurisdictions where we hold the majority of our non-U.S. dollar investments depreciated against the U.S. dollar, in particular the Brazilian real and Colombian peso;

•	$3.5 billion of distributions to non-controlling interests; and

•	ownership changes decrease attributable to non-controlling interests of $1.2 billion; partially offset by

•	net equity issuances to non-controlling interests totaling $6.9 billion.

1.	Using Brazilian real and Colombian peso as the price currency.

Q2 2020 INTERIM REPORT 25

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The following table disaggregates the impact of foreign currency translation on our equity by the most significant non-U.S. currencies:

FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	Three Months Ended								Six Months Ended
	2020				2019				2020				2019
Australian dollar	$	785			$	(61	)		$	(126	)		$	(35	)
Brazilian real	(657		)		207				(3,770		)		141
British pound	(6		)		(241		)		(731		)		(46		)
Canadian dollar	381				149				(561		)		295
Colombian peso	351				(83		)		(532		)		54
Other	163				149				(486		)		167
Total cumulative translation adjustments	1,017				120				(6,206		)		576
Currency hedges1	(585		)		(81		)		1,406				(262		)
Total cumulative translation adjustments net of currency hedges	$	432			$	39			$	(4,800	)		$	314
Attributable to:
Shareholders	$	48			$	(54	)		$	(1,271	)		$	13
Non-controlling interests	384				93				(3,529		)		301
	$	432			$	39			$	(4,800	)		$	314

1.	Includes deferred income tax recovery of $9 million for the three months ended June 30, 2020 (2019 – expense of $6 million) and expense of $57 million for six months ended June 30, 2020 (2019 – recovery of $3 million).

26 BROOKFIELD ASSET MANAGEMENT

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CORPORATE DIVIDENDS

The dividends paid by Brookfield on outstanding securities during the first six months of 2020, 2019 and 2018, are summarized in the following table. Dividends to the Class A and B Limited Voting Shares have been adjusted to reflect a three-for-two stock split on April 1, 2020.

	Distribution per Security
	2020				2019				2018
Class A and B1 Limited Voting Shares (“Class A and B shares”)2	$	0.24			$	0.21			$	0.20
Class A Preferred Shares
Series 2	0.21				0.26				0.23
Series 4	0.21				0.26				0.23
Series 8	0.31				0.37				0.33
Series 9	0.25				0.26				0.27
Series 13	0.21				0.26				0.23
Series 15	0.18				0.25				0.19
Series 17	0.44				0.44				0.46
Series 18	0.44				0.44				0.46
Series 24	0.28				0.28				0.29
Series 253	0.36				0.37				0.32
Series 26	0.32				0.32				0.34
Series 28	0.25				0.26				0.27
Series 30	0.43				0.44				0.46
Series 324	0.46				0.47				0.44
Series 345	0.41				0.40				0.41
Series 36	0.44				0.45				0.47
Series 37	0.45				0.46				0.48
Series 386	0.37				0.41				0.43
Series 407	0.37				0.42				0.44
Series 42	0.41				0.42				0.44
Series 44	0.46				0.47				0.49
Series 46	0.44				0.45				0.47
Series 48	0.44				0.45				0.46

1.	Class B Limited Voting Shares (“Class B shares”).

2.	Adjusted to reflect three-for-two stock split effective April 1, 2020.

3.	Dividend rate reset commenced the last day of each quarter.

4.	Dividend rate reset commenced September 30, 2018.

5.	Dividend rate reset commenced March 31, 2019.

6.	Dividend rate reset commenced March 31, 2020.

7.	Dividend rate reset commenced September 30, 2019.

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	2020								2019																2018
FOR THE PERIODS ENDED (MILLIONS, EXCEPT PER SHARE AMOUNTS)	Q2				Q1				Q4				Q3				Q2				Q1				Q4				Q3
Revenues	$	12,829			$	16,586			$	17,819			$	17,875			$	16,924			$	15,208			$	16,006			$	14,858
Net (loss) income	(1,493		)		(157		)		1,638				1,756				704				1,256				3,028				941
Net (loss) income to shareholders	(656		)		(293		)		846				947				399				615				1,884				163
Per share1
– diluted	$	(0.43	)		$	(0.20	)		$	0.50			$	0.61			$	0.24			$	0.39			$	1.25			$	0.07
– basic	(0.43		)		(0.20		)		0.51				0.62				0.25				0.39				1.27				0.07

1.	Adjusted to reflect the three-for-two split effective April 1, 2020.

	2020								2019																2018
FOR THE PERIODS ENDED (MILLIONS)	Q2				Q1				Q4				Q3				Q2				Q1				Q4				Q3
Fair value changes	$	(1,153	)		$	(414	)		$	4			$	394			$	(1,398	)		$	169			$	257			$	132
Income taxes	(5		)		(364		)		(200		)		180				(239		)		(236		)		884				(144		)
Net impact	$	(1,158	)		$	(778	)		$	(196	)		$	574			$	(1,637	)		$	(67	)		$	1,141			$	(12	)

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•	In the second quarter of 2020 our revenues decreased in comparison to the prior quarter, due to the impact of the economic shut down for a large part of the quarter. The higher net loss in the quarter is primarily attributed to a decline in the valuation of our investment property portfolio as cash flow assumptions were adjusted downwards to reflect the impact of the shutdown.

•

The decrease of revenues in the first quarter of 2020 compared to the prior quarter is primarily attributable to lower same-store growth as a result of seasonality and the impact of the economic shutdown. Contributions from acquisitions across our operating segments were partially offset by recent asset sales from our Private Equity and Renewable Power segments. Net income also decreased due to unrealized fair value changes brought about by the current environment.

•	In the fourth quarter of 2019, revenues remained consistent with the prior quarter as we continued to benefit from contributions from recently acquired businesses and strong same-store growth across our operating segments. Net income decreased primarily due to lower fair value gains and the absence of a deferred tax recovery, partially offset by an increase in equity accounted income.

•	In the third quarter of 2019, revenues increased from a full quarter contribution from Clarios and Healthscope, which we acquired in the second quarter of 2019. In addition, net income increased from the prior quarter due to the recognition of deferred income tax recoveries and valuation gains in our core office and LP investment properties.

•

In the second quarter of 2019, revenues increased due to recent acquisitions across a number of segments, in particular industrials and infrastructure services in the Private Equity segment. The increase in revenue was offset by higher direct operating costs, interest expense from incremental borrowing, as well as valuation losses on some of our core retail properties and our service provider to the offshore oil production industry in the Private Equity segment.

•

In the first quarter of 2019, revenues decreased slightly from the prior quarter primarily due to seasonality at our residential homebuilding business and certain of our private equity operations as well as a decrease in sales volumes at our road fuel distribution business. In addition, the absence of a deferred tax recovery in our Corporate segment, as well as higher depreciation and amortization expenses due to the impact of revaluation gains reported in the fourth quarter contributed to the decrease in net income.

•

The increase in revenues in the fourth quarter of 2018 is due primarily to recent acquisitions, including a full quarter of revenues from Brookfield Property REIT Inc. (“BPYU”)1 following the privatization of GGP, as well as the impact of same-store growth across the business. Consolidated net income is higher than prior period due to gains on sales of businesses, fair value valuation gains on investment properties and a deferred tax recovery in our Corporate segment. These increases were partially offset by higher interest expense from new borrowings to fund acquisitions and debts assumed from acquired businesses.

•

Revenues increased in the third quarter of 2018 primarily due to recent acquisitions across all segments, including the privatization of BPYU, and same-store growth, in particular improved pricing at our graphite electrode manufacturing business. Higher interest and depreciation expenses associated with recent acquisitions, and the recognition of a deferred tax expense associated with the BPYU privatization, more than offset the increase in revenues.

1.	See definition in Glossary of Terms beginning on page 57.

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i.

Asset management operations include managing our long-term private funds, perpetual strategies and public securities on behalf of our investors and ourselves, as well as our share of the asset management activities of Oaktree. We generate contractual base management fees for these activities as well as incentive distributions and performance income, including performance fees, transaction fees and carried interest.

ii.	Real estate operations include the ownership, operation and development of core office, core retail, LP investments and other properties.

iii.	Renewable power operations include the ownership, operation and development of hydroelectric, wind, solar, storage and other power generating facilities.

iv.	Infrastructure operations include the ownership, operation and development of utilities, transport, energy, data infrastructure and sustainable resource assets.

v.	Private equity operations include a broad range of industries, and are mostly focused on business services, infrastructure services and industrials.

vi.	Residential development operations consist of homebuilding, condominium development and land development.

vii.

Corporate activities include the investment of cash and financial assets, as well as the management of our corporate leverage, including corporate borrowings and preferred equity, which fund a portion of the capital invested in our other operations. Certain corporate costs such as technology and operations are incurred on behalf of our operating segments and allocated to each operating segment based on an internal pricing framework.

1.	See definition in Glossary of Terms beginning on page 57.

30 BROOKFIELD ASSET MANAGEMENT

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SUMMARY OF RESULTS BY OPERATING SEGMENT

The following table presents revenues, FFO and common equity by segment on a year-over-year basis for comparative purposes:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 AND FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	Revenues1												FFO												Common Equity
	2020				2019				Change				2020				2019				Change				2020				2019				Change
Asset Management	$	743			$	610			$	133			$	355			$	400			$	(45	)		$	4,950			$	4,927			$	23
Real Estate	1,856				2,569				(713		)		89				316				(227		)		17,825				18,781				(956		)
Renewable Power	1,035				1,032				3				566				69				497				4,398				5,320				(922		)
Infrastructure	2,097				1,806				291				84				62				22				2,336				2,792				(456		)
Private Equity	7,391				10,845				(3,454		)		137				326				(189		)		3,494				4,086				(592		)
Residential Development	447				594				(147		)		(11		)		18				(29		)		2,503				2,859				(356		)
Corporate Activities	88				122				(34		)		(59		)		(83		)		24				(7,581		)		(7,897		)		316
Total segments	$	13,657			$	17,578			$	(3,921	)		$	1,161			$	1,108			$	53			$	27,925			$	30,868			$	(2,943	)

1.	Revenues include inter-segment revenues which are adjusted to arrive at external revenues for IFRS purposes. Please refer to Note 3(c) of the consolidated financial statements.

•	lower occupancy at hospitality assets, lower rent collections at our core retail portfolio and the absence of a one-time performance fee earned on development assets in our Real Estate segment;

•	reduced generation in our North American hydro portfolio;

•	lower same-store results at our Private Equity segment’s industrial operations as sales volumes were negatively impacted by the economic shutdown;

•	slowdown in sales at our residential homebuilding business;

•	negative impact of foreign currency exchange; and

•	a decrease in realized carried interest1, net of direct costs, to $31 million for the quarter, compared to $137 million recognized in the prior period; partially offset by

•	increased fee-related earnings1 in our Asset Management segment where we benefited from fees earned on new capital raised across our existing and new fund strategies and contributions from Oaktree;

•	contributions from recent acquisitions, net of the impact of asset sales;

•	improved same store results at Norbord Inc. (“Norbord”)1, one of the world’s largest producers of oriented strand board, as we benefited from a recovery in pricing and reduced losses from our energy contracts; and

•	contributions from our financial assets portfolio as we benefited from a significant recovery in public markets during the current quarter.

1.	See definition in Glossary of Terms beginning on page 57.

Q2 2020 INTERIM REPORT 31

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Fee-Bearing Capital

The following table summarizes fee-bearing capital:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	Long-Term Private Funds				Perpetual Strategies				Oaktree				Public  Securities				Total 2020				Total 2019
Real estate	$	28,795			$	18,147			$	—			$	—			$	46,942			$	56,056
Renewable power	11,695				22,842				—				—				34,537				33,520
Infrastructure	29,466				23,531				—				—				52,997				54,220
Private equity	14,664				4,681				—				—				19,345				20,710
Oaktree	—				—				111,688				—				111,688				110,349
Diversified	—				—				—				11,693				11,693				14,957
June 30, 2020	$	84,620			$	69,201			$	111,688			$	11,693			$	277,202			n/a
December 31, 2019	$	85,825			$	78,681			$	110,349			$	14,957			n/a				$	289,812

AS AT AND FOR THE THREE MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Long-Term Private Funds				Perpetual Strategies				Oaktree				Public  Securities				Total
Balance, March 31, 2020	$	87,383			$	63,048			$	102,642			$	10,787			$	263,860
Inflows	285				549				5,847				968				7,649
Outflows	—				—				(1,214		)		(1,293		)		(2,507		)
Distributions	(2		)		(1,234		)		(201		)		—				(1,437		)
Market valuation	(12		)		6,367				3,843				1,236				11,434
Other	(3,034		)		471				771				(5		)		(1,797		)
Change	(2,763		)		6,153				9,046				906				13,342
Balance, June 30, 2020	$	84,620			$	69,201			$	111,688			$	11,693			$	277,202

•	$3.0 billion of other movement primarily related to uninvested capital in two flagship funds that ended their investment periods during the quarter. However, this capital will become fee-earning again once it is deployed; partially offset by

•	$0.3 billion of inflows, including $0.1 billion of capital invested in our latest infrastructure debt fund, as well as an additional $0.2 billion of co-investment capital within our infrastructure and renewable energy strategies.

•	an increase of $6.4 billion from market valuation as a result of partial recoveries of our listed affiliates’ prices from the end of the previous quarter; and

•	$0.5 billion of inflows relating to capital market issuances at BIP and BEP; partially offset by

•	$1.2 billion of distributions, including quarterly distributions paid to the investors of our listed affiliates, as well as redemptions made by investors in our core and core plus perpetual funds.

•	$5.8 billion of capital raised and/or invested across various Oaktree strategies;

•	$3.8 billion of market valuation recoveries since the prior quarter, reflecting the positive fair value increases in funds whose management fees are based on the net asset values of the funds; and

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•	$0.8 billion of other movements primarily relate to positive fair value changes in the fee-bearing capital managed by an affiliate of Oaktree; partially offset by

•	$1.2 billion of outflows within open-end and evergreen funds.

•	an increase of $1.2 billion from market valuation; and

•	$1.0 billion of fund inflows; partially offset by

•	$1.3 billion of redemptions, primarily within our real estate and natural resources public funds and separately managed accounts.

FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)			Revenues								FFO
	Ref.		2020				2019				2020				2019
Fee-related earnings	i		$	667			$	420			$	324			$	263
Realized carried interest	ii		76				190				31				137
Asset management FFO			$	743			$	610			$	355			$	400
Unrealized carried interest
Generated											$	(172	)		$	20
Foreign exchange											(2		)		8
											(174		)		28
Less: direct costs											13				(8		)
Unrealized carried interest, net	iii										(161		)		20
Less: unrealized carried interest not attributable to BAM											(5		)		—
											$	(166	)		$	20

1.	See definition in Glossary of Terms beginning on page 57.

Q2 2020 INTERIM REPORT 33

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i.    Fee-Related Earnings

FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	2020				2019
Fee revenues
Base management fees	$	591			$	351
Incentive distributions	76				64
Transaction and advisory fees	—				5
	667				420
Less: direct costs	(315		)		(157		)
	352				263
Less: fee-related earnings not attributable to BAM	(28		)		—
Fee-related earnings	$	324			$	263

•	$218 million increase in fees related to Oaktree acquired in September 2019, or $134 million at our share;

•	$18 million increase in long-term private fund fees, primarily due to third-party commitments raised over the last twelve months, including $5 billion for our latest flagship infrastructure and private equity funds; and

•	$15 million increase in perpetual strategies, as a result of increased capitalization from higher unit prices at BEP and BIP, as well as new capital raised and deployed in our perpetual private fund strategies; partially offset by

•	$11 million decrease in our public securities fees due to a decrease in fee-bearing capital mainly due to the impact of market valuations over the last twelve months.

34 BROOKFIELD ASSET MANAGEMENT

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iii.    Unrealized Carried Interest

The amounts of accumulated unrealized carried interest and associated costs are not included in our Consolidated Balance Sheets or Consolidated Statements of Operations as they are still subject to clawback. These amounts are shown in the following table:

	2020												2019
FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	Unrealized  Carried  Interest				Direct  Costs				Net				Unrealized  Carried  Interest				Direct  Costs				Net
Accumulated unrealized, beginning of period	$	3,584			$	(1,288	)		$	2,296			$	2,699			$	(810	)		$	1,889
In-period change
Unrealized in period	(172		)		13				(159		)		20				(6		)		14
Foreign currency revaluation	(2		)		—				(2		)		8				(2		)		6
	(174		)		13				(161		)		28				(8		)		20
Less: realized	(76		)		31				(45		)		(190		)		53				(137		)
	(250		)		44				(206		)		(162		)		45				(117		)
Accumulated unrealized, end of period	3,334				(1,244		)		2,090				2,537				(765		)		1,772
Oaktree carried interest not attributable to BAM shareholders	(402		)		212				(190		)		—				—				—
Accumulated unrealized, end of period, net	$	2,932			$	(1,032	)		$	1,900			$	2,537			$	(765	)		$	1,772

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1.

Brookfield’s equity units in BPY consist of 432.6 million redemption-exchange units, 87.1 million Class A limited partnership units, 4.8 million special limited partnership units, 0.1 million general partnership units, and 3.0 million BPYU Class A shares, together representing an effective economic interest of 56% of BPY. See “Economic ownership interest” in the Glossary of Terms beginning on page 57.

i.	Brookfield Property Partners

FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	2020				2019
Core office	$	126			$	187
Core retail	140				170
LP investments	(8		)		79
Corporate	(80		)		(101		)
Attributable to unitholders	178				335
Non-controlling interests	(77		)		(151		)
Segment reallocation and other1	(14		)		(8		)
Brookfield’s interest	$	87			$	176

1.	Reflects preferred dividend distributions as well as fee-related earnings, net carried interest and associated asset management expenses not included in FFO reclassified to the Asset Management segment.

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•	the absence of a one-time performance fee earned at Five Manhattan West in the prior year quarter;

•	the impact of the recent economic shutdown, which decreased parking income and revenues from certain retail tenants in our office portfolio; and

•	net disposition activity over the last twelve months as well as foreign currency translation; partially offset by

•	lower interest expense.

•	mall closures due to the economic shutdown, which lowered revenue; partially offset by

•	additional tuck-in interests acquired in malls throughout the U.S. over the last twelve months.

ii.	Other Real Estate Investments

iii.	Realized Disposition Gains

•	a directly held residential management services company, contributing a net gain of $101 million; and

•	a number of multifamily and other opportunistic properties.

Q2 2020 INTERIM REPORT 37

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Summary of Operating Results

The following table disaggregates segment revenues and our share of FFO and common equity of entities in our Renewable Power segment, and summarizes realized disposition gains. We have provided additional detail, where referenced, to explain significant movements from the prior period.

AS AT JUN. 30, 2020 AND DEC. 31, 2019 AND FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)			Revenues								FFO								Common Equity
	Ref.		2020				2019				2020				2019				2020				2019
Brookfield Renewable Partners1, 2	i		$	1,056			$	1,086			$	118			$	132			$	3,867			$	4,810
Energy contracts	ii		(21		)		(54		)		(35		)		(67		)		531				510
Realized disposition gains	iii		—				—				483				4				—				—
			$	1,035			$	1,032			$	566			$	69			$	4,398			$	5,320

1.	Brookfield’s interest in BEP consists of 129.7 million redemption-exchange units, 45.8 million Class A limited partnership units and 2.7 million general partnership units; together representing an economic interest of 57% of BEP. Segment revenues at BEP include $307 million (2019 – $269 million) revenue from TERP.

2.	On July 30, 2020, we completed the special distribution of Class A exchangeable subordinate voting shares of Brookfield Renewable Corporation (“BEPC”). Each BEP unitholder of record as of July 27, 2020 received one class A exchangeable subordinate voting share of BEPC for every four BEP units held. Dilution impact was immaterial.

Compared to the prior year quarter, revenues and FFO excluding realized disposition gains generated by our renewable power operations increased by $3 million and $18 million, respectively. This was primarily due to a lower deficit from energy contracts as a result of favorable hedges and lower generation sold at a deficit, partially offset by lower generation at BEP as a result of hydrology conditions in New York and Colombia.

i.	Brookfield Renewable Partners

The following table disaggregates BEP’s generation and FFO by business line to facilitate analysis of the quarter-over-quarter variances in FFO:

	Actual Generation (GWh)1				Long-Term Average (GWh)1						FFO
FOR THE THREE MONTHS ENDED JUN. 30 (GIGAWATT HOURS AND MILLIONS)	2020		2019		2020			2019			2020				2019
Hydroelectric	4,932		6,061		5,448			5,450			$	193			$	226
Wind	1,157		1,164		1,399			1,364			48				39
Solar	376		287		462			295			37				27
Storage and other	87		90		—			—			8				7
Corporate	—		—		—			—			(54		)		(69		)
Attributable to unitholders	6,552		7,602		7,309			7,109			232				230
Non-controlling interests and other2											(103		)		(98		)
Segment reallocation3											(11		)		—
Brookfield’s interest											$	118			$	132

1.	Proportionate to BEP; see “Proportionate basis generation” in Glossary of Terms beginning on page 57.

2.	Includes incentive distributions paid to Brookfield of $15 million (2019 – $12 million) as the general partner of BEP.

