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corresp

July 6, 2006

Mr. Rufus Decker

Accounting Branch Chief

United States Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C.

20549-7010

    Re:

    Brookfield Asset Management Inc.

    Form 40-F for the Fiscal Year Ended December 31, 2006

    Your File No. 33-97038

Dear Mr. Decker:

I am responding at your request to questions raised by SEC staff during our conference call of June
23, 2006.

Enclosed with this letter is correspondence from our legal counsel, Torys LLP, which addresses the
questions raised during the conference call and, in particular, the doctrine of frustration as it
applies to the key issues in these circumstances as well as relevant case law.

As we stated during the call, the Series 10, 11 and 12 preferred shares issued by Brookfield are
very similar in nature to preferred shares issued by a number of Canadian public companies. There
are currently 33 series of preferred shares issued by 16 companies, with an aggregate value of $6.3
billion. The first issuance of securities of this nature occurred in 1998 and the terms of the
securities remained relatively consistent among subsequent issues. We reviewed a number of issues
and found that the holders’ conversion option and the relevant mechanics (i.e. the concept of the
greater of market price and $2.00 factor) is almost identical in each case. The only substantial
differences among the various issues are the length of time between issue and the availability of
the conversion rights, the currency (i.e. USD versus CAD), the dividend rate, and whether dividends
are cumulative or not.

Brookfield issued the relevant preferred shares between September 2001 and February 2003. At the
time of the first issue by Brookfield, the terms of the securities had become relatively
standardized and served as a precedent for the terms of our preferred shares. Accordingly, the
principal terms that were negotiated were the items in the last sentence of the preceding
paragraph. To our knowledge, there was no discussion concerning the possibility of Brookfield’s
common shares becoming unlisted while the preferred shares remained outstanding.

We submit that the prospect of an issuer’s common shares becoming unlisted was not a material
consideration for the underwriters at the time of issue because the issuers were well seasoned
mature public companies with solid investment grade credit ratings. Of the total value of
preferred shares outstanding, 71% are issued by companies rated A- or better, and the balance were
rated BBB or BBB+ at the time of issuance. Brookfield is rated A- (P2(low)) and A-low (P2(low)) by
Standard & Poor’s and DBRS, respectively. Moody’s rates Brookfield’s corporate debt at Baa3 but
does not provide a rating for Brookfield’s preferred shares.

In our view, the objective of the holder’s conversion option was to provide the holder with an
ability to monetize the preferred share for proceeds approximating the redemption value after a
pre-determined period of time without imposing any obligation on the company to fund the
monetization. This was to be achieved by giving the holder the ability to convert the preferred
share into a sufficient number of the issuers’ common shares which could in turn be sold in the
market. Absent this feature, the value of the preferred share would be influenced by changes in
interest rates and the company’s credit profile (i.e. as though it was a perpetual preferred
share).

As discussed above, the expectation at the time of issuance was that the issuer’s common shares
would continue to be listed and that the holder’s conversion option would operate as contemplated.
However, as discussed during our call, it is clear that there were circumstances whereby the
holder’s conversion offer provides value less than the $25.00 redemption value i.e. if the share
price is less than $2.00 per share. We believe it is important to stress that the economics of
this instrument provide the holder with limited upside and unlimited downside. If one can
reasonably assume that our theoretical share price would be close to zero immediately prior to a
cease-trade order, the value of the conversion option to the holder would be de minimis. We
believe that this economic outcome strengthens the legal opinion that a court would not impose new
obligations on the company as the holders’ rights pursuant to the original conversion terms become
virtually worthless in a cease trade scenario.

Furthermore, we submit that if it was intended that the company be required to issue unlisted
common shares in the event of a conversion request, the articles would have provided for an
appropriate valuation process, including a dispute resolution mechanic, owing to the lack of a
readily independently verifiable “price” for the common shares.

For these reasons, we continue to maintain that the holder’s conversion option is only operable
when the issuer’s common shares are listed and, failing that, the option is not operable and the
preferred shares remain outstanding as perpetual preferred shares until such time as the common
shares are re-listed or the company opts to redeem the preferred shares.

    2

We are anxious to resolve this matter, and would welcome the opportunity to discuss our response
with you in person or by telephone in order to provide you with any other information or commentary
that you would find helpful in achieving this.

Yours very truly,

Brian D. Lawson

Managing Partner & Chief Financial Officer

    3

    Suite 3000

79 Wellington St. W.

Box 270, TD Centre

Toronto, Ontario

M5K 1N2 Canada

tel
416.865.0040

fax 416.865.7380

www.torys.com

               July 6, 2006

Brookfield Asset Management Inc.

P.O. Box 762

Suite 300

BCE Place, 181 Bay Street

Toronto, ON

M5J 2T3

Dear Sirs/Mesdames:

          Re:     Conversion of Class A Preference Shares

          You have requested our advice with respect to the operation of the conversion privileges
attached to the Series 10, 11 and 12 Class A Preference Shares (the “Preference Shares”) in the
event that the Class A Limiting Voting Shares (the “Class A Shares”) were to be de-listed from the
Toronto Stock Exchange (the “TSX”). For this purpose, we have reviewed the rights, privileges,
restrictions and conditions attached to each Series of Preference Shares, as well as the relevant
provisions of the Business Corporations Act (Ontario).

