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## ANNUAL FINANCIAL PERFORMANCE 

The following section contains a discussion and analysis of line items presented within our consolidated financial statements. We have disaggregated several of the line items into the amounts that are attributable to our eight operating segments in order to facilitate the review of variances. 

The financial data in this section has been prepared in accordance with IFRS for each of the three most recently completed financial years. The 2012 and 2011 consolidated IFRS results have been adjusted to reflect changes in the company’s accounting policies on a retroactive basis, as noted in Part 6 of this MD&A and Note 2 of the December 31, 2013 consolidated financial statements. 

## Overview 

## 2013 vs. 2012 

Net income attributable to shareholders of $2.12 billion increased $740 million or 54% from a year ago. On a per share basis, net income was $3.12 and $1.97 in the current and prior year, respectively. 

The increase in net income reflects improved operating performance in almost all of our operations. Of particular note, we earned $566 million of carried interests within our asset management activities and a $664 million gain on the sale of an investment within our private equity operations ($261 million attributable to shareholders), both of which are included in total revenue and other gains in our Consolidated Statement of Operations. We also recorded $525 million of other income on the settlement of long-dated interest rate swaps. Direct costs were virtually unchanged as the addition of costs within recently acquired or expanded operations were offset by the removal of costs associated with operations sold during the past two years. 

We recorded a lower level of fair value gains on consolidated investment property assets as well as those held through equity accounted investments, resulting in a decrease of $478 million in equity accounted income and a decrease of $490 million in fair value changes. Our provision for income taxes increased by $326 million, while the net income attributable to non-controlling interests increased by $349 million, reflecting the higher level of earnings. 

## 2012 vs. 2011 

In 2012, net income attributable to shareholders of $1.38 billion decreased by $577 million or 29% from 2011. Net income per share for was $1.97 for 2012 and $2.89 in 2011. 

The most significant contributor to the decrease in net income in 2012, compared to 2011, was the amount of fair value changes recorded in 2011, including our proportionate share of fair value gains recorded by equity accounted investments. The largest single factor was a decrease of $422 million in the equity accounted income from General Growth Properties (“GGP”) in 2012 compared to 2011, almost all of which was attributable to shareholders. The decrease reflects our share of the reduced amount of fair value gains recorded on GGP’s investment properties in 2012 relative to 2011. We also recorded a lower level of fair value gains in equity accounted commercial office properties relative to 2011 in part due to the consolidation of our U.S. Office Fund part way through that year. 

## Statement of Operations 

## Total Revenues and Other Gains and Direct Costs 

The following tables present consolidated total revenues and other gains and direct costs, which we have disaggregated into our operating segments, consistent with Note 3 to our consolidated financial statements, in order to facilitate a review of year-over- year variances. Segmented revenue is presented in the following table and reconciled to consolidated revenues. 

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1. Adjustment to eliminate base management fees and interest income earned from entities that we consolidate. See Note 3 to our Consolidated Financial Statements 