3.	Segment reallocation refers to disposition gains, net of NCI, included in BEP’s operating FFO that we reclassify to realized disposition gains. This allows us to present FFO attributable to unitholders on the same basis as BEP.

BEP’s FFO for the second quarter of 2020 was $232 million, of which our share was $118 million, compared to $132 million in the prior year quarter. Generation for the quarter totaled 6,552 GWh, 10% below the long-term average (“LTA”)¹. This represents a 14% decrease compared to the prior year quarter.

1.	See definition in Glossary of Terms beginning on page 57.

38 BROOKFIELD ASSET MANAGEMENT

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Hydroelectric

The primary contributors to the $33 million decrease in FFO were:

•	decrease in North American FFO as a result of lower realized pricing and generation; and

•	lower generation in Colombia and the impact of foreign currency translation; partially offset by

•	cost-reduction initiatives, higher contracted pricing as a result of inflation indexation and re-contracting initiatives.

Wind

Wind operations’ FFO increased by $9 million to $48 million due to:

•	cost-reduction initiatives in our North American, European and Brazilian operations; partially offset by

•	lower generation at our North American and European operations; and

•	impact of foreign currency translation.

Solar

FFO from our solar operations was $10 million higher than the prior year quarter as a result of growth in our portfolio and the expansion of our distributed generation business within TerraForm Power, Inc. (“TERP”)¹, partially offset by the sale of our non-core solar assets and lower realized market prices.

Storage and Other

FFO from our storage and other activities were largely consistent with the prior year quarter. Lower realized capacity prices in the United States were partially offset by higher ancillary revenues at our storage facility in the United Kingdom.

Corporate

The corporate FFO deficit decreased by $15 million as a result of an increase in realized investment income, partially offset by an increase in management fees due to the growth of our business.

ii.	Energy Contracts

During the quarter, we purchased 831 GWh (2019 – 1,329 GWh) from BEP at $79 per MWh (2019 – $78 per MWh) and sold the purchased generation at a higher average selling price of $37 per MWh (2019 – $28 per MWh). As a result, we incurred an FFO deficit of $35 million compared to a deficit of $67 million in the prior year quarter.

iii.	Realized Disposition Gains

Disposition gains of $483 million for the quarter relate to the sale of approximately 10 million LP units of BEP for gross proceeds of $479 million as well as $4 million from the sale of certain of our solar assets.

Prior year quarter disposition gains relate to the sale of European non-core wind assets.

Common Equity

Common equity in our Renewable Power segment decreased to $4.4 billion as at June 30, 2020 from $5.3 billion as at December 31, 2019. The contribution from FFO was more than offset by the foreign exchange impact from invested capital denominated in foreign currencies, depreciation and distributions paid to investors. Our renewable PP&E is revalued annually and as such common equity in this segment is typically not affected by revaluation items during the first three quarters of the year. Our critical estimates and assumptions underlying the valuation of PP&E have not changed materially as a result of the global economic shutdown. Refer to Part 5 for discussions.

1.	See definition in Glossary of Terms beginning on page 57.

Q2 2020 INTERIM REPORT 39

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Summary of Operating Results

The following table disaggregates segment revenues and our share of FFO and common equity of entities in our Infrastructure segment, and summarizes realized disposition gains. We have provided additional detail, where referenced, to explain significant movements from the prior period.

AS AT JUN. 30, 2020 AND DEC. 31, 2019 AND FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)			Revenues								FFO								Common Equity
	Ref.		2020				2019				2020				2019				2020				2019
Brookfield Infrastructure Partners1	i		$	2,004			$	1,735			$	81			$	88			$	1,794			$	2,141
Sustainable resources and other	ii		93				71				3				4				542				651
Realized disposition gains	iii		—				—				—				(30		)		—				—
			$	2,097			$	1,806			$	84			$	62			$	2,336			$	2,792

1.	Brookfield’s interest consists of 122.0 million redemption-exchange units, 0.2 million limited partnership units and 1.6 million general partnership units of BIP LP, as well as 13.8 million Class A shares in Brookfield Infrastructure Corporation (“BIPC”), together representing an economic interest of approximately 30% of BIP.

Revenues generated by our Infrastructure segment increased by $291 million compared to the prior year quarter. This was due to the contribution from acquisitions completed in the last twelve months and growth initiatives across our operations. These increases were partially offset by the impact of foreign exchange, dispositions and lower revenue from market-sensitive businesses as a result of government-imposed lock downs.

FFO excluding realized disposition gains decreased by $8 million compared to the prior year quarter. Benefits from the aforementioned activities were offset by the impact of foreign exchange.

i.	Brookfield Infrastructure Partners

The following table disaggregates BIP’s FFO excluding realized gains by business line to facilitate analysis of the quarter-over-quarter variances:

FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	2020				2019
Utilities	$	130			$	143
Transport	108				135
Energy	106				96
Data infrastructure	43				30
Corporate	(54		)		(67		)
Attributable to unitholders	333				337
Non-controlling interests and other1	(249		)		(249		)
Segment reallocation2	(3		)		—
Brookfield’s interest	$	81			$	88

1.	Includes incentive distributions paid to Brookfield of $46 million (2019 – $38 million) as the general partner of BIP.

2.	Segment reallocation refers to certain items, net of NCI, included in BIP’s FFO that we reclassify. This allows us to present FFO attributable to unitholders on the same basis as BIP.

BIP’s FFO for the second quarter of 2020 was $333 million, of which our share was $81 million compared to $88 million in the prior year quarter. Key variances for our businesses are described below.

Utilities

FFO of $130 million was $13 million lower than the prior year quarter. The decrease was primarily due to:

•	delay in the recognition of connections revenue at our U.K. regulated distribution business;

•	loss of earnings associated with the sale of EBSA in January 2020;

•	the impact of a decline in the Brazilian real; partially offset by

40 BROOKFIELD ASSET MANAGEMENT

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•	benefits of inflation-indexation and capital commissioned into the rate base over the last twelve months; and

•	the contribution from our North American regulated gas transmission business acquired in October 2019.

Transport

FFO in our transport segment of $108 million was $27 million lower than the prior year quarter. The decrease is primarily due to:

•	lower volumes at our toll road businesses due to temporary government shutdown;

•	lower volumes at our ports operations due to a decline in global trading activity and the sale of a non-core European bulk port operation; and

•	the negative impact of a decline in the Brazilian real compared to the prior period; partially offset by

•	contribution from G&W acquired in December 2019 and higher volumes on our Australian and Brazilian rail networks.

Energy

FFO from our energy operations of $106 million was $10 million higher than the prior year quarter due to:

•	organic growth at our North American natural gas pipeline business due to strong demand for transport services;

•	additional customers secured at our North American residential infrastructure business; and

•	the acquisition of the federally regulated portion of our western Canadian midstream business; partially offset by

•	the absence of income resulting from the sale of our Australian district energy operation in the fourth quarter of 2019.

Data Infrastructure

FFO from our data infrastructure operations of $43 million was $13 million higher than the prior year quarter due to:

•	the acquisitions of a data distribution business in New Zealand and a telecoms tower business in the U.K.; and

•	inflation-indexation and new points-of-presence added at our French telecom business.

Corporate

The Corporate FFO deficit of $54 million decreased by $13 million from the prior year quarter as a result of gains in our securities portfolio following a sharp recovery in public equity prices during the quarter. This was predominantly offset by higher base management fee expense from an increase in market capitalization.

ii.	Sustainable Resources and Other

FFO at our agriculture operations decreased compared to the prior year quarter due to the impact of the depreciating Brazilian real and the sale of Acadian Timber Corp. (“Acadian”)¹, our Canadian timber business.

iii.	Realized Disposition Gains

In the current quarter we had no dispositions whereas in the prior year quarter we recognized disposition losses of $30 million relating to the sale of a non-core European bulk port operation.

Common Equity

Common equity in our Infrastructure segment was $2.3 billion as at June 30, 2020 (December 31, 2019 – $2.8 billion). The contributions from earnings were more than offset by the depreciation of foreign currencies against the U.S. dollar and distributions to unitholders. This equity is primarily our investment in PP&E and certain concessions, which are recorded as intangible assets. Our PP&E is recorded at fair value and revalued annually while concessions are considered intangible assets under IFRS and therefore recorded at historical cost and amortized over the life of the concession. Accordingly, a smaller portion of our equity is impacted by revaluation compared to our Real Estate and Renewable Power segments, where a larger portion of the balance sheet is subject to revaluations. Our critical estimates and assumptions underlying the valuation of PP&E, as well as intangibles assets have not changed materially as a result of the global economic shutdown. Refer to Part 5 for discussions.

1.	See definition in Glossary of Terms beginning on page 57.

Q2 2020 INTERIM REPORT 41

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Summary of Operating Results

The following table disaggregates segment revenues and our share of FFO and common equity of entities in our Private Equity segment, and summarizes realized disposition gains. We have provided additional detail, where referenced, to explain significant movements from the prior period.

AS AT JUN. 30, 2020 AND DEC. 31, 2019 AND FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)			Revenues								FFO								Common Equity
	Ref.		2020				2019				2020				2019				2020				2019
Brookfield Business Partners1	i		$	7,382			$	10,769			$	109			$	94			$	1,893			$	2,389
Other investments	ii		9				76				28				23				1,601				1,697
Realized disposition gains	iii		—				—				—				209				—				—
			$	7,391			$	10,845			$	137			$	326			$	3,494			$	4,086

1.	Brookfield’s interest in BBU consists of 69.7 million redemption-exchange units, 24.8 million limited partnership units and four general partnership units together representing an economic interest of 63% of BBU.

Revenues generated from our private equity operations decreased by $3.5 billion primarily due to the impact of the global economic shutdown, resulting in lower volumes at Greenergy and lost productivity at Multiplex, our construction services business. Lower revenues from the sale of our global provider of facilities management services and our executive relocation services business in the prior year quarter were partially offset by a full quarter of contributions from Clarios, Healthscope, and Genworth.

FFO, prior to disposition gains, increased by $20 million to $137 million primarily due to the contributions from the acquisitions of Genworth, Healthscope, BrandSafway, Clarios, and the increase in our ownership interest of Altera. The aforementioned factors were partially offset by pandemic related factors, including the global economic shutdown, which included reduced volumes and sales prices at GrafTech International Ltd. (“GrafTech”)¹, our manufacturer of a broad range of high-quality graphite electrodes, and generated losses at Cardone. FFO was also reduced by the absence of contribution from NAP, which we sold during the fourth quarter of 2019.

i.	Brookfield Business Partners

The following table disaggregates BBU’s FFO by business line to facilitate analysis of the quarter-over-quarter variances in FFO:

FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	2020				2019
Business services	$	39			$	342
Infrastructure services	87				54
Industrials	62				46
Corporate	(15		)		(7		)
Attributable to unitholders	173				435
Non-controlling interests	(64		)		(139		)
Segment reallocation and other1	—				(202		)
Brookfield’s interest	$	109			$	94

1.	Segment reallocation and other refers to disposition gains, net of NCI, included in BBU’s FFO that we reclassify to realized disposition gains. This allows us to present FFO attributable to unitholders on the same basis as BBU.

BBU generated $173 million of FFO compared to $435 million in the prior period of which our share of BBU’s FFO was $109 million, compared to $94 million in the prior year quarter.

1.	See definition in Glossary of Terms beginning on page 57.

42 BROOKFIELD ASSET MANAGEMENT

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Business Services

Business services’ FFO decreased by $303 million to $39 million primarily due to realized disposition gains on the sale of our global provider of facilities management services and our executive relocation services business in the prior year quarter. Excluding gains that we reclassify to realized disposition gains, FFO decreased by $6 million primarily due to:

•	reduced project productivity at Multiplex; partially offset by

•	contributions from the acquisitions of Genworth and Healthscope.

Infrastructure Services

Within our infrastructure services operations, we generated $87 million of FFO, compared to $54 million in the prior year quarter, primarily due to:

•	contributions from Altera due to an increase in our proportionate ownership from 25% to 43%;

•	contributions from the acquisition of BrandSafway, an equity accounted investment, which was acquired in the prior quarter; and

•	ongoing cost savings and efficiency initiatives at Westinghouse Electric Company (“Westinghouse”)1, a service provider to the power generation industry.

Industrials

FFO from our industrials portfolio increased by $16 million to $62 million due to:

•	a full quarter contribution from Clarios; and

•	current tax recovery recognized on the extinguishment of debt at Cardone; partially offset by

•	reduced volume and sales prices at GrafTech.

Corporate

The Corporate FFO deficit increased by $8 million due to higher management fees paid and lower interest income.

Performance Fees

BBU pays performance fees quarterly based on the volume-weighted average increase in BBU’s unit price above the previous threshold on which fees were paid. There were no performance fees paid in the current or prior quarter.

ii.	Other Investments

FFO from other investments increased by $5 million to $28 million primarily as a result of an increase in average product pricing despite lower volumes during the quarter.

iii.	Realized Disposition Gains

BBU did not have realized disposition gains in the current quarter, compared to the aforementioned gain of $209 million in the prior year quarter.

Common Equity

Common equity in our Private Equity segment was $3.5 billion as at June 30, 2020 (December 31, 2019 – $4.1 billion). The decrease is primarily attributable to foreign currency translation, distributions to unit holders and depreciation expense. These decreases were partially offset by contributions from FFO. The assets held in these operations are recorded at amortized cost, with depreciation recorded on a quarterly basis, with the exception of investments in financial assets, which are carried at fair value based predominantly on quoted prices.

1.	See definition in Glossary of Terms beginning on page 57.

Q2 2020 INTERIM REPORT 43

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Summary of Operating Results

The following table disaggregates segment revenues, FFO and common equity into the amounts attributable to the two principal operating regions of our wholly owned residential development businesses:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 AND FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	Revenues								FFO								Common Equity
	2020				2019				2020				2019				2020				2019
North America	$	379			$	476			$	(7	)		$	22			$	1,947			$	2,083
Brazil and other	68				118				(4		)		(4		)		556				776
	$	447			$	594			$	(11	)		$	18			$	2,503			$	2,859

North America

FFO deficit from our North American operations was $7 million, a decrease from $22 million of FFO generated in the prior year quarter. The decrease is largely driven by fewer numbers of home and land closings, along with slight decrease in gross margin in the current quarter, which was partially offset by a decrease to interest expense paid.

As at June 30, 2020, we had 89 active housing communities (June 30, 2019 – 90) and 26 active land communities (June 30, 2019 – 30).

Brazil and Other

FFO from our Brazilian operations stayed consistent with the prior year comparison with a deficit of $4 million in the current quarter. We delivered two projects in the current quarter, compared to three in the prior year, resulting in lower margin which was offset by lower selling expenses.

We began 2020 with 20 projects under construction and as of June 30, 2020, we have 23 projects under construction, of which five relate to projects launched since late 2016 with relatively higher margins than our legacy projects.

Common Equity

Common equity was $2.5 billion as at June 30, 2020 (December 31, 2019 – $2.9 billion) and consists largely of residential development inventory which is carried at historical cost, or the lower of cost and market, notwithstanding the length of time that we may have held these assets and created value through the development process. The decrease in common equity is primarily attributable to weakening of the Brazilian real in comparison to the U.S. dollar.

44 BROOKFIELD ASSET MANAGEMENT

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Summary of Operating Results

The following table disaggregates segment revenues, FFO and common equity into the principal assets and liabilities within our corporate operations and associated FFO to facilitate analysis:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 AND FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	Revenues								FFO								Common Equity
	2020				2019				2020				2019				2020				2019
Corporate cash and financial assets, net	$	81			$	32			$	79			$	35			$	3,229			$	2,181
Corporate borrowings	—				—				(95		)		(86		)		(8,051		)		(7,083		)
Preferred equity1	—				—				—				—				(4,145		)		(4,145		)
Other corporate investments	7				90				(4		)		4				643				680
Corporate costs and taxes/net working capital	—				—				(39		)		(36		)		743				470
	$	88			$	122			$	(59	)		$	(83	)		$	(7,581	)		$	(7,897	)

1.	FFO excludes preferred share distributions of $36 million (2019 – $38 million).

Our portfolio of corporate cash and financial assets is generally recorded at fair value with changes recognized through net income, unless the underlying financial investments are classified as fair value through other comprehensive income, in which case changes in value are recognized in other comprehensive income. Loans and receivables are typically carried at amortized cost.  As at June 30, 2020, our portfolio of corporate cash and financial assets includes $1.8 billion of cash and cash equivalents (December 31, 2019 – $789 million), which is higher than the year-end of 2019 as we had issuances of $750 million and $600 million of corporate debt in the current and first quarter of 2020, respectively, and received proceeds of $479 million from the sale of BEP units in the current quarter. This was partially offset by the early redemption of $251 million (C$350 million) of corporate debt in the prior quarter, dividends paid to shareholders, funding of capital calls in our BSREP III fund and the repurchase of 5.5 million Class A shares on a post-split basis.

Our corporate cash and financial assets generated FFO of $79 million, which was $44 million higher than the prior year quarter, primarily due to higher mark-to-market gains on our financial assets in the current quarter.

Corporate borrowings are generally issued with fixed interest rates. Some of these borrowings are denominated in Canadian dollars and therefore the carrying value fluctuates with changes in the exchange rate. A number of these borrowings have been designated as hedges of our Canadian dollar net investments within our other segments, resulting in the majority of the currency revaluation being recognized in other comprehensive income. The $95 million FFO expense reported through corporate borrowings reflects the interest expense on those borrowings. The increase from the prior year quarter was primarily as a result of the aforementioned net increase in our borrowings, partially offset by the foreign exchange impact of our Canadian dollar interest expense as a result of a decrease in the average exchange rate in the current quarter.

Preferred equity does not revalue under IFRS and the total outstanding shares remain unchanged from year-end.

We describe cash and financial assets, corporate borrowings and preferred equity in more detail within Part 4 – Capitalization and Liquidity.

Other corporate investments include our insurance and pension businesses, as well as the non-asset management related investment in Oaktree which was acquired in the third quarter of 2019. The decrease in FFO is primarily from higher operating expenses in Oaktree, partially offset by a reduction in provisions at our insurance business.

Net working capital includes accounts receivable, accounts payable, other assets and other liabilities, and was in an asset position of $743 million as at June 30, 2020, an increase from the prior year balance of $470 million. Included within this balance are net deferred income tax assets of $1.9 billion (December 31, 2019 – $2.2 billion). The FFO deficit also includes corporate costs and cash taxes which increased primarily as a result of higher professional fees and compensation expense.

The common equity deficit in our Corporate segment of $7.6 billion as at June 30, 2020 decreased from the balance at year-end (December 31, 2019 – $7.9 billion). The decrease in deficit is primarily related to higher net working capital from a decrease in stock compensation liability and net derivative liability.

Q2 2020 INTERIM REPORT 45

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PART 4 – CAPITALIZATION AND LIQUIDITY

CAPITALIZATION

We review key components of our capitalization in the following sections. In several instances we have disaggregated the balances into the amounts attributable to our operating segments in order to facilitate discussion and analysis.

Corporate Capitalization¹ – reflects the amount of debt held in the Corporate segment and our issued and outstanding common and preferred shares. Corporate debt includes unsecured bonds and, from time to time, draws on revolving credit facilities. At June 30, 2020, our corporate capitalization was $44.7 billion (December 31, 2019 – $47.1 billion) with a debt to capitalization of 18% (December 31, 2019 – 15%).

Consolidated Capitalization¹ – reflects the full capitalization of wholly owned, partially owned, and managed entities that we consolidate in our financial statements. At June 30, 2020, consolidated capitalization increased compared to the prior year largely due to acquisitions, which resulted in additional associated borrowings, working capital balances and non-controlling interests. Much of the borrowings issued within our managed entities are included in our consolidated balance sheet not withstanding that virtually none of this debt has any recourse to the Corporation.

Our Share of Capitalization¹ – reflects our proportionate exposure of debt and equity balances in consolidated entities and our share of the debt and equity in our equity accounted investments.

The following table presents our capitalization on a consolidated, corporate and our share basis:

			Corporate								Consolidated								Our Share
AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	Ref.		2020				2019				2020				2019				2020				2019
Corporate borrowings	i		$	8,051			$	7,083			$	8,051			$	7,083			$	8,051			$	7,083
Non-recourse borrowings
Subsidiary borrowings	i		—				—				9,493				8,423				6,224				5,382
Property-specific borrowings	i		—				—				126,869				127,869				46,777				44,436
			8,051				7,083				144,413				143,375				61,052				56,901
Accounts payable and other			4,066				4,708				42,235				43,077				12,251				13,617
Deferred income tax liabilities			513				279				14,347				14,849				3,987				4,541
Subsidiary equity obligations			—				—				4,201				4,132				1,976				1,896
Liabilities associated with assets classified as held for sale			—				—				173				1,690				28				212
Equity
Non-controlling interests			—				—				78,996				81,833				—				—
Preferred equity	ii		4,145				4,145				4,145				4,145				4,145				4,145
Common equity	iii		27,925				30,868				27,925				30,868				27,925				30,868
			32,070				35,013				111,066				116,846				32,070				35,013
Total capitalization			$	44,700			$	47,083			$	316,435			$	323,969			$	111,364			$	112,180

Debt to capitalization			18	%		15	%		46	%		44	%		55	%		51	%

1.	See definition in Glossary of Terms beginning on page 57.

46 BROOKFIELD ASSET MANAGEMENT

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i.    Borrowings

Corporate Borrowings

	Average Rate						Average Term (Years)				Consolidated
AS AT JUN. 30, 2020 AND DEC. 31, 2019 ($ MILLIONS)	2020			2019			2020		2019		2020				2019
Term debt	4.5	%		4.6	%		11		10		$	8,106			$	7,128
Revolving facilities	—	%		—	%		4		4		—				—
Deferred financing costs	n/a			n/a			n/a		n/a		(55		)		(45		)
Total											$	8,051			$	7,083

As at June 30, 2020, corporate borrowings included term debt of $8.1 billion (December 31, 2019 – $7.1 billion) which had an average term to maturity of 11 years (December 31, 2019 – 10 years). Term debt consists of public and private bonds, all of which are fixed rate and have maturities ranging from March 2023 until 2050. These financings provide an important source of long-term capital and are appropriately matched to our long-term asset profile.

The increase in term debt compared to the prior year is due to the issuance of $600 million of 3.45% notes with a 2050 maturity, the issuance of $750 million of 4.35% notes with a 2030 maturity, partially offset by the early repayment of $251 million (C$350 million) of 5.30% notes due on March 1, 2021, as well as $121 million of foreign currency depreciation.

We had no commercial paper or bank borrowings outstanding at June 30, 2020 (December 31, 2019 – $nil). Our commercial paper program is supplemented by our $2.6 billion revolving term credit facilities with maturities ranging from 2022 to 2024. As at June 30, 2020, $65 million of the facilities were utilized for letters of credit (December 31, 2019 – $66 million).

Subsidiary Borrowings

We endeavor to capitalize our principal subsidiaries to enable continuous access to the debt capital markets, usually on an investment-grade basis, thereby reducing the demand for capital from the Corporation.

	Average Rate						Average Term (Years)						Consolidated
AS AT JUN. 30, 2020 AND DEC. 31, 2019 ($ MILLIONS)	2020			2019			2020			2019			2020				2019
Real estate	3.4	%		3.9	%		3			4			$	2,120			$	2,024
Renewable power	3.9	%		4.0	%		9			9			2,122				2,098
Infrastructure	2.8	%		3.4	%		5			6			3,075				2,470
Private equity	2.7	%		—	%		4			—			253				—
Residential development	5.5	%		6.2	%		6			5			1,923				1,831
Total	3.7	%		4.2	%		6			6			$	9,493			$	8,423

Subsidiary borrowings include listed affiliates’ recourse term debt and credit facility draws. It generally has no recourse to the Corporation but are recourse to its principal subsidiaries (primarily BPY, BEP, BIP and BBU).

Q2 2020 INTERIM REPORT 47

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Property-Specific Borrowings

As part of our financing strategy, the majority of our debt capital is in the form of property-specific borrowings and project financings and is denominated in local currencies that have recourse only to the assets being financed and have no recourse to the Corporation or the listed affiliates.

	Average Rate						Average Term (Years)						Consolidated
AS AT JUN. 30, 2020 AND DEC. 31, 2019 ($ MILLIONS)	2020			2019			2020			2019			2020				2019
Real estate	3.6	%		4.4	%		4			4			$	68,886			$	67,909
Renewable power	4.7	%		5.0	%		9			9			15,912				15,787
Infrastructure	3.9	%		4.7	%		7			7			19,027				20,776
Private equity and other	4.9	%		5.4	%		5			6			22,642				23,105
Residential development	5.1	%		5.4	%		3			3			402				292
Total	4.0	%		4.7	%		5			6			$	126,869			$	127,869

Property-specific borrowings have decreased by $1.0 billion since December 31, 2019. The decrease in borrowings in our infrastructure and private equity operations are primarily related to the pay-down of fund level subscription facilities with capital calls since year-end, as well as foreign exchange fluctuations, partially offset by asset acquisitions and net draws on our real estate subscription facility.

Fixed and Floating Interest Rate Exposure

Many of our borrowings, including all corporate borrowings recourse to the Corporation, are fixed rate, long-term financings. The remainder of our borrowings are at floating rates; however, from time to time, we enter into interest rate contracts to swap our floating rate debt to fixed rates.

As at June 30, 2020, 66% of our share of debt outstanding, reflecting swaps, was fixed rate. Accordingly, changes in interest rates are typically limited to the impact of refinancing borrowings at prevailing market rates or changes in the level of debt as a result of acquisitions and dispositions.

The following table presents the fixed and floating rates of interest expense:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	Fixed Rate														Floating Rate
	2020							2019							2020							2019
	Average Rate			Consolidated				Average Rate			Consolidated				Average Rate			Consolidated				Average Rate			Consolidated
Corporate borrowings	4.5	%		$	8,051			4.6	%		$	7,083			—	%		$	—			—	%		$	—
Subsidiary borrowings	4.4	%		6,878				4.6	%		6,152				1.9	%		2,615				3.4	%		2,271
Property-specific borrowings	5.0	%		50,807				5.2	%		49,614				3.3	%		76,062				4.4	%		78,255
Total	4.9	%		$	65,736			4.9	%		$	62,849			3.2	%		$	78,677			5.0	%		$	80,526

ii.    Preferred Equity

Preferred equity is comprised of perpetual preferred shares and represents permanent non-participating equity that provides leverage to our common equity. The shares are categorized by their principal characteristics in the following table:

	Term		Average Rate
AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)			2020			2019			2020				2019
Fixed rate-reset	Perpetual		4.2	%		4.3	%		$	2,875			$	2,875
Fixed rate	Perpetual		4.8	%		4.8	%		739				739
Floating rate	Perpetual		2.0	%		2.9	%		531				531
Total			4.0	%		4.2	%		$	4,145			$	4,145

Fixed rate-reset preferred shares are issued with an initial fixed rate coupon that is reset after an initial period, typically five years, at a predetermined spread over the Canadian five-year government bond yield. The average reset spread as at June 30, 2020 was 284 basis points.

48 BROOKFIELD ASSET MANAGEMENT

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iii.    Common Equity

Issued and Outstanding Shares

Changes in the number of issued and outstanding Class A shares during the quarters are as follows:

	Three Months Ended						Six Months Ended
AS AT AND FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	20201			20191			20201			20191
Outstanding at beginning of period	1,513.1			1,433.0			1,509.3			1,432.7
Issued (repurchased)
Repurchases	(2.6	)		(1.8	)		(5.5	)		(3.2	)
Long-term share ownership plans2	1.0			2.6			7.6			4.2
Dividend reinvestment plan and others	—			—			0.1			0.1
Outstanding at end of period	1,511.5			1,433.8			1,511.5			1,433.8
Unexercised options and other share-based plans2	60.4			71.0			60.4			71.0
Total diluted shares at end of period	1,571.9			1,504.8			1,571.9			1,504.8

1.	Adjusted to reflect the three-for-two-stock split effective April 1, 2020.

2.	Includes management share option plan and restricted stock plan.

The company holds 61.0 million Class A shares (2019 – 58.4 million) purchased by consolidated entities in respect of long-term share ownership programs, which have been deducted from the total amount of shares outstanding at the date acquired. Diluted shares outstanding include 8.8 million (2019 – 12.2 million) shares issuable in respect of these plans based on the market value of the Class A shares at June 30, 2020 and June 30, 2019, resulting in a net reduction of 52.2 million (2019 – 46.2 million) diluted shares outstanding.

During the second quarter of 2020, 0.4 million options were exercised, of which 0.1 million were issued on a net-settled basis, resulting in the cancellation of 0.3 million vested options.

The cash value of unexercised options was $1.2 billion as at June 30, 2020 (2019 – $1.2 billion) based on the proceeds that would be paid on exercise of the options.

On April 1, 2020, the company completed a three-for-two stock split by way of a stock dividend of one-half of a Class A share for each Class A and Class B share outstanding, resulting in the issuance of 524 million Class A shares.

As of August 13, 2020, the Corporation had outstanding 1,511,444,429 Class A shares and 85,120 Class B shares. Refer to Note 12 of the consolidated financial statements for additional information on equity.

LIQUIDITY

Corporate Liquidity

We maintain significant liquidity at the corporate level. Our primary sources of liquidity, which we refer to as core liquidity, consist of:

•	cash and financial assets, net of deposits and other associated liabilities; and

•	undrawn committed credit facilities.

We further assess overall liquidity inclusive of our principal subsidiaries BPY, BEP, BIP and BBU because of their role in funding acquisitions both directly and through our managed funds. Overall core liquidity at quarter-end was $16.0 billion, or inclusive of investor commitments to our private funds, was $65.5 billion at the end of the quarter, as we continue to pursue a number of attractive investment opportunities.

Q2 2020 INTERIM REPORT 49

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Capital Requirements

The Corporation has very few non-discretionary capital requirements. Our largest normal course capital requirement is our debt maturities. There are no corporate debt maturities until March 2023 when $442 million (C$600 million) is due. Periodically, we will also fund acquisitions and seed new investment strategies.

At the listed affiliate level, the largest normal course capital requirements are debt maturities and the pro-rata share of private fund capital calls. New acquisitions are primarily funded through the private funds or listed affiliates that we manage. We endeavor to structure these entities so that they are predominantly self-funding, preferably on an investment-grade basis, and in almost all circumstances do not rely on financial support from the Corporation.

In the case of private funds, the necessary equity capital is obtained by calling on commitments made by the limited partners in each fund, which include commitments made by our listed affiliates. In the case of our real estate, infrastructure and private equity funds, these commitments are expected to be funded by BPY, BEP, BIP and BBU. On January 31, 2019, the Corporation committed $2.75 billion to our third flagship real estate fund alongside BPY’s $1 billion commitment. As of June 30, 2020, the Corporation has funded $990 million of our $2.75 billion commitment. In the case of listed affiliates, capital requirements are funded through their own resources and access to capital markets, which may be supported by us from time to time through participation in equity offerings or bridge financings.

At the asset level, we schedule ongoing capital expenditure programs to maintain the operating capacity of our assets at existing levels. We refer to this as sustaining capital expenditures. The sustaining capital expenditure program are typically funded by, and represent a relatively small proportion of, the operating cash flows within each business. The timing of these expenditures is discretionary; however, we believe it is important to maintain the productivity of our assets in order to optimize cash flows and value accretion.

Core and Total Liquidity

The following table presents core liquidity of the Corporation and operating segments:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	Corporate1				Real Estate1				Renewable Power				Infrastructure				Private Equity1				Oaktree				Total 2020				Total 2019
Cash and financial assets, net	$	3,229			$	31			$	422			$	999			$	243			$	438			$	5,362			$	3,575
Undrawn committed credit facilities	2,525				2,393				1,892				1,710				1,512				575				10,607				9,808
Core liquidity2	5,754				2,424				2,314				2,709				1,755				1,013				15,969				13,383
Uncalled private fund commitments	—				11,428				3,843				11,461				6,854				15,967				49,553				50,735
Total liquidity2	$	5,754			$	13,852			$	6,157			$	14,170			$	8,609			$	16,980			$	65,522			$	64,118

1.	We secured an incremental $1 billion two-year credit facility in April of 2020 to support growth initiatives; BBU and BPY can each draw up to $500 million or BAM can draw up to $1 billion. Undrawn commitments of $500 million are reported within each Real Estate and Private Equity, respectively.

2.	See definition in Glossary of Terms beginning on page 57.

As at June 30, 2020, the Corporation’s core liquidity was $5.8 billion, consisting of $3.2 billion in cash and financial assets, net of deposits and other liabilities and $2.5 billion in undrawn credit facilities. The Corporation’s liquidity is readily available for use without any material tax consequences. We utilize this liquidity to support our asset management business which includes supporting the activities of our listed affiliates and private funds, as well as seeding new investment products.

The Corporation also has the ability to raise additional liquidity through the issuance of securities and sale of holdings of listed investments in our principal subsidiaries and other holdings including from those listed on page 52. However, this is not included in our core liquidity as we are generally able to finance our operations and capital requirements through other means.

The Corporation generates significant cash available for distribution and/or reinvestment. Our primary sources of recurring cash flows include:

•	fee-related earnings from our asset management activities and proceeds in the form of realized carried interest from asset sales within private funds;

•	distributions from invested capital, in particular our listed affiliates; and

•	other invested capital earnings: comprised of our wholly owned investments offset by corporate interest expense, corporate costs and taxes and dividends paid on preferred shares.

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During the second quarter of 2020, we generated $605 million of cash available for distribution and/or reinvestment, inclusive of:

•	$279 million fee-related earnings, excluding Oaktree;

•	$9 million realized carried interest, net, excluding Oaktree;

•	$58 million of distributable earnings from our investment in Oaktree;

•	$443 million of distributions from our listed affiliates, other investments, and corporate cash and financial assets; partially offset by

•	other invested capital earnings and preferred share dividends paid, net of equity-based compensation costs, which resulted in expenses of $184 million.

The Corporation paid $181 million in cash dividends on its common equity during the quarter ended June 30, 2020 (2019 – $153 million).

Earnings and distributions received by the Corporation are available for distribution and/or reinvestment and are as follows:

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				2020				2019
1) Asset management FFO
Fee revenues	$	449			$	420			$	910			$	820
Direct costs	(170		)		(157		)		(345		)		(319		)
Fee-related earnings1	279				263				565				501
Realized carried interest, net1	9				137				39				222
	288				400				604				723
Our share of Oaktree’s distributable earnings	58				—				113				—
2) Distributions from investments
Listed affiliates	348				336				697				682
Corporate cash and financial assets	79				35				134				133
Other investments	16				29				36				59
	443				400				867				874
3) Other invested capital earnings
Corporate borrowings	(95		)		(86		)		(184		)		(173		)
Corporate costs and taxes	(39		)		(36		)		(76		)		(73		)
Other wholly owned investments	(35		)		(30		)		(81		)		(69		)
	(169		)		(152		)		(341		)		(315		)
Preferred share dividends	(36		)		(38		)		(71		)		(75		)
Add back: equity-based compensation costs	21				22				46				43
Cash available for distribution and/or reinvestment	$	605			$	632			$	1,218			$	1,250

1.	Excludes $73 million and $36 million of fee-related earnings and realized carried interest, net from Oaktree, respectively.

Q2 2020 INTERIM REPORT 51

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The following table shows the quoted market value of the company’s listed securities and annual cash distributions based on current distribution policies for each entity:

AS AT JUN. 30, 2020 (MILLIONS, EXCEPT PER UNIT AMOUNTS)	Ownership %			Brookfield Owned Units			Distributions  Per Unit1				Quoted Value2				Current Distributions (Current Rate)3				YTD Distributions (Actual)
Distributions from investments
Listed affiliates
Brookfield Property 4	56	%		527.7			$	1.33			$	5,235			$	702			$	349
Brookfield Renewable5	57	%		178.1			2.17				8,533				387				206
Brookfield Infrastructure6	30	%		137.6			1.94				5,718				267				130
Brookfield Business Partners	63	%		94.5			0.25				2,915				24				12
															1,380				697
Corporate cash and financial assets7	various			various			various				3,229				180				134
Other investments
Norbord	42	%		35.0			0.88				794				31				6
Other8	various			various			various				various				60				30
															91				36
Total															$	1,651			$	867

1.	Based on current distribution policies.

2.	Quoted value represents the value of Brookfield owned units as at market close on June 30, 2020.

3.	Distributions (current rate) are calculated by multiplying units held as at June 30, 2020 by distributions per unit. Actual dividends may differ due to timing of dividend increases and payment of special dividends, which are not factored into the current rate calculation. See definition in Glossary of Terms beginning on page 57.

4.	BPY’s quoted value includes $16 million of preferred shares. Fully diluted ownership is 53%, assuming conversion of convertible preferred shares held by a third party. For the three and six months ended June 30, 2020, BPY’s distributions include nominal amounts of preferred share dividends received by the Corporation (2019 – $2 million and $11 million, respectively).

5.

On July 30, 2020, we completed the special distribution of Class A exchangeable subordinate voting shares of Brookfield Renewable Corporation (“BEPC”). Each BEP unitholder of record as of July 27, 2020 will receive one class A exchangeable subordinate voting share of BEPC for every four BEP units held. The special distribution is analogous to a unit split and has no impact on our ownership and distributions received.

6.	Brookfield owned units represent the combined units held in BIP LP and BIPC.

7.	Includes cash and cash equivalents and financial assets net of deposits.

8.	Other includes cash distributions from our 27.5% interest in a BAM-sponsored real estate venture in New York and a listed investment in our Private Equity segment.

52 BROOKFIELD ASSET MANAGEMENT

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REVIEW OF CONSOLIDATED STATEMENTS OF CASH FLOWS

The following table summarizes the consolidated statements of cash flows within our consolidated financial statements:

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				2020				2019
Operating activities	$	1,616			$	803			$	3,298			$	2,399
Financing activities	1,627				16,582				5,464				16,607
Investing activities	(3,665		)		(16,748		)		(5,752		)		(19,979		)
Change in cash and cash equivalents	$	(422	)		$	637			$	3,010			$	(973	)

This statement reflects activities within our consolidated operations and therefore excludes activities within non-consolidated entities.

Operating Activities

Cash flows from operating activities totaled $1.6 billion in the second quarter of 2020, a $813 million increase from the second quarter of 2019. Operating cash flows prior to non-cash working capital and residential inventory were $1.7 billion this quarter, $130 million higher than the prior year quarter due to the benefits of same-store growth from our existing operations and the contributions from assets acquired during the last twelve months, partially offset by the negative impact of foreign currency translation.

Financing Activities

The company had a net cash inflow of $1.6 billion from financing activities during the second quarter of 2020, compared to $16.6 billion in the second quarter of 2019. Our subsidiaries issued $5.8 billion (2019 – $23.7 billion) and repaid $5.7 billion (2019 – $10.5 billion) of non-recourse borrowings, for a net issuance of $66 million (2019 – $13.2 billion) during the quarter. We raised $1.6 billion of capital from our institutional private fund partners and other investors to fund their portion of acquisitions, arranged $981 million of short-term borrowings backed by private fund commitments and returned $1.4 billion to our investors in the form of either distributions or returns of capital. 

Investing Activities

During the second quarter of 2020, we invested $9.0 billion and generated proceeds of $5.6 billion from dispositions for net cash deployed in investing activities of $3.4 billion. This compares to net cash deployed of $16.9 billion during the same period in 2019. We paid cash of $207 million to acquire equity accounted investments during the quarter. Refer to our Acquisitions of Consolidated Entities in Note 4 and Equity Accounted Investments in Note 8 to the consolidated financial statements for further details. We continued to acquire and sell financial assets, which represent a net outflow of $1.7 billion, relating to investments in debt and equity securities as well as contract assets associated with managing currency risk.

Q2 2020 INTERIM REPORT 53

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PART 5 – ACCOUNTING POLICIES AND INTERNAL CONTROLS

ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

Overview

We are a Canadian corporation and, as such, we prepare our consolidated financial statements in accordance with IFRS.

We present our consolidated balance sheets on a non-classified basis, meaning that we do not distinguish between current and long-term assets or liabilities. We believe this classification is appropriate given the nature of our business strategy.

The preparation of the consolidated financial statements requires management to select appropriate accounting policies and to make judgments and estimates that affect the carrying amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.

In making judgments and estimates, management relies on external information and observable conditions, where possible, supplemented by internal analysis, as required. These estimates have been applied in a manner consistent with the prior year and there are no known trends, commitments, events or uncertainties that we believe will materially affect the methodology or assumptions utilized in this report. As we update the fair values of our investment property portfolios quarterly, with gains reflected in net income, we discuss judgments and estimates relating to the key valuation metrics in Note 9 of the unaudited June 30, 2020 Consolidated Financial Statements and below.

For further reference on accounting policies, including new and revised standards issued by the IASB and judgments and estimates, see our significant accounting policies contained in Note 2 of the December 31, 2019 consolidated financial statements.

COVID-19

The company continues to closely monitor developments related to the global economic shutdown. As government restrictions are being lifted and businesses are gradually re-opening, the company is implementing safety measures for employees to return to work safely and to ensure minimal interruption to the business with the transition. Our results reflect the impact of the shutdown on our businesses in the current quarter. The longer-term impacts of the shutdown will depend on future developments which are highly uncertain, rapidly evolving and difficult to predict. These impacts may differ in magnitude depending on a number of scenarios, which we continue to monitor and take into consideration in our decision making as we continue to assess medium to long-term impacts of the economic shutdown.

Consolidated Financial Information

IFRS uses a control-based model to determine if consolidation is required. Therefore, we are deemed to control an investment if we: (1) exercise power over the investee; (2) are exposed to variable returns from our involvement with the investee; and (3) have the ability to use our power to affect the amount of the returns. Due to the ownership structure of many of our subsidiaries, we control entities in which we hold only a minority economic interest. Please refer to Part 2 of Management’s Discussion and Analysis in the December 31, 2019 Annual Report for additional information.

54 BROOKFIELD ASSET MANAGEMENT

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i.	Investment Properties

We classify the majority of the property assets within our Real Estate segment as investment properties. Our valuations are prepared at the individual property level by internal investment professionals with the appropriate expertise in the respective industry, geography and asset type. These valuations are updated at each balance sheet date with gains or losses recognized in net income.

Prior to the end of the first quarter, the global economic shutdown prompted certain responses from global government authorities across the various geographies in which the company owns and operates investment properties. Such responses, have included mandatory temporary closure of, or imposed limitations on, the operations of certain non-essential properties and businesses including office properties and retail malls and associated businesses which operate within these properties such as retailers and restaurants. In addition, shelter-in-place mandates and severe travel restrictions have had a significant adverse impact on consumer spending and demand in the near term. These negative economic indicators, restrictions and closure have created significant estimation uncertainty in the determination of the fair value of investment properties as of June 30, 2020. Specifically, while discount and capitalization rates are inherently uncertain, there has been an absence of recently observed market transactions across the partnership’s geographies to support changes in such rates which is a key input into the determination of fair value. In addition, the company has had to make assumptions with respect to the length and severity of these restrictions and closures as well as the viability of our tenants in consideration of any credit reserves that should be applied based on deemed tenant risk and the recovery period in estimating the impact and timing of future cash flows generated from investment properties and used in the discounted cash flow model used to determine fair value. As a result of this material estimation uncertainty there is a risk that the assumptions used to determine fair value as of June 30, 2020 may result in a material adjustment to the fair value of investment properties in future reporting periods as more information becomes available.

The majority of underlying cash flows in the models are comprised of contracted leases, many of which are long term, with our core office portfolio having a combined 92% occupancy level and an average 8.5-year lease life, while our core retail portfolio has an occupancy rate of 95%. The models also include property-level assumptions for renewal probabilities, future leasing rates and capital expenditures. These are reviewed as part of the business planning process and external market data is utilized when determining the cash flows associated with lease renewals.

We test the outcome of our process by having a number of our properties externally appraised each year, including appraisals for core office properties, at least on a three-year rotating basis. We compare the results of the external appraisals to our internally prepared values and reconcile significant differences when they arise. In the current quarter, 60 of our properties were externally appraised, representing a gross property value of $25 billion of assets; external appraisals were within 0.5% of management’s valuations.

The valuations are most sensitive to changes in cash flows, which include assumptions relating to lease renewal probabilities, downtime, capital expenditures, future leasing rates and associated leasing costs, discount rates and terminal capitalization rates. The key valuation metrics of our real estate assets as of June 30, 2020 and December 31, 2019 are summarized below.

	Core Office						Core Retail						LP Investments and Other						Weighted Average
AS AT JUN. 30, 2020 AND DEC. 31, 2019	2020			2019			2020			2019			2020			2019			2020			2019
Discount rate	6.5	%		6.7	%		6.9	%		6.7	%		9.0	%		8.1	%		7.6	%		7.3	%
Terminal capitalization rate	5.4	%		5.5	%		5.4	%		5.4	%		6.2	%		6.6	%		5.7	%		5.9	%
Investment horizon (years)	11			11			10			10			13			14			12			12

We undertook a process to assess the appropriateness of the discount and terminal capitalization rates considering changes to risk- free rates, changes to credit spreads as well as changes to property-level cash flows and any risk premium inherent in such cash flow changes. All of these considerations led us to conclude that the vast majority of discount rates and terminal cap rates for the current period should remain consistent with year-end rates. As we learn more about the mid- and longer-term impacts of the pandemic on our business, we will update our valuation models accordingly.

Q2 2020 INTERIM REPORT 55

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The following table presents the impact on the fair value of our consolidated investment properties as at June 30, 2020 from a 25-basis point change to the relevant unobservable inputs. For properties valued using the discounted cash flow method, the basis point change in valuation metrics relates to a change in discount and terminal capitalization rates. For properties valued using the direct capitalization approach, the basis point change in valuation metrics relates to a change in the overall capitalization rate.

AS AT JUN. 30, 2020 (MILLIONS)	Fair Value				Sensitivity
Core office
United States	$	15,275			$	754
Canada	4,676				218
Australia	2,370				120
Europe	2,852				52
Brazil	269				10
Core retail	21,253				1,134
LP investments and other
LP investments office	8,367				385
LP investments retail	2,832				222
Logistics	136				3
Mixed-use	2,748				130
Multifamily	2,776				127
Triple net lease	4,426				155
Self-storage	1,020				40
Student housing	2,564				104
Manufactured housing	2,517				110
Other investment properties1	22,806				1,036
Total	$	96,887			$	4,600

1.	Includes investments in office, mixed-use and student housing properties which are held through our direct investment in BSREP III as well as other directly held investment properties.

ii.	Revaluation Method for PP&E

PP&E is revalued on a regular basis. The critical estimates and assumptions underlying the valuation of PP&E are set out in Note 10, Property, Plant and Equipment in our December 31, 2019 audited consolidated financial statements. Our PP&E are measured at fair value on a recurring basis with an effective date of revaluation for all asset classes as of December 31, 2019. Brookfield determines fair value under both the income and cost methods with due consideration to significant inputs such as the discount rate, terminal value multiple, overall investment horizon, useful life and replacement cost. We have updated our valuation assumptions based on the available information as a result of the shutdown. Refer to Note 10 for further information.

MANAGEMENT REPRESENTATIONS AND INTERNAL CONTROLS

Internal Control Over Financial Reporting

No changes were made in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We have not experienced any material impact to our internal control over financial reporting due to the global economic shutdown. We are continually monitoring and assessing the shutdown on our internal controls to minimize the impact on their design and operating effectiveness.

56 BROOKFIELD ASSET MANAGEMENT

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GLOSSARY OF TERMS

The below summarizes certain terms relating to our business that are made throughout the MD&A and it defines IFRS performance measures, non-IFRS performance measures and key operating measures that we use to analyze and discuss our results.

References

“Brookfield,” the “company,” “we,” “us” or “our” refers to Brookfield Asset Management Inc. and its consolidated subsidiaries. The “Corporation” refers to our asset management business which is comprised of our asset management and corporate business segments.

We refer to investors in the Corporation as shareholders and we refer to investors in our private funds and listed affiliates as investors.

We use asset manager to refer to our Asset Management segment which offers a variety of investment products to our investors:

•	We have over 40 active funds across major asset classes: real estate, infrastructure/renewable power and private equity. These funds include core, credit, value-add and opportunistic closed-end funds and core long-life funds. We refer to these funds as our private funds.

•	We refer to BPY, BPYU, BEP, BEPC, BIP, BIPC, BBU and TERP as our listed affiliates.

•	We refer to our public securities group as public securities. This group manages fee-bearing capital through numerous funds and separately managed accounts, focused on fixed income and equity securities.

Throughout the MD&A and consolidated financial statements, the following operating companies, joint ventures and associates, and their respective subsidiaries, will be referenced as follows:

•    Acadian – Acadian Timber Corp.		•    EBSA – Empresa de Energia de Boyaca S.A.
•    Altera – Altera Infrastructure L.P. (formerly Teekay Offshore)		•    G&W – Genesee & Wyoming Inc.
•    BBU – Brookfield Business Partners L.P.		•    Genworth – Genworth MI Canada Inc.
•    BEP – Brookfield Renewable Partners L.P.		•    GrafTech – GrafTech International Ltd.
•    BEPC – Brookfield Renewable Corporation		•    Greenergy – Greenergy Fuels Holdings Limited
•    BIP – Brookfield Infrastructure Partners L.P.		•    Healthscope – Healthscope Limited
•    BIPC – Brookfield Infrastructure Corporation		•    NAP – North American Palladium Ltd.
•    BPY – Brookfield Property Partners L.P.		•    Norbord – Norbord Inc.
•    BPYU – Brookfield Property REIT Inc. (formerly GGP Inc. or BPR)		•    Oaktree – Oaktree Capital Management
•    BrandSafway – Brand Industrial Holdings Inc.		•    TERP – TerraForm Power, Inc.
•    Cardone – Cardone Industries, Inc.		•    Westinghouse – Westinghouse Electric Company
•    Clarios – Clarios Global LP

Performance Measures

Definitions of performance measures, including IFRS, non-IFRS and operating measures, are presented below in alphabetical order. We have specifically identified those measures which are IFRS or non-IFRS measures; the remainder are operating measures.

Assets under management (“AUM”) refers to the total fair value of assets that we manage, on a gross asset value basis, including assets for which we earn management fees and those for which we do not. AUM is calculated as follows: (i) for investments that Brookfield consolidates for accounting purposes or actively manages, including investments of which Brookfield or a controlled investment vehicle is the largest shareholder or the primary operator or manager, at 100% of the investment’s total assets on a fair value basis; and (ii) for all other investments, at Brookfield’s or its controlled investment vehicle’s, as applicable, proportionate share of the investment’s total assets on a fair value basis. Brookfield’s methodology for determining AUM may differ from the methodology employed by other alternative asset managers and Brookfield’s AUM presented herein may differ from our AUM reflected in other public filings and/or our Form ADV and Form PF.

Q2 2020 INTERIM REPORT 57

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Base management fees, which are determined by contractual arrangements, are typically equal to a percentage of fee-bearing capital and are accrued quarterly. Base management fees, including private fund base fees and listed partnership base fees, are IFRS measures.

Private fund base fees are typically earned on fee-bearing capital from third-party investors only and are earned on invested and/or uninvested fund capital, depending on the stage of the fund life.

Listed affiliate base fees are earned on the total capitalization, including debt and market capitalization, of the listed affiliates, which includes our investment. Base fees for BPY, BEP and TERP include a quarterly fixed fee amount of $12.5 million, $5 million and $3 million, respectively. BPY and BEP each pay additional fees of 1.25% on the increase in market capitalization above their initial capitalization of $11.5 billion and $8 billion, respectively. TERP pays an additional fee of 1.25% on the increase above initial per unit price at the time of acquisition. Base fees for BPYU, BIP and BBU are 1.25% of total capitalization. BPYU capital was subject to a 12-month fee waiver which expired at the end of August 2019.

Capitalization at “our share” is a non-IFRS measure and presents our share of debt and other obligations based on our ownership percentage of the related investments. We use this measure to provide insight into the extent to which our capital is leveraged in each investment, which is an important component of enhancing shareholders returns. This may differ from our consolidated leverage because of the varying levels of ownership that we have in consolidated and equity accounted investments, that in turn have different degrees of leverage. We also use capitalization at our share to make financial risk management decisions at the Corporation.

A reconciliation of consolidated liabilities and equity to capitalization at our share is provided below:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	2020				2019
Total consolidated liabilities and equity	$	316,435			$	323,969
Add: our share of debt of investments in associates	13,082				11,234
Less: non-controlling interests’ share of liabilities
Non-recourse borrowings	(96,443		)		(97,708		)
Liabilities associated with assets held for sale	(145		)		(1,478		)
Accounts payable and other	(29,984		)		(29,460		)
Deferred tax liabilities	(10,360		)		(10,308		)
Subsidiary equity obligations	(2,225		)		(2,236		)
Non-controlling interests	(78,996		)		(81,833		)
Total capitalization at our share	$	111,364			$	112,180

Carried interest is an IFRS measure that is a contractual arrangement whereby we receive a fixed percentage of investment gains generated within a private fund provided that the investors receive a pre-determined minimum return. Carried interest is typically paid towards the end of the life of a fund after the capital has been returned to investors and may be subject to clawback until all investments have been monetized and minimum investment returns are sufficiently assured.

Realized carried interest is an IFRS measure and represents our share of investment returns based on realized gains within a private fund. Realized carried interest earned is recognized when an underlying investment is profitably disposed of and the fund’s cumulative returns are in excess of preferred returns, in accordance with the respective terms set out in the fund’s governing agreements, and when the probability of clawback is remote. We include realized carried interest when determining our Asset Management segment results within our consolidated financial statements.

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Realized carried interest, net is a non-IFRS measure and represents realized carried interest after direct costs, which include employee expenses and cash taxes. A reconciliation of realized carried interest to realized carried interest, net, is shown below:

FOR THE THREE MONTHS ENDED JUN. 30 (MILLIONS)	2020				2019
Realized carried interest1	$	76			$	190
Less: direct costs associated with realized carried interest	(31		)		(53		)
	45				137
Less: realized carried interest not attributable to BAM	(14		)		—
Realized carried interest, net	$	31			$	137

1.	Includes $64 million of realized carried interest related to Oaktree. For segment reporting, Oaktree’s revenue is shown on a 100% basis.

Carry eligible capital represents the capital committed, pledged or invested in the private funds that we manage and which entitle us to earn carried interest. Carry eligible capital includes both invested and uninvested (i.e. uncalled) private fund amounts as well as those amounts invested directly by investors (co-investments) if those entitle us to earn carried interest. We believe this measure is useful to investors as it provides additional insight into the capital base upon which we have potential to earn carried interest once minimum investment returns are sufficiently assured.

Adjusted carry eligible capital excludes uncalled fund commitments and funds that have not yet reached their preferred return, as well as co-investments and separately managed accounts that are subject to lower carried interest than our standard funds.

A reconciliation from carry eligible capital to adjusted carry eligible capital is provided below:

AS AT JUN. 30 (MILLIONS)	2020				2019
Carry eligible capital1	$	81,065			$	71,782
Less:
Uncalled private fund commitments	(29,850		)		(33,759		)
Co-investments and other	(7,135		)		(6,802		)
Funds not yet at target preferred return	(21,459		)		(7,268		)
Adjusted carry eligible capital	$	22,621			$	23,953

1.	Excludes carry eligible capital related to Oaktree.

Cash available for distribution and/or reinvestment is a non-IFRS measure that provides insight into earnings received by the Corporation that are available for distribution to common shareholders or to be reinvested into the business. It is calculated as the sum of our Asset Management segment FFO (i.e., fee-related earnings and realized carried interest, net); distributions from our listed affiliates, other investments that pay regular cash distributions and FFO from our corporate cash and financial assets; other invested capital earnings, which include FFO from our residential operations, energy contracts, sustainable resources and other real estate, private equity, corporate investments that do not pay regular cash distributions, corporate costs and corporate interest expense; excluding equity-based compensation costs and net of preferred share dividend payments.

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				2020				2019
Asset management FFO	$	288			$	400			$	604			$	723
Our share of Oaktree’s distributable earnings	58				—				113				—
Distributions from investments	443				400				867				874
Other invested capital earnings
Corporate borrowings	(95		)		(86		)		(184		)		(173		)
Corporate costs and taxes	(39		)		(36		)		(76		)		(73		)
Other wholly owned investments	(35		)		(30		)		(81		)		(69		)
	(169		)		(152		)		(341		)		(315		)
Preferred share dividends	(36		)		(38		)		(71		)		(75		)
Add back: equity-based compensation costs	21				22				46				43
Cash available for distribution and/or reinvestment	$	605			$	632			$	1,218			$	1,250

Q2 2020 INTERIM REPORT 59

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Consolidated capitalization reflects the full capitalization of wholly owned and partially owned entities that we consolidate in our financial statements. Our consolidated capitalization includes 100% of the debt of the consolidated entities even though in many cases we only own a portion of the entity and therefore our pro-rata exposure to this debt is much lower. In other cases, this basis of presentation excludes the debt of partially owned entities that are accounted for following the equity method, such as our investments in Canary Wharf and several of our infrastructure businesses.

Core liquidity represents the amount of cash, financial assets and undrawn credit lines at the Corporation, listed affiliates and directly held investments. We use core liquidity as a key measure of our ability to fund future transactions and capitalize quickly on opportunities as they arise. Our core liquidity also allows us to backstop the transactions of our various businesses as necessary and fund the development of new activities that are not yet suitable for our investors.

Total liquidity represents the sum of core liquidity and uncalled private fund commitments and is used to pursue new transactions.

Corporate capitalization represents the amount of debt issued by the Corporation, accounts payable and deferred tax liability in our Corporate segment as well as our issued and outstanding common and preferred shares.

Distributions (current rate) represents the distributions that we would receive during the next twelve months based on the current distribution rates of the investments that we currently hold. The dividends from our listed investments are calculated by multiplying the number of shares held by the most recently announced distribution policy. The yield on cash and financial assets portfolio is equal to 8% of the weighted-average balance of the last four quarters of our corporate cash and financial assets. Distributions on our unlisted investments are calculated based on the quarterly distributions received in the most recent fiscal year.

Economic ownership interest represents the company’s proportionate equity interest in our listed partnerships which can include redemption-exchange units (“REUs”), Class A limited partnership units, special limited partnership units and general partnership units in each subsidiary, where applicable, as well as any units or shares issued in subsidiaries that are exchangeable for units in our listed partnerships (“exchange units”). REUs and exchange units share the same economic attributes as the Class A limited partnership units in all respects except for our redemption right, which the listed partnership can satisfy through the issuance of Class A limited partnership units. The REUs, general partnership units and exchange units participate in earnings and distributions on a per unit basis equivalent to the per unit participation of the Class A limited partnership units of the subsidiary.

Fee-bearing capital represents the capital committed, pledged or invested in the listed affiliates, private funds and public securities that we manage which entitles us to earn fee revenues. Fee-bearing capital includes both called (“invested”) and uncalled (“pledged” or “committed”) amounts. When reconciling period amounts we utilize the following definitions:

•	Inflows include capital commitments and contributions to our private and public securities funds and equity issuances in our listed affiliates.

•	Outflows represent distributions and redemptions of capital from within the public securities capital.

•	Distributions represent quarterly distributions from listed affiliates as well as returns of committed capital (excluding market valuation adjustments), redemptions and expiry of uncalled commitments within our private funds.

•	Market valuation includes gains (losses) on portfolio investments, listed affiliates and public securities based on market prices.

•	Other includes changes in net non-recourse leverage included in the determination of listed affiliate capitalization and the impact of foreign exchange fluctuations on non-U.S. dollar commitments.

Fee-related earnings is an IFRS measure that is comprised of fee revenues less direct costs associated with earning those fees, which include employee expenses and professional fees as well as business related technology costs, other shared services and taxes. We use this measure to provide additional insight into the operating profitability of our asset management activities.

Fee revenues is an IFRS measure and includes base management fees, incentive distributions, performance fees and transaction fees presented within our Asset Management segment. Many of these items do not appear in consolidated revenues because they are earned from consolidated entities and are eliminated on consolidation.

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Funds from operations (“FFO”) is a key measure of our financial performance. We use FFO to assess operating results and the performance of our businesses on a segmented basis. While we use segment FFO as our segment measure of profit and loss (see Note 3 to our consolidated financial statements), the sum of FFO for all our segments, or total FFO, is a non-IFRS measure. The following table reconciles total FFO to net income:

	Three Months Ended																Six Months Ended
	Total								Per Share								Total								Per Share
FOR THE PERIODS ENDED JUN. 30 (MILLIONS, EXCEPT PER SHARE AMOUNTS)	2020				2019				2020				2019				2020				2019				2020				2019
Net (loss) income	$	(1,493	)		$	704			$	(1.01	)		$	0.45			$	(1,650	)		$	1,960			$	(1.14	)		$	1.29
Realized disposition gains recorded as fair value changes or equity	469				7				0.29				0.01				562				239				0.34				0.16
Non-controlling interest in FFO	(1,501		)		(1,863		)		(0.99		)		(1.27		)		(3,482		)		(3,465		)		(2.30		)		(2.37		)
Financial statement components not included in FFO
Equity accounted fair value changes and other non-FFO items	1,253				(379		)		0.83				(0.26		)		2,191				(128		)		1.45				(0.09		)
Fair value changes	1,153				1,398				0.76				0.95				1,567				1,229				1.04				0.84
Depreciation and amortization	1,376				1,234				0.91				0.84				2,785				2,268				1.84				1.55
Deferred income taxes	(96		)		7				(0.06		)		0.01				72				56				0.05				0.04
Total FFO	$	1,161			$	1,108			$	0.73			$	0.73			$	2,045			$	2,159			$	1.28			$	1.42

We use FFO to assess our performance as an asset manager and separately as an investor in our assets. FFO includes the fees that we earn from managing capital as well as our share of revenues earned and costs incurred within our operations, which include interest expense and other costs. Specifically, FFO includes the impact of contracts that we enter into to generate revenue, including asset management agreements, power sales agreements, contracts that our operating businesses enter into such as leases and take or pay contracts and sales of inventory. FFO also includes the impact of changes in borrowings or the cost of borrowings as well as other costs incurred to operate our business.

We use realized disposition gains and losses within FFO in order to provide additional insight regarding the performance of investments on a cumulative realized basis, including any unrealized fair value adjustments that were recorded in equity and not otherwise reflected in current period FFO, and believe it is useful to investors to better understand variances between reporting periods. We exclude depreciation and amortization from FFO as we believe that the value of most of our assets typically increases over time, provided we make the necessary maintenance expenditures, the timing and magnitude of which may differ from the amount of depreciation recorded in any given period. In addition, the depreciated cost base of our assets is reflected in the ultimate realized disposition gain or loss on disposal. As noted above, unrealized fair value changes are excluded from FFO until the period in which the asset is sold. We also exclude deferred income taxes from FFO because the vast majority of the company’s deferred income tax assets and liabilities are a result of the revaluation of our assets under IFRS.

Our definition of FFO may differ from the definition used by other organizations, as well as the definition of FFO used by the Real Property Association of Canada (“REALPAC”) and the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), in part because the NAREIT definition is based on U.S. GAAP, as opposed to IFRS. The key differences between our definition of FFO and the determination of FFO by REALPAC and/or NAREIT are that we include the following: realized disposition gains or losses and cash taxes payable or receivable on those gains or losses, if any; foreign exchange gains or losses on monetary items not forming part of our net investment in foreign operations; and foreign exchange gains or losses on the sale of an investment in a foreign operation. We do not use FFO as a measure of cash generated from our operations.

Incentive distributions is an IFRS measure that is determined by contractual arrangements; incentive distributions are paid to us by BPY, BEP, BIP and TERP and represent a portion of distributions paid by listed affiliates above a predetermined hurdle. Incentive distributions are accrued on the record date of the associated distributions of the entity.

Q2 2020 INTERIM REPORT 61

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A summary of our distribution hurdles and current distribution rates is as follows:

AS AT JUN. 30, 2020	Current Distribution Rate1				Distribution Hurdles (per unit)2								Incentive Distributions
Brookfield Infrastructure Partners (BIP)	$	1.94			$	0.73		/	$	0.79			15% / 25%
Brookfield Renewable Partners (BEP)	2.17				1.50			/	1.69				15% / 25%
Brookfield Property Partners (BPY)	1.33				1.10			/	1.20				15% / 25%

1.	Current rate based on most recently announced distribution rates.

2.	We are also entitled to earn a portion of increases in distributions by TERP, based on distribution hurdles of $0.93 and $1.05. TERP’s current annual distribution has not yet reached the first hurdle.

Invested capital consists of investments in our listed affiliates, other listed securities, unlisted investments and corporate working capital. Our invested capital provides us with FFO and cash distributions.

Invested capital, net consists of invested capital and leverage.

Leverage represents the amount of corporate borrowings and perpetual preferred shares held by the company.

Long-term average (“LTA”) generation is used in our Renewable Power segment and is determined based on expected electrical generation from its assets in commercial operation during the year. For assets acquired or reaching commercial operation during the year, LTA generation is calculated from the acquisition or commercial operation date. In Brazil, assured generation levels are used as a proxy for LTA. We compare LTA generation to actual generation levels to assess the impact on revenues and FFO of hydrology, wind generation levels and irradiance, which vary from one period to the next.

Performance fees is an IFRS measure. Performance fees are paid to us when we exceed predetermined investment returns within BBU and on certain public securities portfolios. BBU performance fees are accrued quarterly based on the volume-weighted average increase in BBU unit price over the previous threshold, whereas performance fees within public securities funds are typically determined on an annual basis. Performance fees are not subject to clawback.

Proportionate basis generation is used in our Renewable Power segment to describe the total amount of power generated by facilities held by BEP, at BEP’s respective economic ownership interest percentage.

Realized disposition gains/losses is a component of FFO and includes gains or losses arising from transactions during the reporting period together with any fair value changes and revaluation surplus recorded in prior periods, presented net of cash taxes payable or receivable. Realized disposition gains include amounts that are recorded in net income, other comprehensive income and as ownership changes in our consolidated statements of equity, and exclude amounts attributable to non-controlling interests unless otherwise noted. We use realized disposition gains/losses to provide additional insight regarding the performance of investments on a cumulative realized basis, including any unrealized fair value adjustments that were recorded in prior periods and not otherwise reflected in current period FFO, and believe it is useful to investors to better understand variances between reporting periods.

Same-store or same-property represents the earnings contribution from assets or investments held throughout both the current and prior reporting period on a constant ownership basis. We utilize same-store analysis to illustrate the growth in earnings excluding the impact of acquisitions or dispositions.

Unrealized carried interest is the change in accumulated unrealized carried interest from prior period and represents the amount of carried interest generated during the period. We use this measure to provide insight into the value our investments have created in the period.

Accumulated unrealized carried interest is based on carried interest that would be receivable under the contractual formula at the period end date as if a fund was liquidated and all investments had been monetized at the values recorded on that date. We use this measure to provide insight into our potential to realize carried interest in the future. Details of components of our accumulated unrealized carried interest are included in the definition of unrealized carried interest below.

62 BROOKFIELD ASSET MANAGEMENT

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Accumulated unrealized carried interest, net is after direct costs, which include employee expenses and taxes.

The following table identifies the inputs of accumulated unrealized carried interest to arrive at unrealized carried interest generated in the period:

AS AT JUN. 30 (MILLIONS)	Adjusted Carry Eligible Capital1				Adjusted Multiple of Capital2			Fund Target Carried Interest3			Current Carried Interest4
2020
Real Estate	$	7,207			1.5			20	%		18	%
Infrastructure	13,280				1.5			20	%		18	%
Private Equity	2,134				2.6			20	%		16	%
	$	22,621
2019
Real Estate	$	9,364			1.7x			20%			14	%
Infrastructure	12,994				1.4x			20%			17	%
Private Equity	1,595				2.7x			20%			17	%
	$	23,953

1.	Excludes uncalled private fund commitments, co-investment capital and funds that have not met their preferred return.

2.

Adjusted Multiple of Capital represents the ratio of total distributions plus estimates of remaining value to the equity invested, and reflects performance net of fund management fees and expenses, before carried interest. Our core, credit and value add funds pay management fees of 0.90-1.50% and our opportunistic and private equity funds pay fees of 1.50-2.00%. Funds typically incur fund expenses of approximately 0.35% of carry eligible capital annually.

3.	Fund target carried interest percentage is the target carry average of the funds within adjusted carry eligible capital as at each period end.

4.	When a fund has achieved its preferred return, we earn an accelerated percentage of the additional fund profit until we have earned the fund target carried interest percentage. Funds in their early stage of earning carry will not yet have earned the full percentage of total fund profit to which we are entitled.

The following table summarizes the unrealized carried interest generated in the current and prior year periods:

	Accumulated Unrealized Carried Interest												Accumulated Unrealized Carried Interest
(MILLIONS)	Jun. 30, 2020				Mar. 31 2020				Change				Jun. 30, 2019				Mar. 31 2019				Change
Real Estate	$	640			$	956			$	(316	)		$	906			$	1,060			$	(154	)
Infrastructure	1,095				970				125				992				896				96
Private Equity	552				565				(13		)		639				743				(104		)
Oaktree	645				673				(28		)		—				—				—
Accumulated unrealized carried interest	2,932				3,164				(232		)		2,537				2,699				(162		)
Less: associated expenses1	(1,032		)		(1,069		)		37				(765		)		(810		)		45
Accumulated unrealized carry, net	$	1,900			$	2,095			(195		)		$	1,772			$	1,889			(117		)
Add: realized carried interest, net									31												137
Unrealized carried interest, net									$	(164	)										$	20

1.	Carried interest generated is subject to taxes and long-term incentive expenses to investment professionals. These expenses are typically 30-35% of carried interest generated.

Q2 2020 INTERIM REPORT 63

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Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS

(UNAUDITED) AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	Note		2020				2019
Assets
Cash and cash equivalents	5		$	9,523			$	6,778
Other financial assets	5,6		14,353				12,468
Accounts receivable and other	5,6		17,140				18,469
Inventory	6		10,212				10,272
Assets classified as held for sale	7		542				3,502
Equity accounted investments	8		39,213				40,698
Investment properties	9		96,887				96,686
Property, plant and equipment	10		86,067				89,264
Intangible assets			25,117				27,710
Goodwill			13,816				14,550
Deferred income tax assets			3,565				3,572
Total assets			$	316,435			$	323,969
Liabilities and equity
Corporate borrowings	5,6		$	8,051			$	7,083
Accounts payable and other	5,6		42,235				43,077
Liabilities associated with assets classified as held for sale	7		173				1,690
Non-recourse borrowings of managed entities	5,6		136,362				136,292
Deferred income tax liabilities			14,347				14,849
Subsidiary equity obligations	5		4,201				4,132
Equity
Preferred equity			4,145				4,145
Non-controlling interests			78,996				81,833
Common equity	12		27,925				30,868
Total equity			111,066				116,846
Total liabilities and equity			$	316,435			$	323,969

64 BROOKFIELD ASSET MANAGEMENT

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CONSOLIDATED STATEMENTS OF OPERATIONS 

			Three Months Ended								Six Months Ended
(UNAUDITED) FOR THE PERIODS ENDED JUN. 30 (MILLIONS, EXCEPT PER SHARE AMOUNTS)	Note		2020				2019				2020				2019
Revenues	13		$	12,829			$	16,924			$	29,415			$	32,132
Direct costs			(9,446		)		(13,385		)		(22,155		)		(24,970		)
Other income and gains			29				889				270				921
Equity accounted (loss) income	8		(631		)		1,003				(843		)		1,347
Expenses
Interest			(1,715		)		(1,833		)		(3,567		)		(3,449		)
Corporate costs			(25		)		(23		)		(49		)		(49		)
Fair value changes	14		(1,153		)		(1,398		)		(1,567		)		(1,229		)
Depreciation and amortization			(1,376		)		(1,234		)		(2,785		)		(2,268		)
Income taxes			(5		)		(239		)		(369		)		(475		)
Net (loss) income			$	(1,493	)		$	704			$	(1,650	)		$	1,960
Net (loss) income attributable to:
Shareholders			$	(656	)		$	399			$	(949	)		$	1,014
Non-controlling interests			(837		)		305				(701		)		946
			$	(1,493	)		$	704			$	(1,650	)		$	1,960
Net (loss) income per share:
Diluted	12		$	(0.43	)		$	0.24			$	(0.63	)		$	0.63
Basic	12		(0.43		)		0.25				(0.63		)		0.64

Q2 2020 INTERIM REPORT 65

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED) FOR THE PERIODS ENDED JUN. 30 (MILLIONS)			Three Months Ended								Six Months Ended
	Note		2020				2019				2020				2019
Net (loss) income			$	(1,493	)		$	704			$	(1,650	)		$	1,960
Other comprehensive income (loss)
Items that may be reclassified to net income
Financial contracts and power sale agreements			101				(134		)		(636		)		(130		)
Marketable securities			180				(4		)		140				41
Equity accounted investments	8		(13		)		(82		)		(186		)		(78		)
Foreign currency translation			423				45				(4,743		)		311
Income taxes			(13		)		18				28				7
			678				(157		)		(5,397		)		151
Items that will not be reclassified to net income
Revaluations of property, plant and equipment	10		(169		)		2				(245		)		2
Revaluation of pension obligations			(26		)		(8		)		(5		)		(15		)
Equity accounted investments	8		(202		)		(3		)		(220		)		(4		)
Marketable securities			270				(105		)		120				262
Income taxes			(5		)		4				(60		)		(46		)
			(132		)		(110		)		(410		)		199
Other comprehensive income (loss)			546				(267		)		(5,807		)		350
Comprehensive (loss) income			$	(947	)		$	437			$	(7,457	)		$	2,310
Attributable to:
Shareholders
Net (loss) income			$	(656	)		$	399			$	(949	)		$	1,014
Other comprehensive income (loss)			124				(160		)		(1,484		)		60
Comprehensive (loss) income			$	(532	)		$	239			$	(2,433	)		$	1,074
Non-controlling interests
Net (loss) income			$	(837	)		$	305			$	(701	)		$	946
Other comprehensive income (loss)			422				(107		)		(4,323		)		290
Comprehensive (loss) income			$	(415	)		$	198			$	(5,024	)		$	1,236

66 BROOKFIELD ASSET MANAGEMENT

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

																	Accumulated Other Comprehensive Income
(UNAUDITED) FOR THE THREE MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Common Share Capital				Contributed Surplus				Retained Earnings				Ownership Changes1				Revaluation Surplus				Currency Translation				Other Reserves2				Total Common Equity				Preferred Equity				Non- controlling Interests				Total Equity
Balance as at March 31, 2020	$	7,344			$	258			$	15,462			$	1,024			$	7,823			$	(3,351	)		$	105			$	28,665			$	4,145			$	79,637			$	112,447
Changes in period:
Net (loss) income	—				—				(656		)		—				—				—				—				(656		)		—				(837		)		(1,493		)
Other comprehensive income (loss)	—				—				—				—				(38		)		48				114				124				—				422				546
Comprehensive income (loss)	—				—				(656		)		—				(38		)		48				114				(532		)		—				(415		)		(947		)
Shareholder distributions
Common equity	—				—				(181		)		—				—				—				—				(181		)		—				—				(181		)
Preferred equity	—				—				(36		)		—				—				—				—				(36		)		—				—				(36		)
Non-controlling interests	—				—				—				—				—				—				—				—				—				(1,308		)		(1,308		)
Other items
Equity issuances, net of redemptions	1				(5		)		(73		)		—				—				—				—				(77		)		—				1,537				1,460
Share-based compensation	—				14				—				—				—				—				—				14				—				—				14
Ownership changes	—				—				207				154				(336		)		78				(31		)		72				—				(455		)		(383		)
Total change in period	1				9				(739		)		154				(374		)		126				83				(740		)		—				(641		)		(1,381		)
Balance as at June 30, 2020	$	7,345			$	267			$	14,723			$	1,178			$	7,449			$	(3,225	)		$	188			$	27,925			$	4,145			$	78,996			$	111,066

1.	Includes gains or losses on changes in ownership interests of consolidated subsidiaries.

2.	Includes changes in fair value of marketable securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated income taxes.

																	Accumulated Other Comprehensive Income
(UNAUDITED) FOR THE THREE MONTHS ENDED JUN. 30, 2019 (MILLIONS)	Common Share Capital				Contributed Surplus				Retained Earnings				Ownership Changes1				Revaluation Surplus				Currency Translation				Other Reserves2				Total Common Equity				Preferred Equity				Non- controlling Interests				Total Equity
Balance as at March 31, 2019	$	4,468			$	278			$	14,615			$	935			$	7,351			$	(1,714	)		$	461			$	26,394			$	4,149			$	68,021			$	98,564
Changes in period:
Net income	—				—				399				—				—				—				—				399				—				305				704
Other comprehensive income (loss)	—				—				—				—				2				(54		)		(108		)		(160		)		—				(107		)		(267		)
Comprehensive income (loss)	—				—				399				—				2				(54		)		(108		)		239				—				198				437
Shareholder distributions
Common equity	—				—				(153		)		—				—				—				—				(153		)		—				—				(153		)
Preferred equity	—				—				(38		)		—				—				—				—				(38		)		—				—				(38		)
Non-controlling interests	—				—				—				—				—				—				—				—				—				(1,919		)		(1,919		)
Other items
Equity issuances, net of redemptions	14				(12		)		(48		)		—				—				—				—				(46		)		(3		)		5,759				5,710
Share-based compensation	—				13				(8		)		—				—				—				—				5				—				—				5
Ownership changes	—				—				103				178				(5		)		—				(18		)		258				—				265				523
Total change in period	14				1				255				178				(3		)		(54		)		(126		)		265				(3		)		4,303				4,565
Balance as at June 30, 2019	$	4,482			$	279			$	14,870			$	1,113			$	7,348			$	(1,768	)		$	335			$	26,659			$	4,146			$	72,324			$	103,129

1.	Includes gains or losses on changes in ownership interests of consolidated subsidiaries.

2.	Includes changes in fair value of marketable securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated income taxes.

Q2 2020 INTERIM REPORT 67

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																	Accumulated Other Comprehensive Income
(UNAUDITED) FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Common Share Capital				Contributed Surplus				Retained Earnings				Ownership Changes1				Revaluation Surplus				Currency Translation				Other Reserves2				Common Equity				Preferred Equity				Non- controlling Interests				Total Equity
Balance as at December 31, 2019	$	7,305			$	286			$	16,026			$	1,010			$	7,876			$	(2,017	)		$	382			$	30,868			$	4,145			$	81,833			$	116,846
Changes in period:
Net (loss) income	—				—				(949		)		—				—				—				—				(949		)		—				(701		)		(1,650		)
Other comprehensive loss	—				—				—				—				(58		)		(1,271		)		(155		)		(1,484		)		—				(4,323		)		(5,807		)
Comprehensive loss	—				—				(949		)		—				(58		)		(1,271		)		(155		)		(2,433		)		—				(5,024		)		(7,457		)
Shareholder distributions
Common equity	—				—				(363		)		—				—				—				—				(363		)		—				—				(363		)
Preferred equity	—				—				(71		)		—				—				—				—				(71		)		—				—				(71		)
Non-controlling interests	—				—				—				—				—				—				—				—				—				(3,465		)		(3,465		)
Other items
Equity issuances, net of redemptions	40				(48		)		(182		)		—				—				—				—				(190		)		—				6,897				6,707
Share-based compensation	—				29				(30		)		—				—				—				—				(1		)		—				—				(1		)
Ownership changes	—				—				292				168				(369		)		63				(39		)		115				—				(1,245		)		(1,130		)
Total change in year	40				(19		)		(1,303		)		168				(427		)		(1,208		)		(194		)		(2,943		)		—				(2,837		)		(5,780		)
Balance as at June 30, 2020	$	7,345			$	267			$	14,723			$	1,178			$	7,449			$	(3,225	)		$	188			$	27,925			$	4,145			$	78,996			$	111,066

1.	Includes gains or losses on changes in ownership interests of consolidated subsidiaries.

2.	Includes changes in fair value of marketable securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated income taxes.

																	Accumulated Other Comprehensive Income
(UNAUDITED) FOR THE SIX MONTHS ENDED JUN. 30, 2019 (MILLIONS)	Common Share Capital				Contributed Surplus				Retained Earnings				Ownership Changes1				Revaluation Surplus				Currency Translation				Other Reserves2				Total Common Equity				Preferred Equity				Non- controlling Interests				Total Equity
Balance as at December 31, 2018	$	4,457			$	271			$	14,244			$	645			$	7,556			$	(1,833	)		$	307			$	25,647			$	4,168			$	67,335			$	97,150
Changes in period:
Net income	—				—				1,014				—				—				—				—				1,014				—				946				1,960
Other comprehensive income	—				—				—				—				2				13				45				60				—				290				350
Comprehensive income	—				—				1,014				—				2				13				45				1,074				—				1,236				2,310
Shareholder distributions
Common equity	—				—				(306		)		—				—				—				—				(306		)		—				—				(306		)
Preferred equity	—				—				(75		)		—				—				—				—				(75		)		—				—				(75		)
Non-controlling interests	—				—				—				—				—				—				—				—				—				(4,407		)		(4,407		)
Other items
Equity issuances, net of redemptions	25				(18		)		(85		)		—				—				—				—				(78		)		(22		)		6,657				6,557
Share-based compensation	—				26				(25		)		—				—				—				—				1				—				—				1
Ownership changes	—				—				103				468				(210		)		52				(17		)		396				—				1,503				1,899
Total change in year	25				8				626				468				(208		)		65				28				1,012				(22		)		4,989				5,979
Balance as at June 30, 2019	$	4,482			$	279			$	14,870			$	1,113			$	7,348			$	(1,768	)		$	335			$	26,659			$	4,146			$	72,324			$	103,129

1.	Includes gains or losses on changes in ownership interests of consolidated subsidiaries.

2.	Includes changes in fair value of marketable securities, cash flow hedges, actuarial changes on pension plans and equity accounted other comprehensive income, net of associated income taxes.

68 BROOKFIELD ASSET MANAGEMENT

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) FOR THE PERIODS ENDED JUN. 30 (MILLIONS)			Three Months Ended								Six Months Ended
	Note		2020				2019				2020				2019
Operating activities
Net (loss) income			$	(1,493	)		$	704			$	(1,650	)		$	1,960
Other income and gains			(29		)		(889		)		(270		)		(921		)
Share of undistributed equity accounted earnings			835				(838		)		1,328				(1,050		)
Fair value changes	14		1,153				1,398				1,567				1,229
Depreciation and amortization			1,376				1,234				2,785				2,268
Deferred income taxes			(96		)		7				72				56
Investments in residential inventory			(109		)		(3		)		(167		)		(34		)
Net change in non-cash working capital balances			(21		)		(810		)		(367		)		(1,109		)
			1,616				803				3,298				2,399
Financing activities
Corporate borrowings arranged			745				—				1,334				992
Corporate borrowings repaid			—				(450		)		(251		)		(450		)
Non-recourse borrowings arranged			5,779				23,726				16,654				32,122
Non-recourse borrowings repaid			(5,713		)		(10,490		)		(13,994		)		(17,486		)
Non-recourse credit facilities, net			981				178				(873		)		(262		)
Subsidiary equity obligations issued			73				180				195				182
Subsidiary equity obligations redeemed			(20		)		(25		)		(24		)		(30		)
Capital provided from non-controlling interests			1,649				6,296				8,018				7,899
Capital repaid to non-controlling interests			(112		)		(537		)		(1,121		)		(1,242		)
Repayment of lease liabilities			(140		)		(128		)		(271		)		(228		)
Preferred equity redemptions			—				(2		)		—				(15		)
Common shares issued			2				2				5				6
Common shares repurchased			(92		)		(58		)		(309		)		(93		)
Distributions to non-controlling interests			(1,308		)		(1,919		)		(3,465		)		(4,407		)
Distributions to shareholders			(217		)		(191		)		(434		)		(381		)
			1,627				16,582				5,464				16,607
Investing activities
Acquisitions
Investment properties			(1,206		)		(1,047		)		(2,081		)		(2,026		)
Property, plant and equipment			(579		)		(652		)		(1,992		)		(1,190		)
Equity accounted investments			(207		)		(340		)		(1,729		)		(1,265		)
Financial assets and other			(7,100		)		(2,526		)		(11,611		)		(4,127		)
Acquisition of subsidiaries			65				(17,066		)		(56		)		(19,319		)
Dispositions
Investment properties			253				786				544				1,700
Property, plant and equipment			13				63				55				77
Equity accounted investments			12				454				90				1,094
Financial assets and other			5,290				2,310				10,204				3,701
Disposition of subsidiaries			10				1,112				962				1,147
Restricted cash and deposits			(216		)		158				(138		)		229
			(3,665		)		(16,748		)		(5,752		)		(19,979		)
Cash and cash equivalents
Change in cash and cash equivalents			(422		)		637				3,010				(973		)
Net change in cash classified within assets held for sale			(3		)		34				21				(22		)
Foreign exchange revaluation			80				36				(286		)		52
Balance, beginning of period			9,868				6,740				6,778				8,390
Balance, end of period			$	9,523			$	7,447			$	9,523			$	7,447

 

Q2 2020 INTERIM REPORT 69

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.	CORPORATE INFORMATION

Brookfield Asset Management Inc. (the “Corporation”) is a global alternative asset management company. References in these financial statements to “Brookfield,” “us,” “we,” “our” or “the company” refer to the Corporation and its direct and indirect subsidiaries and consolidated entities. The company owns and operates assets with a focus on real estate, renewable power, infrastructure and private equity. The Corporation is listed on the New York and Toronto stock exchanges under the symbols BAM and BAM.A, respectively. The Corporation was formed by articles of amalgamation under the Business Corporations Act (Ontario) and is registered in Ontario, Canada. The registered office of the Corporation is Brookfield Place, 181 Bay Street, Suite 300, Toronto, Ontario, M5J 2T3.

2.	SIGNIFICANT ACCOUNTING POLICIES

a)	Statement of Compliance

The consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”) on a basis consistent with the accounting policies disclosed in the audited consolidated financial statements for the fiscal year ended December 31, 2019.

The consolidated financial statements should be read in conjunction with the most recently issued Annual Report of the company which includes information necessary or useful to understanding the company’s businesses and financial statement presentation. In particular, the company’s significant accounting policies were presented as Note 2 to the Consolidated Financial Statements for the fiscal year ended December 31, 2019 that were included in that report.

The consolidated financial statements are unaudited and reflect any adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for fair statement of results for the interim periods in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB.

The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The consolidated financial statements were authorized for issuance by the Board of Directors of the company on August 12, 2020.

b)    Estimates

The preparation of the interim financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates and assumptions. It also requires management to exercise judgment in applying the company’s accounting policies. The accounting policies and critical estimates and assumptions have been set out in Note 2, Significant Accounting Policies, to  the company’s consolidated financial statements for the year ended December 31, 2019 and have been consistently applied in the preparation of the interim financial statements as of and for the three and six months ended June 30, 2020.

The company continues to closely monitor developments related to the global economic shutdown. As government restrictions are being lifted and businesses are gradually re-opening, the company is implementing safety measures for employees to return to work safely and to ensure minimal interruption to the business with the transition. Our results reflect the impact of the shutdown on our businesses in the current quarter. The longer-term impacts of the shutdown will depend on future developments which are highly uncertain, rapidly evolving and difficult to predict. These impacts may differ in magnitude depending on a number of scenarios, which we continue to monitor and take into consideration in our decision making as we continue to assess medium to long-term impacts of the economic shutdown.

70 BROOKFIELD ASSET MANAGEMENT

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3.	SEGMENTED INFORMATION

a)	Operating Segments

Our operations are organized into five operating business groups in addition to our corporate and asset management activities, which collectively represent seven operating segments for internal and external reporting purposes. We measure performance primarily using funds from operations (“FFO”) generated by each operating segment and the amount of capital invested by the Corporation in each segment using common equity by segment.

Our operating segments are as follows:

i.

Asset management operations include managing our long-term private funds, perpetual strategies and public securities on behalf of our investors and ourselves, as well as our share of the asset management activities of Oaktree Capital Management (“Oaktree”). We generate contractual base management fees for these activities as well as incentive distributions and performance income, including performance fees, transaction fees and carried interest.

ii.	Real estate operations include the ownership, operation and development of core office, core retail, LP investments and other properties.

iii.	Renewable power operations include the ownership, operation and development of hydroelectric, wind, solar, storage and other power generating facilities.

iv.	Infrastructure operations include the ownership, operation and development of utilities, transport, energy, data infrastructure and sustainable resource assets.

v.	Private equity operations include a broad range of industries, and are mostly focused on business services, infrastructure services and industrials.

vi.	Residential development operations consist of homebuilding, condominium development and land development.

vii.

Corporate activities include the investment of cash and financial assets, as well as the management of our corporate leverage, including corporate borrowings and preferred equity, which fund a portion of the capital invested in our other operations. Certain corporate costs such as technology and operations are incurred on behalf of our operating segments and allocated to each operating segment based on an internal pricing framework.

b)	Segment Financial Measures

FFO is a key measure of our financial performance and our segment measure of profit and loss. It is utilized by our Chief Operating Decision Maker in assessing operating results and the performance of our businesses on a segmented basis. We define FFO as net income excluding fair value changes, depreciation and amortization and deferred income taxes, net of non-controlling interests. When determining FFO, we include our proportionate share of the FFO from equity accounted investments on a fully diluted basis. FFO also includes realized disposition gains and losses, which are gains or losses arising from transactions during the reporting period, adjusted to include associated fair value changes and revaluation surplus recorded in prior periods, taxes payable or receivable in connection with those transactions and amounts that are recorded directly in equity, such as ownership changes.

We use FFO to assess our performance as an asset manager and as an investor in our assets. FFO from our Asset Management segment includes fees, net of the associated costs, that we earn from managing capital in our listed affiliates, private funds and public securities accounts. We are also eligible to earn incentive payments in the form of incentive distributions, performance fees or carried interest. As an investor in our assets, our FFO represents the company’s share of revenues less costs incurred within our operations, which include interest expenses and other costs. Specifically, it includes the impact of contracts that we enter into to generate revenues, including power sales agreements, contracts that our operating businesses enter into such as leases and take or pay contracts and sales of inventory. FFO includes the impact of changes in leverage or the cost of that financial leverage and other costs incurred to operate our business.

We use realized disposition gains and losses within FFO in order to provide additional insight regarding the performance of investments on a cumulative realized basis, including any unrealized fair value adjustments that were recorded in equity and not otherwise reflected in current period FFO, and believe it is useful to investors to better understand variances between reporting periods. We exclude depreciation and amortization from FFO as we believe that the value of most of our assets typically increases over time, provided we make the necessary maintenance expenditures, the timing and magnitude of which may differ from the amount of depreciation recorded in any given period. In addition, the depreciated cost base of our assets is reflected in the ultimate realized disposition gain or loss on disposal. As noted above, unrealized fair value changes are excluded from FFO until the period in which the asset is sold. We also exclude deferred income taxes from FFO because the vast majority of the company’s deferred income tax assets and liabilities are a result of the revaluation of our assets under IFRS.

Q2 2020 INTERIM REPORT 71

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Our definition of FFO may differ from the definition used by other organizations, as well as the definition of FFO used by the Real Property Association of Canada (“REALPAC”) and the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), in part because the NAREIT definition is based on U.S. GAAP, as opposed to IFRS. The key differences between our definition of FFO and the determination of FFO by REALPAC and/or NAREIT are that we include the following: realized disposition gains or losses and cash taxes payable or receivable on those gains or losses, if any; foreign exchange gains or losses on monetary items not forming part of our net investment in foreign operations; and foreign exchange gains or losses on the sale of an investment in a foreign operation. We do not use FFO as a measure of cash generated from our operations.

We illustrate how we derive FFO for each operating segment and reconcile total FFO to net income in Note 3(c)(v) of the consolidated financial statements.

Segment Balance Sheet Information

We use common equity by segment as our measure of segment assets when reviewing our deconsolidated balance sheet because it is utilized by our Chief Operating Decision Maker for capital allocation decisions.

Segment Allocation and Measurement

Segment measures include amounts earned from consolidated entities that are eliminated on consolidation. The principal adjustment is to include asset management revenues charged to consolidated entities as revenues within the company’s Asset Management segment with the corresponding expense recorded as corporate costs within the relevant segment. These amounts are based on the in-place terms of the asset management contracts between the consolidated entities. Inter-segment revenues are determined under terms that approximate market value.

The company allocates the costs of shared functions that would otherwise be included within its Corporate Activities segment, such as information technology and internal audit, pursuant to formal policies.

c)	Reportable Segment Measures

AS AT AND FOR THE THREE MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Segments				Note
External revenues	$	55			$	1,848			$	1,035			$	2,096			$	7,247			$	447			$	101			$	12,829
Inter-segment revenues1	688				8				—				1				144				—				(13		)		828				i
Segmented revenues	743				1,856				1,035				2,097				7,391				447				88				13,657
FFO from equity accounted investments1	67				186				6				284				80				4				(5		)		622				ii
Interest expense	—				(755		)		(220		)		(261		)		(379		)		(4		)		(96		)		(1,715		)		iii
Current income taxes	—				—				4				(57		)		(23		)		(8		)		(17		)		(101		)		iv
Funds from operations	355				89				566				84				137				(11		)		(59		)		1,161				v
Common equity	4,950				17,825				4,398				2,336				3,494				2,503				(7,581		)		27,925
Equity accounted investments	4,548				21,083				1,037				7,797				3,741				378				629				39,213
Additions to non-current assets2	64				1,963				341				418				311				12				8				3,117

1.	We equity account for our investment in Oaktree and include our share of the FFO and FFO from equity accounted investments at 62%. However, for segment reporting, Oaktree’s revenue is shown on a 100% basis. For the three months ended June 30, 2020, $290 million of Oaktree’s revenues was included in our Asset Management segment revenue.

2.	Includes additions to equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill.

AS AT DEC. 31, 2019 AND FOR THE THREE MONTHS ENDED JUN. 30, 2019 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Segments				Note
External revenues	$	61			$	2,560			$	1,028			$	1,806			$	10,738			$	594			$	137			$	16,924
Inter-segment revenues	549				9				4				—				107				—				(15		)		654				i
Segmented revenues	610				2,569				1,032				1,806				10,845				594				122				17,578
FFO from equity accounted investments	—				241				11				271				85				13				3				624				ii
Interest expense	—				(884		)		(240		)		(250		)		(372		)		(12		)		(86		)		(1,844		)		iii
Current income taxes	—				(45		)		(15		)		(64		)		(94		)		(2		)		(12		)		(232		)		iv
Funds from operations	400				316				69				62				326				18				(83		)		1,108				v
Common equity	4,927				18,781				5,320				2,792				4,086				2,859				(7,897		)		30,868
Equity accounted investments	4,599				22,314				1,154				8,972				2,596				382				681				40,698
Additions to non-current assets1	—				1,925				199				594				17,505				13				7				20,243

1.	Includes additions to equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill.

72 BROOKFIELD ASSET MANAGEMENT

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FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Segments				Note
External revenues	$	116			$	4,463			$	2,065			$	4,369			$	17,339			$	855			$	208			$	29,415
Inter-segment and other revenues1	1,433				15				—				2				265				—				(17		)		1,698				i
Segmented revenues	1,549				4,478				2,065				4,371				17,604				855				191				31,113
FFO from equity accounted investments1	119				417				15				619				196				6				(24		)		1,348				ii
Interest expense	—				(1,597		)		(448		)		(552		)		(774		)		(12		)		(184		)		(3,567		)		iii
Current income taxes	—				(15		)		(16		)		(116		)		(98		)		(13		)		(39		)		(297		)		iv
Funds from operations1	735				308				632				221				302				(20		)		(133		)		2,045				v
Additions to non-current assets2	64				3,877				1,195				809				2,330				31				87				8,393

1.	We equity account for our investment in Oaktree and include our share of the FFO and FFO from equity accounted investments at 62%. However, for segment reporting, Oaktree’s revenue is shown on a 100% basis. For the six months ended June 30, 2020, $597 million of Oaktree’s revenues was included in our Asset Management segment revenue.

2.	Includes additions to equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill.

FOR THE SIX MONTHS ENDED JUN. 30, 2019 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Segments				Note
External revenues	$	107			$	5,150			$	2,060			$	3,537			$	19,882			$	1,033			$	363			$	32,132
Inter-segment revenues	1,022				20				15				—				201				—				(23		)		1,235				i
Segmented revenues	1,129				5,170				2,075				3,537				20,083				1,033				340				33,367
FFO from equity accounted investments	—				515				23				502				152				17				10				1,219				ii
Interest expense	—				(1,764		)		(466		)		(469		)		(579		)		(25		)		(173		)		(3,476		)		iii
Current income taxes	—				(61		)		(41		)		(129		)		(124		)		(5		)		(59		)		(419		)		iv
Funds from operations	723				566				223				256				501				(4		)		(106		)		2,159				v
Additions to non-current assets1	—				3,655				266				4,314				17,734				30				13				26,012

1.	Includes additions to equity accounted investments, investment properties, property, plant and equipment, sustainable resources, intangible assets and goodwill.

i.	Inter-Segment Revenues

For the three months ended June 30, 2020, the adjustment to external revenues when determining segmented revenues consists of asset management revenues earned from consolidated entities and asset management revenues earned by Oaktree totaling $688 million (2019 – $549 million), revenues earned on construction projects between consolidated entities totaling $144 million (2019 – $102 million), and other revenues totaling a net loss of $4 million (2019 – income of $3 million), which were eliminated on consolidation to arrive at the company’s consolidated revenues.

For the six months ended June 30, 2020, the adjustment to external revenues when determining segmented revenues consists of asset management revenues earned from consolidated entities and asset management revenues earned by Oaktree totaling $1.4 billion (2019 – $1.0 billions), revenues earned on construction projects between consolidated entities totaling $264 million (2019 – $193 million), and interest income and other revenues totaling $1 million (2019 – $20 million), which were eliminated on consolidation to arrive at the company’s consolidated revenues.

Q2 2020 INTERIM REPORT 73

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ii.	FFO from Equity Accounted Investments

The company determines FFO from its equity accounted investments by applying the same methodology utilized in adjusting net income of consolidated entities. The following table reconciles the company’s consolidated equity accounted income to FFO from equity accounted investments:

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				2020				2019
Consolidated equity accounted (loss) income	$	(631	)		$	1,003			$	(843	)		$	1,347
Non-FFO items from equity accounted investments1	1,253				(379		)		2,191				(128		)
FFO from equity accounted investments	$	622			$	624			$	1,348			$	1,219

1.	Adjustment to back out non-FFO expenses (income) that are included in consolidated equity accounted income including depreciation and amortization, deferred taxes and fair value changes from equity accounted investments.

iii.	Interest Expense

For the three months ended June 30, 2020, the adjustment to interest expense consists of interest on loans between consolidated entities totaling $nil (2019 – $11 million) that is eliminated on consolidation, along with the associated revenue.

For the six months ended June 30, 2020, the adjustment to interest expense consists of interest on loans between consolidated entities totaling $nil (2019 – $27 million) that is eliminated on consolidation, along with the associated revenue.

iv.	Current Income Taxes

Current income taxes are included in FFO but are aggregated with deferred income taxes in income tax expense on the company’s Consolidated Statements of Operations. The following table reconciles consolidated income taxes to current and deferred income taxes:

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				2020				2019
Current income tax expense	$	(101	)		$	(232	)		$	(297	)		$	(419	)
Deferred income tax recovery (expense)	96				(7		)		(72		)		(56		)
Income tax expense	$	(5	)		$	(239	)		$	(369	)		$	(475	)

v.	Reconciliation of Net (Loss) Income to Total FFO

The following table reconciles net (loss) income to total FFO:

			Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	Note		2020				2019				2020				2019
Net (loss) income			$	(1,493	)		$	704			$	(1,650	)		$	1,960
Realized disposition gains in fair value changes or equity	vi		469				7				562				239
Non-controlling interests in FFO			(1,501		)		(1,863		)		(3,482		)		(3,465		)
Financial statement components not included in FFO
Equity accounted fair value changes and other non-FFO items			1,253				(379		)		2,191				(128		)
Fair value changes			1,153				1,398				1,567				1,229
Depreciation and amortization			1,376				1,234				2,785				2,268
Deferred income taxes			(96		)		7				72				56
Total FFO			$	1,161			$	1,108			$	2,045			$	2,159

74 BROOKFIELD ASSET MANAGEMENT

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vi.    Realized Disposition Gains

Realized disposition gains include gains and losses recorded in net income arising from transactions during the current period, adjusted to include fair value changes and revaluation surplus recorded in prior periods in connection with the assets sold. Realized disposition gains also include amounts that are recorded directly in equity as changes in ownership, as opposed to net income, because they result from a change in ownership of a consolidated entity.

The realized disposition gains recorded in fair value changes, revaluation surplus or directly in equity were $469 million for the three months ended June 30, 2020 (2019 – $7 million), of which $5 million loss relates to prior periods (2019 – $11 million), $479 million has been recorded directly in equity as changes in ownership (2019 – $nil) and a loss of $5 million has been recorded in fair value changes (2019 – a gain of $18 million).

The realized disposition gains recorded in fair value changes, revaluation surplus or directly in equity were $562 million for the six months ended June 30, 2020 (2019 – $239 million), of which $38 million relates to prior periods (2019 – $58 million), $534 million has been recorded directly in equity as changes in ownership (2019 – $163 million) and a loss of $10 million has been recorded in fair value changes (2019 – gain of $18 million).

d)	Geographic Allocation

The company’s revenues by location of operations are as follows:

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				2020				2019
United States	$	4,111			$	4,228			$	8,650			$	7,731
Canada	1,330				1,393				2,813				3,229
United Kingdom	2,458				5,553				7,413				10,868
Europe	1,273				1,518				2,869				2,660
Australia	1,316				1,423				2,611				2,471
Brazil	767				1,020				1,626				1,946
Asia	771				702				1,434				1,221
Colombia	357				499				877				1,000
Other	446				588				1,122				1,006
	$	12,829			$	16,924			$	29,415			$	32,132

The company’s consolidated assets by location are as follows:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	2020				2019
United States	$	156,990			$	149,687
Canada	32,092				35,840
United Kingdom	28,301				30,184
Brazil	18,708				24,354
Europe	19,812				19,404
Australia	21,640				22,971
Asia	17,083				17,468
Colombia	8,892				10,819
Other	12,917				13,242
	$	316,435			$	323,969

Q2 2020 INTERIM REPORT 75

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4.	ACQUISITIONS OF CONSOLIDATED ENTITIES

During the six months ended June 30, 2020, Brookfield acquired $1.0 billion of total assets as well as assumed $766 million of total liabilities and non-controlling interest in equity through business combinations. Total cash consideration transferred for the business combinations was $248 million. The valuations of the assets acquired are still under evaluation and as such the business combinations have been accounted for on a provisional basis.

Brookfield recorded $66 million of revenue and $4 million of net loss in 2020 from the acquired operations as a result of the acquisitions made during the first six months. If the acquisitions had occurred at the beginning of the year, they would have contributed $102 million to total revenue and a $4 million net loss.

5.	RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

a)	Risk Management

The company`s activities expose it to a variety of financial risks, including market risk (i.e., commodity price risk, interest rate risk, and foreign currency risk), credit risk and liquidity risk. We use financial instruments primarily to manage these risks.

There have been no other material changes to the company’s financial risk exposure or risk management activities since December 31, 2019. Please refer to Note 26 of the December 31, 2019 audited consolidated financial statements for a detailed description of the company’s financial risk exposure and risk management activities.

b)	Financial Instruments

The following table lists the company’s financial instruments by their respective classification as at June 30, 2020 and December 31, 2019:

	2020								2019
AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	Carrying  Value				Fair Value				Carrying  Value				Fair Value
Financial assets
Cash and cash equivalents	$	9,523			$	9,523			$	6,778			$	6,778
Other financial assets
Government bonds	2,227				2,227				2,403				2,403
Corporate bonds	3,857				3,857				3,267				3,267
Fixed income securities and other	1,590				1,590				1,750				1,750
Common shares and warrants	4,833				4,833				3,189				3,189
Loans and notes receivable	1,846				1,846				1,859				1,859
	14,353				14,353				12,468				12,468
Accounts receivable and other	12,925				12,925				14,035				14,035
	$	36,801			$	36,801			$	33,281			$	33,281
Financial liabilities
Corporate borrowings	$	8,051			$	9,078			$	7,083			$	7,933
Non-recourse borrowings of managed entities
Property-specific borrowings	126,869				128,280				127,869				129,728
Subsidiary borrowings	9,493				9,694				8,423				8,632
	136,362				137,974				136,292				138,360
Accounts payable and other	35,548				35,548				36,724				36,724
Subsidiary equity obligations	4,201				4,201				4,132				4,139
	$	184,162			$	186,801			$	184,231			$	187,156

76 BROOKFIELD ASSET MANAGEMENT

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c)    Fair Value Hierarchy Levels

The following table categorizes financial assets and liabilities, which are carried at fair value, based upon the fair value hierarchy levels:

	2020												2019
AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
Financial assets
Other financial assets
Government bonds	$	4			$	2,223			$	—			$	—			$	2,403			$	—
Corporate bonds	62				3,017				258				—				2,682				275
Fixed income securities and other	379				728				483				419				851				480
Common shares and warrants	3,493				398				942				1,966				421				802
Loans and notes receivables	—				—				83				—				51				4
Accounts receivable and other	11				1,764				92				1				1,737				219
	$	3,949			$	8,130			$	1,858			$	2,386			$	8,145			$	1,780
Financial liabilities
Accounts payable and other	$	7			$	3,962			$	616			$	93			$	3,749			$	686
Subsidiary equity obligations	—				28				1,948				—				40				1,856
	$	7			$	3,990			$	2,564			$	93			$	3,789			$	2,542

During the three and six months ended June 30, 2020, there were no transfers between Level 1, 2 or 3.

Fair values of financial instruments are determined by reference to quoted bid or ask prices, as appropriate. If bid and ask prices are unavailable, the closing price of the most recent transaction of that instrument is used. In the absence of an active market, fair values are determined based on prevailing market rates for instruments with similar characteristics and risk profiles or internal or external valuation models, such as option pricing models and discounted cash flow analysis, using observable market inputs.

The following table summarizes the valuation techniques and key inputs used in the fair value measurement of Level 2 financial instruments:

(MILLIONS) Type of Asset/Liability		Carrying Value Jun. 30, 2020				Valuation Techniques and Key Inputs
Derivative assets/Derivative liabilities (accounts receivable/accounts payable)		$	1,764	/		Foreign currency forward contracts – discounted cash flow model – forward exchange rates (from observable forward exchange rates at the end of the reporting period) and discounted at credit adjusted rate   Interest rate contracts – discounted cash flow model – forward interest rates (from observable yield curves) and applicable credit spreads discounted at a credit adjusted rate   Energy derivatives – quoted market prices, or in their absence internal valuation models, corroborated with observable market data
		(3,962		)
Other financial assets		6,366				Valuation models based on observable market data
Redeemable fund units (subsidiary equity obligations)		(28		)		Aggregated market prices of underlying investments

Fair values determined using valuation models requiring the use of unobservable inputs (Level 3 financial assets and liabilities) include assumptions concerning the amount and timing of estimated future cash flows and discount rates. In determining those unobservable inputs, the company uses observable external market inputs such as interest rate yield curves, currency rates and price and rate volatilities, as applicable, to develop assumptions regarding those unobservable inputs.

Q2 2020 INTERIM REPORT 77

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The following table summarizes the valuation techniques and significant unobservable inputs used in the fair value measurement of Level 3 financial instruments:

(MILLIONS) Type of Asset/Liability		Carrying Value Jun. 30, 2020				Valuation Techniques		Significant Unobservable Inputs		Relationship of Unobservable Inputs to Fair Value
Fixed income securities and other		$	483			Discounted cash flows		•  Future cash flows		•  Increases (decreases) in future cash flows increase (decrease) fair value
								•  Discount rate		•  Increases (decreases) in discount rate decrease (increase) fair value
Corporate bonds		258				Discounted cash flows		•  Future cash flows		•  Increases (decreases) in future cash flows increase (decrease) fair value
								•  Discount rate		•  Increases (decreases) in discount rate decrease (increase) fair value
Common shares		942				Discounted cash flows		•  Future cash flows		•  Increases (decreases) in future cash flows increase (decrease) fair value
								•  Discount rate		•  Increases (decreases) in discount rate decrease (increase) fair value
						Black-Scholes model		•  Volatility		•  Increases (decreases) in volatility increase (decreases) fair value
								•  Term to maturity		•  Increases (decreases) in term to maturity increase (decrease) fair value
Limited-life funds (subsidiary equity obligations)		(1,948		)		Discounted cash flows		•  Future cash flows		•  Increases (decreases) in future cash flows increase (decrease) fair value
								•  Discount rate		•  Increases (decreases) in discount rate decrease (increase) fair value
								•  Terminal capitalization rate		•  Increases (decreases) in terminal capitalization rate decrease (increase) fair value
								•  Investment horizon		•  Increases (decreases) in the investment horizon decrease (increase) fair value
Derivative assets/Derivative liabilities (accounts receivable/payable)		92		/		Discounted cash flows		•  Future cash flows		•  Increases (decreases) in future cash flows increase (decrease) fair value
		(616		)
								•  Discount rate		•  Increases (decreases) in discount rate decrease (increase) fair value

The following table presents the changes in the balance of financial assets and liabilities classified as Level 3 for the periods ended June 30, 2020:

	Three Months Ended								Six Months Ended
AS AT AND FOR THE PERIODS ENDED JUN. 30, 2020 (MILLIONS)	Financial Assets				Financial Liabilities				Financial  Assets				Financial  Liabilities
Balance, beginning of period	$	1,769			$	2,549			$	1,780			$	2,542
Fair value changes in net income	(182		)		(48		)		(210		)		(47		)
Fair value changes in other comprehensive income1	—				(33		)		(21		)		(67		)
Additions, net of disposals	271				96				309				136
Balance, end of period	$	1,858			$	2,564			$	1,858			$	2,564

1.	Includes foreign currency translation.

78 BROOKFIELD ASSET MANAGEMENT

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6.    CURRENT AND NON-CURRENT PORTION OF ACCOUNT BALANCES

a)    Assets

	Other Financial Assets								Accounts Receivable and Other								Inventory
AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	2020				2019				2020				2019				2020				2019
Current portion	$	4,054			$	3,605			$	12,504			$	13,862			$	6,360			$	7,054
Non-current portion	10,299				8,863				4,636				4,607				3,852				3,218
	$	14,353			$	12,468			$	17,140			$	18,469			$	10,212			$	10,272

b)    Liabilities

	Accounts Payable and Other								Corporate Borrowings								Non-Recourse Borrowings of Managed Entities
AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	2020				2019				2020				2019				2020				2019
Current portion	$	21,908			$	23,212			$	—			$	—			$	19,091			$	15,713
Non-current portion	20,327				19,865				8,051				7,083				117,271				120,579
	$	42,235			$	43,077			$	8,051			$	7,083			$	136,362			$	136,292

7.	HELD FOR SALE

The following is a summary of the assets and liabilities classified as held for sale:

AS AT JUN. 30, 2020 (MILLIONS)	Real Estate				Renewable Power and Other				Total
Assets
Cash and cash equivalents	$	1			$	6			$	7
Accounts receivable and other	1				36				37
Investment properties	135				—				135
Property, plant and equipment	—				166				166
Equity accounted investments	—				197				197
Assets classified as held for sale	$	137			$	405			$	542
Liabilities
Accounts payable and other	$	—			$	23			$	23
Non-recourse borrowings of managed entities	70				63				133
Deferred income tax liabilities	—				17				17
Liabilities associated with assets classified as held for sale	$	70			$	103			$	173

As at June 30, 2020, assets held for sale within the company’s Real Estate segment include five triple net lease assets and an office asset in Brazil.

Within our Renewable Power segment, we are currently holding for sale solar assets in South Africa and Asia. Within our Infrastructure segment, we are currently holding for sale a Texas electricity transmission business.

For the six months ended June 30, 2020, we disposed of $3.2 billion and $1.7 billion of assets and liabilities held for sale, respectively. The majority of disposals relate to the sale of the Australian rail operation of Genesee & Wyoming, the Colombian regulated distribution business, and the sale of solar assets in Thailand.

Q2 2020 INTERIM REPORT 79

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8.	EQUITY ACCOUNTED INVESTMENTS

The following tables presents the change in the balance of investments in associates and joint ventures:

AS AT AND FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)
Balance, beginning of period	$	40,698
Additions, net of (disposals)1	1,945
Share of comprehensive loss	(1,249		)
Distributions received	(485		)
Return of capital	(40		)
Foreign currency translation and other	(1,656		)
Balance, end of period	$	39,213

1.	Includes assets sold, amounts reclassified to held for sale.

Additions, net of disposals, of $1.9 billion during the period relate primarily to the acquisition of a $1.3 billion interest in BrandSafway in the first quarter of 2020.

9.	INVESTMENT PROPERTIES

The following table presents the change in the fair value of the company’s investment properties:

AS AT AND FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)
Fair value, beginning of period	$	96,686
Additions	2,912
Dispositions1	(535		)
Fair value changes	(679		)
Foreign currency translation and other	(1,497		)
Fair value, end of period2	$	96,887

1.	Includes amounts reclassified to held for sale.

2.	Includes $3.0 billion of ROU investment property balances (December 31, 2019 – $2.6 billion).

Investment properties include the company’s office, retail, multifamily, logistics and other properties as well as highest and best-use land within the company’s sustainable resources operations. Additions of $2.9 billion primarily relates to the purchases of investment properties and enhancement of existing assets during the period.

80 BROOKFIELD ASSET MANAGEMENT

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The following table presents our investment properties measured at fair value:

AS AT JUN. 30, 2020 (MILLIONS)
Core office
United States	$	15,275
Canada	4,676
Australia	2,370
Europe	2,852
Brazil	269
Core retail	21,253
LP investments and other
LP investments office	8,367
LP investments retail	2,832
Logistics	136
Multifamily	2,776
Triple net lease	4,426
Self-storage	1,020
Student housing	2,564
Manufactured housing	2,517
Mixed-use	2,748
Directly held real estate properties	21,509
Other investment properties	1,297
	$	96,887

Significant unobservable inputs (Level 3) are utilized when determining the fair value of investment properties. The significant Level 3 inputs include:

Valuation Technique		Significant Unobservable Inputs		Relationship of Unobservable Inputs to Fair Value		Mitigating Factors
Discounted cash flow analysis1		•    Future cash flows – primarily driven by net operating income		•    Increases (decreases) in future cash flows increase (decrease) fair value		•    Increases (decreases) in cash flows tend to be accompanied by increases (decreases) in discount rates that may offset changes in fair value from cash flows
		•    Discount rate		• Increases (decreases) in discount rate decrease (increase) fair value		•    Increases (decreases) in discount rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from discount rates
		•    Terminal capitalization rate		• Increases (decreases) in terminal capitalization rate decrease (increase) fair value		•    Increases (decreases) in terminal capitalization rates tend to be accompanied by increases (decreases) in cash flows that may offset changes in fair value from terminal capitalization rates
		•    Investment horizon		•    Increases (decreases) in the investment horizon decrease (increase) fair value		•    Increases (decreases) in the investment horizon tend to be the result of changing cash flow profiles that may result in higher (lower) growth in cash flows prior to stabilizing in the terminal year

1.	Certain investment properties are valued using the direct capitalization method instead of a discounted cash flow model. Under the direct capitalization method, a capitalization rate is applied to estimated current year cash flows.

The company’s investment properties are diversified by asset type, asset class, geography and market. Therefore, there may be mitigating factors in addition to those noted above such as changes to assumptions that vary in direction and magnitude across different geographies and markets.

Q2 2020 INTERIM REPORT 81

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The following table summarizes the key valuation metrics of the company’s investment properties:

AS AT JUN. 30, 2020	Discount Rate			Terminal Capitalization Rate			Investment Horizon (years)
Core office
United States	7.0	%		5.7	%		12
Canada	5.9	%		5.2	%		10
Australia	6.5	%		5.8	%		10
Europe	5.1	%		4.0	%		10
Brazil	7.9	%		7.4	%		10
Core retail	6.9	%		5.4	%		10
LP investments and other
LP investments office	9.7	%		7.3	%		7
LP investments retail	8.6	%		7.0	%		10
Mixed-use	7.3	%		5.2	%		10
Logistics1	5.8	%		n/a			n/a
Multifamily1	5.0	%		n/a			n/a
Triple net lease1	6.2	%		n/a			n/a
Self-storage1	5.6	%		n/a			n/a
Student housing1	4.9	%		n/a			n/a
Manufactured housing1	5.5	%		n/a			n/a
Directly held real estate properties2	5.4% – 9.0%			6.2	%		13
Other investment properties1	8.9	%		n/a			n/a

1.	Logistics, multifamily, triple net lease, self-storage, student housing, manufactured housing and other investment properties are valued using the direct capitalization method. The rates presented as the discount rate represent the overall implied capitalization rate. The terminal capitalization rate and the investment horizon are not applicable.

2.	We use either the discounted cash flow or the direct capitalization method when valuing our directly held real estate properties. The rates presented as the discount rate represent the overall implied capitalization rates for investment properties that are valued using the direct capitalization approach.

82 BROOKFIELD ASSET MANAGEMENT

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10.	PROPERTY, PLANT AND EQUIPMENT

The company’s property, plant and equipment relates to the operating segments as shown below:

AS AT AND FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Renewable Power				Infrastructure				Real Estate				Private Equity and Other				Total
Balance, beginning of period	$	41,595			$	23,772			$	9,729			$	14,168			$	89,264
Additions	507				667				635				986				2,795
Acquisitions through business combinations	661				—				—				16				677
Dispositions1	(43		)		(82		)		(20		)		(105		)		(250		)
Depreciation and impairment	(656		)		(549		)		(590		)		(863		)		(2,658		)
Foreign currency translation and other	(2,203		)		(976		)		(245		)		(337		)		(3,761		)
Total change	(1,734		)		(940		)		(220		)		(303		)		(3,197		)
Balance, end of period2	$	39,861			$	22,832			$	9,509			$	13,865			$	86,067

1.	Includes amounts reclassified to held for sale.

2.

Our ROU PP&E assets include $2.1 billion (December 31, 2019 – $2.2 billion) in our Infrastructure segment, $807 million (December 31, 2019 – $796 million) in our Real Estate segment, $1.3 billion (December 31, 2019 – $1.1 billion) in our Renewable Power segment and $1.4 billion (December 31, 2019 – $1.3 billion) in Private Equity and other segments, totaling $5.6 billion (December 31, 2019 – $5.4 billion) of ROU assets.

Renewable Power

Perpetual renewable power assets, such as many of our hydroelectric facilities, are revalued using 20-year discounted cash flow models with a terminal value that is determined, where appropriate, using the Gordon growth model. For assets with finite lives, such as wind and solar farms, the cash flow model is based on the estimated remaining service life and the residual asset value is used to represent the terminal value. Since we generate revenues that are predominantly backed by long-term contracts with well diversified creditworthy counterparties, it is not expected that the valuation of the assets will be significantly impacted by the economic slowdown. Additionally, the majority of our assets are operated from centralized control centers and our operators around the world have implemented contingency plans to ensure operations, maintenance and capital programs continue with little disruption, maintaining the value of the associated long-lived assets.

Infrastructure

Revenues at our Infrastructure segment have largely been unaffected by the economic slowdown due to the long-term and contracted nature of the assets. Overall, our Transport businesses are the most gross domestic product sensitive and have therefore experienced some impacts during the economic shutdown. We currently view the economic shut down to be a short-term disruption which does not significantly impact the long-term outlook of these infrastructure businesses or the recoverable amount of their property, plant and equipment.

Real Estate

In the first half of 2020, the hospitality sector had the most immediate and acute impact from the shutdown as the majority of the company’s hospitality investments were closed, and currently remain closed or are operating a reduced occupancy, either as a result of mandatory closure orders from various government authorities or due to severe travel restrictions. As a result of these closures, the partnership identified impairment indicators and performed impairment tests for each of the company’s hospitality investments based on revised cash flows and valuation metrics. For the six months ended June 30, 2020, we recorded revaluation decreases of $355 million on PP&E of which $246 million reversed previously recognized valuation gains in other comprehensive income and the remainder was charged to net income in our Real Estate segment.

Private Equity

The Private Equity segment has a diversified portfolio of operating businesses in the industrial, business services, and infrastructure services sectors. While some of the businesses have been considered as essential services amid social distancing measures being taken globally and continued their operation during the economic shutdown, certain of our businesses have been impacted by the shutdown but have not reported a material decline in the value of the property, plant and equipment. We have recorded an impairment charge of $156 million from the impact of contract modifications, changes in lay-up cost estimates, revenue forecasts and timing of vessel re-contracting.

Q2 2020 INTERIM REPORT 83

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11.	SUBSIDIARY PUBLIC ISSUERS AND FINANCE SUBSIDIARY

Brookfield Finance Inc. (“BFI”) is an indirect 100% owned subsidiary of the Corporation that may offer and sell debt securities. Any debt securities issued by BFI are fully and unconditionally guaranteed by the Corporation. BFI issued:

•	$500 million of 4.25% notes due in 2026 on June 2, 2016;

•	$550 million of 4.70% notes due in 2047 on September 14, 2017;

•	$350 million of 4.70% notes due in 2047 on January 17, 2018;

•	$650 million of 3.90% notes due in 2028 on January 17, 2018;

•	$1.0 billion of 4.85% notes due in 2029 on January 29, 2019;

•	$600 million of 4.35% notes due in 2030 on April 9, 2020; and

•	$150 million of 4.35% notes due in 2030 on April 14, 2020.

Brookfield Finance LLC (“BFL”) is a Delaware limited liability company formed on February 6, 2017 and an indirect 100% owned subsidiary of the Corporation. BFL is a “finance subsidiary,” as defined in Rule 3-10 of Regulation S-X. Any debt securities issued by BFL are fully and unconditionally guaranteed by the Corporation. On March 10, 2017, BFL issued $750 million of 4.00% notes due in 2024. On December 31, 2018, as part of an internal reorganization, the 2024 notes were transferred to BFI. On February 21, 2020, BFL issued $600 million of 3.45% notes due in 2050. BFL has no independent activities, assets or operations other than in connection with any debt securities it may issue.

Brookfield Investments Corporation (“BIC”) is an investment company that holds investments in the real estate and forest products sectors, as well as a portfolio of preferred shares issued by the Corporation’s subsidiaries. The Corporation provided a full and unconditional guarantee of the Class 1 Senior Preferred Shares, Series A issued by BIC. As at June 30, 2020, C$37 million of these senior preferred shares were held by third-party shareholders and are retractable at the option of the holder.

84 BROOKFIELD ASSET MANAGEMENT

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The following tables contain summarized financial information of the Corporation, BFI, BFL, BIC and non-guarantor subsidiaries:

AS AT AND FOR THE THREE MONTHS ENDED JUN. 30, 2020 (MILLIONS)	The  Corporation1				BFI				BFL				BIC				Subsidiaries of the Corporation  Other than BFI, BFL and BIC2				Consolidating  Adjustments3				The Company  Consolidated
Revenues	$	(8	)		$	138			$	8			$	27			$	13,916			$	(1,252	)		$	12,829
Net (loss) income attributable to shareholders	(656		)		87				—				(13		)		680				(754		)		(656		)
Total assets	68,118				6,109				600				3,340				327,434				(89,166		)		316,435
Total liabilities	36,048				4,611				596				2,599				194,297				(32,782		)		205,369
AS AT DEC. 31, 2019 AND FOR THE THREE MONTHS ENDED JUN. 30, 2019	The  Corporation1				BFI				BFL				BIC				Subsidiaries of the Corporation  Other than BFI, BFL and BIC2				Consolidating  Adjustments3				The Company  Consolidated
Revenues	$	—			$	38			$	—			$	27			$	18,152			$	(1,293	)		$	16,924
Net income attributable to shareholders	399				30				—				8				633				(671		)		399
Total assets	70,976				5,389				—				3,520				331,698				(87,614		)		323,969
Total liabilities	35,963				3,994				—				2,239				195,586				(30,659		)		207,123
FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)	The  Corporation1				BFI				BFL				BIC				Subsidiaries of the Corporation  Other than BFI, BFL and BIC2				Consolidating  Adjustments3				The Company  Consolidated
Revenues	$	430			$	176			$	12			$	52			$	31,963			$	(3,218	)		$	29,415
Net (loss) income attributable to shareholders	(949		)		82				—				11				2,079				(2,172		)		(949		)
FOR THE SIX MONTHS ENDED JUN. 30, 2019 (MILLIONS)	The  Corporation1				BFI				BFL				BIC				Subsidiaries of the Corporation  Other than BFI, BFL and BIC2				Consolidating  Adjustments3				The Company  Consolidated
Revenues	$	(21	)		$	72			$	—			$	54			$	35,304			$	(3,277	)		$	32,132
Net income attributable to shareholders	1,014				34				—				16				1,969				(2,019		)		1,014

1.	This column accounts for investments in all subsidiaries of the Corporation under the equity method.

2.	This column accounts for investments in all subsidiaries of the Corporation other than BFI, BFL and BIC on a combined basis.

3.	This column includes the necessary amounts to present the company on a consolidated basis.

Q2 2020 INTERIM REPORT 85

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12.	EQUITY

Common Equity

The company’s common equity is comprised of the following:

AS AT JUN. 30, 2020 AND DEC. 31, 2019 (MILLIONS)	2020				2019
Common shares	$	7,345			$	7,305
Contributed surplus	267				286
Retained earnings	14,723				16,026
Ownership changes	1,178				1,010
Accumulated other comprehensive income	4,412				6,241
Common equity	$	27,925			$	30,868

The company is authorized to issue an unlimited number of Class A Limited Voting Shares ("Class A Shares") and 85,120 Class B Limited Voting Shares ("Class B Shares"). The company’s Class A shares and Class B shares have no stated par value. The holders of Class A shares and Class B shares rank on par with each other with respect to the payment of dividends and the return of capital on the liquidation, dissolution or winding up of the company or any other distribution of the assets of the company among its shareholders for the purpose of winding up its affairs. Holders of the Class A shares are entitled to elect half of the Board of Directors of the company and holders of the Class B shares are entitled to elect the other half of the Board of Directors. With respect to the Class A and Class B shares, there are no dilutive factors, material or otherwise, that would result in different diluted earnings per share between the classes. This relationship holds true irrespective of the number of dilutive instruments issued in either one of the respective classes of Class A and Class B shares, as both classes of shares participate equally, on a pro rata basis, in the dividends, earnings and net assets of the company, whether taken before or after dilutive instruments, regardless of which class of shares is diluted.

On April 1, 2020, the company completed a three-for-two stock split of the company’s outstanding Class A shares. All share count and per-share disclosure are presented a post-split basis.

The holders of the company’s Class A shares and Class B shares received cash dividends during the second quarter of 2020 of $0.12 per share (2019 – $0.11 per share).

The number of issued and outstanding Class A and Class B shares and unexercised options are as follows:

AS AT JUN. 30, 2020 AND DEC. 31, 2019	2020			20191
Class A shares2	1,511,444,429			1,509,208,521
Class B shares	85,120			85,120
Shares outstanding2	1,511,529,549			1,509,293,641
Unexercised options and other share-based plans3	60,336,551			70,018,161
Total diluted shares	1,571,866,100			1,579,311,802

1.	Adjusted to reflect the three-for-two stock split effective on April 1, 2020.

2.	Net of 61,032,215 Class A shares held by the company in respect of long-term compensation agreements as at June 30, 2020 (December 31, 2019 – 63,417,346).

3.	Includes management share option plan and escrowed stock plan.

86 BROOKFIELD ASSET MANAGEMENT

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The authorized common share capital consists of an unlimited number of Class A shares and 85,120 Class B shares. Shares issued and outstanding changed as follows:

	Three Months Ended						Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	20201			20191			20201			20191
Outstanding, beginning of period2	1,513,055,374			1,432,967,575			1,509,293,641			1,432,714,261
Issued (repurchased)
Repurchases	(2,618,685	)		(1,765,020	)		(5,513,309	)		(3,214,212	)
Long-term share ownership plans3	1,034,483			2,541,521			7,622,148			4,180,865
Dividend reinvestment plan and others	58,377			53,718			127,069			116,880
Outstanding, end of period4	1,511,529,549			1,433,797,794			1,511,529,549			1,433,797,794

1.	Adjusted to reflect the three-for-two stock split effective on April 1, 2020.

2.	Net of 58,434,060 Class A shares held by the company in respect of long-term compensation agreements as at March 31, 2020 (March 31, 2019 – 56,644,846) and 63,417,346 as at December 31, 2019 (December 31, 2018 – 56,307,796).

3.	Includes management share option plan and restricted stock plan.

4.	Net of 61,032,215 Class A shares held by the company in respect of long-term compensation agreements as at June 30, 2020 (June 30, 2019 – 58,393,135).

Earnings Per Share

The components of basic and diluted earnings per share are summarized in the following table:

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				2020				2019
Net (loss) income attributable to shareholders	$	(656	)		$	399			$	(949	)		$	1,014
Preferred share dividends	(36		)		(38		)		(71		)		(75		)
Dilutive effect of conversion of subsidiary preferred shares	49				(5		)		68				(18		)
Net (loss) income available to shareholders	$	(643	)		$	356			$	(952	)		$	921

	Three Months Ended						Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	20201			20191			20201			20191
Weighted average – Class A and Class B shares	1,512.1			1,433.3			1,511.7			1,433.2
Dilutive effect of the conversion of options and escrowed shares using treasury stock method	—			34.1			—			31.8
Class A and Class B shares and share equivalents	1,512.1			1,467.4			1,511.7			1,465.0

1.	Adjusted to reflect the three-for-two stock split effective on April 1, 2020.

Share-Based Compensation

The company and its consolidated subsidiaries account for stock options using the fair value method. Under the fair value method, compensation expense for stock options that are direct awards of stock is measured at fair value at the grant date using an option pricing model and recognized over the vesting period. Options issued under the company’s Management Share Option Plan (“MSOP”) vest over a period of up to five years, expire 10 years after the grant date, and are settled through issuance of Class A shares. The exercise price is equal to the market price at the grant date. During the three months ended June 30, 2020, the company did not grant any stock options. During the six months ended June 30, 2020, the company granted 3.3 million stock options at a weighted average exercise price of $45.21. The compensation expense was calculated using the Black-Scholes method of valuation, assuming an average 7.5-year term, 17.0% volatility, a weighted average expected dividend yield of 1.5% annually, a risk-free rate of 1.4% and a liquidity discount of 25%.

Q2 2020 INTERIM REPORT 87

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The company previously established an Escrowed Stock Plan whereby a private company is capitalized with preferred shares issued to Brookfield for cash proceeds and common shares (the “escrowed shares”) that are granted to executives. The proceeds are used to purchase Class A shares and therefore the escrowed shares represent an interest in the underlying Class A shares. The escrowed shares generally vest over five years and must be held to the fifth anniversary of the grant date. At a date no more than 10 years from the grant date, all escrowed shares held will be exchanged for a number of Class A shares issued from treasury of the company, based on the market value of Class A shares at the time of exchange. During the three months ended June 30, 2020, the company did not grant any escrowed shares. During the six months ended June 30, 2019, the company granted 3.8 million escrowed shares at a weighted average price $45.21. The compensation expense was calculated using the Black-Scholes method of valuation, assuming an average 7.5-year term, 17.0% volatility, a weighted average expected dividend yield of 1.5% annually, a risk-free rate of 1.4% and a liquidity discount of 25%.

13.	REVENUES

We perform a disaggregated analysis of revenues considering the nature, amount, timing and uncertainty of revenues. This includes disclosure of our revenues by segment and type, as well as a breakdown of whether revenues from goods or services are recognized at a point in time or delivered over a period of time.

a)	Revenue by Type

FOR THE THREE MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Revenues
Revenue from contracts with customers	$	55			$	402			$	927			$	1,828			$	6,866			$	426			$	—			$	10,504
Other revenue	—				1,446				108				268				381				21				101				2,325
	$	55			$	1,848			$	1,035			$	2,096			$	7,247			$	447			$	101			$	12,829

FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Revenues
Revenue from contracts with customers	$	116			$	1,261			$	1,928			$	3,936			$	16,579			$	814			$	—			$	24,634
Other revenue	—				3,202				137				433				760				41				208				4,781
	$	116			$	4,463			$	2,065			$	4,369			$	17,339			$	855			$	208			$	29,415

FOR THE THREE MONTHS ENDED JUN. 30, 2019 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Revenues
Revenue from contracts with customers	$	61			$	895			$	994			$	1,744			$	10,564			$	586			$	1			$	14,845
Other revenue	—				1,665				34				62				174				8				136				2,079
	$	61			$	2,560			$	1,028			$	1,806			$	10,738			$	594			$	137			$	16,924

FOR THE SIX MONTHS ENDED JUN. 30, 2019 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Revenues
Revenue from contracts with customers	$	107			$	1,838			$	1,987			$	3,418			$	19,509			$	1,018			$	1			$	27,878
Other revenue	—				3,312				73				119				373				15				362				4,254
	$	107			$	5,150			$	2,060			$	3,537			$	19,882			$	1,033			$	363			$	32,132

88 BROOKFIELD ASSET MANAGEMENT

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b)	Timing of Recognition of Revenue from Contracts with Customers

FOR THE THREE MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Revenues
Goods and services provided at a point in time	$	—			$	59			$	35			$	48			$	5,253			$	426			$	—			$	5,821
Services transferred over a period of time	55				343				892				1,780				1,613				—				—				4,683
	$	55			$	402			$	927			$	1,828			$	6,866			$	426			$	—			$	10,504

FOR THE SIX MONTHS ENDED JUN. 30, 2020 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Revenues
Goods and services provided at a point in time	$	—			$	335			$	65			$	91			$	13,314			$	810			$	—			$	14,615
Services transferred over a period of time	116				926				1,863				3,845				3,265				4				—				10,019
	$	116			$	1,261			$	1,928			$	3,936			$	16,579			$	814			$	—			$	24,634

FOR THE THREE MONTHS ENDED JUN. 30, 2019 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Revenues
Goods and services provided at a point in time	$	—			$	330			$	21			$	65			$	8,433			$	580			$	1			$	9,430
Services transferred over a period of time	61				565				973				1,679				2,131				6				—				5,415
	$	61			$	895			$	994			$	1,744			$	10,564			$	586			$	1			$	14,845

FOR THE SIX MONTHS ENDED JUN. 30, 2019 (MILLIONS)	Asset Management				Real Estate				Renewable Power				Infrastructure				Private Equity				Residential Development				Corporate Activities				Total Revenues
Goods and services provided at a point in time	$	—			$	648			$	39			$	153			$	15,090			$	1,012			$	1			$	16,943
Services transferred over a period of time	107				1,190				1,948				3,265				4,419				6				—				10,935
	$	107			$	1,838			$	1,987			$	3,418			$	19,509			$	1,018			$	1			$	27,878

14.	FAIR VALUE CHANGES

Fair value changes recorded in net income represent gains or losses arising from changes in the fair value of assets and liabilities, including derivative financial instruments, accounted for using the fair value method and are comprised of the following:

	Three Months Ended								Six Months Ended
FOR THE PERIODS ENDED JUN. 30 (MILLIONS)	2020				2019				2020				2019
Investment properties	$	(797	)		$	(624	)		$	(679	)		$	(99	)
Transaction related gains (losses), net of expenses	224				(174		)		—				(246		)
Financial contracts	(64		)		(180		)		94				(225		)
Impairment and provisions	(325		)		(333		)		(550		)		(364		)
Other fair value changes	(191		)		(87		)		(432		)		(295		)
	$	(1,153	)		$	(1,398	)		$	(1,567	)		$	(1,229	)

Q2 2020 INTERIM REPORT 89

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Shareholder Information

Shareholder Enquiries Shareholder enquiries should be directed to our Investor Relations group at: Brookfield Asset Management Inc. Suite 300, Brookfield Place, Box 762, 181 Bay Street Toronto, Ontario M5J 2T3 T: 416-363-9491 or toll free in North America: 1-866-989-0311 F: 416-363-2856 E: enquiries@brookfield.com www.bam.brookfield.com Shareholder enquiries relating to dividends, address changes and share certificates should be directed to our Transfer Agent: AST Trust Company (Canada) P.O. Box 700, Station B Montreal, Quebec H3B 3K3 T: 1-877-715-0498 (North America) 416-682-3860 (Outside North America) F: 1-888-249-6189 E: inquiries@astfinancial.com www.astfinancial.com/ca-en				Investor Relations and Communications We are committed to informing our shareholders of our progress through our comprehensive communications program which includes publication of materials such as our annual report, quarterly interim reports and news releases. We also maintain a website that provides ready access to these materials, as well as statutory filings, stock and dividend information and other presentations. Meeting with shareholders is an integral part of our communications program. Directors and management meet with Brookfield’s shareholders at our annual meeting and are available to respond to questions. Management is also available to investment analysts, financial advisors and media. The text of our 2019 Annual Report is available in French on request from the company and is filed with and available through SEDAR at www.sedar.com. Dividends The quarterly dividend payable on Class A shares is declared in U.S. dollars. Registered shareholders who are U.S. residents receive their dividends in U.S. dollars, unless they request the Canadian dollar equivalent. Registered shareholders who are Canadian residents receive their dividends in the Canadian dollar equivalent, unless they request to receive dividends in U.S. dollars. The Canadian dollar equivalent of the quarterly dividend is based on the Bank of Canada daily average exchange rate exactly two weeks (or 14 days) prior to the payment date for the dividend. Dividend Reinvestment Plan The Corporation has a Dividend Reinvestment Plan which enables registered holders of Class A Shares who are resident in Canada and the United States to receive their dividends in the form of newly issued Class A shares. Registered shareholders of our Class A shares who are resident in the United States may elect to receive their dividends in the form of newly issued Class A shares at a price equal to the volume-weighted average price (in U.S. dollars) at which the shares traded on the New York Stock Exchange based on the average closing price during each of the five trading days immediately preceding the relevant dividend payment date (the “NYSE VWAP”). Registered shareholders of our Class A shares who are resident in Canada may also elect to receive their dividends in the form of newly issued Class A shares at a price equal to the NYSE VWAP multiplied by an exchange factor which is calculated as the average of the daily average exchange rates as reported by the Bank of Canada during each of the five trading days immediately preceding the relevant dividend payment date. Our Dividend Reinvestment Plan allows current shareholders of the Corporation who are resident in Canada and the United States to increase their investment in the Corporation free of commissions. Further details on the Dividend Reinvestment Plan and a Participation Form can be obtained from our Toronto office, our transfer agent or from our website.
Stock Exchange Listings
	Symbol	Stock Exchange
Class A Limited Voting Shares	BAM	New York
	BAM.A	Toronto
Class A Preference Shares
Series 2	BAM.PR.B	Toronto
Series 4	BAM.PR.C	Toronto
Series 8	BAM.PR.E	Toronto
Series 9	BAM.PR.G	Toronto
Series 13	BAM.PR.K	Toronto
Series 17	BAM.PR.M	Toronto
Series 18	BAM.PR.N	Toronto
Series 24	BAM.PR.R	Toronto
Series 25	BAM.PR.S	Toronto
Series 26	BAM.PR.T	Toronto
Series 28	BAM.PR.X	Toronto
Series 30	BAM.PR.Z	Toronto
Series 32	BAM.PF.A	Toronto
Series 34	BAM.PF.B	Toronto
Series 36	BAM.PF.C	Toronto
Series 37	BAM.PF.D	Toronto
Series 38	BAM.PF.E	Toronto
Series 40	BAM.PF.F	Toronto
Series 42	BAM.PF.G	Toronto
Series 44	BAM.PF.H	Toronto
Series 46	BAM.PF.I	Toronto
Series 48	BAM.PF.J	Toronto

Dividend Record and Payment Dates
Security1		Record Date2		Payment Date3
Class A and Class B shares		Last day of February, May, August and November		Last day of March, June, September and December
Class A Preference shares
Series 2, 4, 13, 17, 18, 24, 25, 26, 28, 30
32, 34, 36, 37, 38, 40, 42, 44, 46 and 48		15th day of March, June, September and December		Last day of March, June, September and December
Series 8		Last day of each month		12th day of following month
Series 9		15th day of January, April, July and October		First day of February, May, August and November
1.    All dividend payments are subject to declaration by the Board of Directors. 2.    If the Record Date is not a business day, the Record Date will be the previous business day. 3.    If the Payment Date is not a business day, the Payment Date will be the previous business day.

90 BROOKFIELD ASSET MANAGEMENT

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Board of Directors and Officers

BOARD OF DIRECTORS

M. Elyse Allan, C.M.  Former President and Chief Executive Officer, General Electric Canada Company Inc. and former Vice-President, General Electric Co. Jeffrey M. Blidner Vice Chair, Brookfield Asset Management Inc. Angela F. Braly Former Chair of the Board, President and Chief Executive Officer, WellPoint, Inc. (now known as Anthem, Inc.) Jack L. Cockwell, C.M. Chair, Brookfield Partners Foundation Marcel R. Coutu Former President and Chief Executive Officer, Canadian Oil Sands Limited and former Chair of Syncrude Canada Ltd.	Murilo Ferreira Former Chief Executive Officer, Vale S.A. Bruce Flatt Chief Executive Officer, Brookfield Asset Management Inc. Janice Fukakusa, F.C.P.A., F.C.A. Former Chief Administrative Officer and Chief Financial Officer, Royal Bank of Canada  Maureen Kempston Darkes, O.C., O.ONT. Former President, Latin America, Africa and Middle East, General Motors Corporation Brian D. Lawson Vice Chair, Brookfield Asset Management Inc. Howard Marks Director and Co-chair, Oaktree Capital Group, LLC.	Hon. Frank J. McKenna, P.C., O.C., O.N.B. Chair, Brookfield Asset Management Inc. and Deputy Chair, Wholesale, TD Bank Group Rafael Miranda Former Chief Executive Officer, Endesa, S.A. Lord O’Donnell Chair, Frontier Economics Limited Seek Ngee Huat Former Chair of the Latin American Business Group, Government of Singapore Investment Corporation Diana L. Taylor Former Vice Chair, Solera Capital LLC

Details on Brookfield’s directors are provided in the Management Information Circular and on Brookfield’s website at www.brookfield.com.

CORPORATE OFFICERS

Bruce Flatt, Chief Executive Officer

Nicholas Goodman, Chief Financial Officer

Justin B. Beber, Head of Corporate Strategy and Chief Legal Officer

Brookfield incorporates sustainable development practices within our corporation.

This document was printed in Canada using vegetable-based inks on FSC^® stock.

Q2 2020 INTERIM REPORT 91

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