          We are solicitors qualified to practice law in Ontario and this opinion is limited to the
laws of Ontario and the federal laws of Canada applicable therein.

          All capitalized terms which are used but not defined in this opinion have the meanings given
to them in the share conditions attached to the Preference Shares.

Conversion Privileges

          In summary terms, both the Corporation and the Holder have the right, on and after certain
dates, to convert all or any part of each Series of Preference Shares into freely tradeable Class
A Shares.1 The number of Class A Shares to which a Holder is entitled is determined by
dividing the applicable Redemption Price by the greater of (i) $2.00 or (ii) 95% of the weighted
average trading price of the Class A Shares on the TSX over a prescribed period (called the
Current Market Price). If a Holder exercises his or her conversion privilege, the

    1

    The share conditions attached to the Series 11 Preference Shares do not use the
phrase “freely tradeable”, but, for the reasons expressed below, this does not affect the
conclusions reached in this opinion.

- 2 -

Corporation may, at its option, either redeem all or part of the Subject Shares or cause the
Holder to sell all or part of the Subject Shares to another willing purchaser (if one can be
found). If either of those options is exercised, the Corporation is required to pay to the Holder
$25.00 per share, plus accrued and unpaid dividends.

Analysis

    (1)

    The Doctrine of Frustration

    A.

    General Principles

          The resolution of the issue addressed in this opinion involves the interpretation of the
share conditions attached to the Preference Shares, under applicable Canadian legal principles.
Under these principles, share conditions are interpreted in the same manner as are
contracts.2 In our opinion, if the Class A Shares of the Corporation were to be
de-listed from the TSX, neither the Corporation nor any Holder would be entitled to exercise their
respective conversion privileges. This is based on the doctrine of frustration, as it has evolved
and been developed under Canadian contract law principles.3 In our view, this doctrine
is applicable to the interpretation of the rights, privileges, restrictions and conditions
attached to the Preference Shares because they represent, or evidence, the contract (or bargain)
between the Holders and the Corporation. We begin first by summarizing the doctrine of frustration
under Canadian contract law.

          The premise underlying the doctrine of frustration is that there has occurred a supervening
event through the fault of neither party,4 and which their contract does not
contemplate, that constitutes such a fundamental change to the contractual relationship that the
parties ought to be discharged from their respective obligations. It has been expressed in the
following terms:

         ...[F]rustration occurs whenever the law recognises that
without default of either party a contractual obligation has become
incapable of being performed because the circumstances in which
performance is called for would render it a thing radically
different from that which was undertaken by contract... There must be
    ...     such a change in the

    2

    K. P. McGuinness, The Law and Practice of Canadian Business Corporations
(Toronto: Butterworths, 1999), §5.48, at 298: “The construction of share terms, conditions and restrictions is governed by the
ordinary rules of contractual interpretation.”

    3

    Contract law principles are virtually identical in all the common law provinces in
Canada (i.e., all provinces except
Québec), since those principles are essentially derived from English law. Hence, the references in this opinion to
“Canadian” contract law principles can be equated with “Ontario” contract law principles.

    4

    The term “fault” in this context means a deliberate or negligent act or omission on the part of the party invoking
the doctrine of frustration. It does not refer to something which the party cannot prevent or
which is beyond its control: see Paal Wilson & Co. A/S v. Partenreederei Hannah Blumenthal, [1983] 1 A.C. 854 (H.L.),
at 882 and 909; Denmark Productions Ltd. v. Boscobel Productions Ltd., [1969] 1 Q.B. 699, at 725 and 736-37;
Cheall v. Association of Professional, Executive, Clerical
& Computer Staff, [1983] 2 A.C. 180 (H.L.), at 188-89.

- 3 -

    significance of the obligation that the thing undertaken
would, if performed, be a different thing than that contracted
for.5

          In a subsequent leading decision, the concept of frustration was articulated as follows:

         Frustration of a contract takes place when there supervenes an
event (without default of either party and for which the contract
makes no sufficient provision) which so significantly changes the
nature (not merely the expense or onerousness) of the outstanding
contractual rights and/or obligations from what the parties could
reasonably have contemplated at the time of its execution that it
would be unjust to hold them to the literal sense of its
stipulations in the new circumstances; in such case the law
declares both parties to be discharged from further
performance.6

          These tests have been adopted and applied by Ontario courts.7 In effect, the
doctrine of frustration, in its modern formulation, is based on the construction of the contract in
issue.8 Thus, the question for the court is what, on an objective basis, the parties intended would
happen in light of the supervening event that actually occurred, taking into account the language
of the contract and the surrounding circumstances at the time the contract was entered into. The
key issue, therefore, is whether the situation which has developed, following the entering into of
the contract, was or was not within the scope of the contract or the reasonable expectations of the
parties, in each case viewed objectively. Accordingly, what is
not involved is a subjective inquiry
into the actual or presumed intentions of the parties.9

          In this context, two specific subsidiary questions arise. First, would the concept of
“partial frustration” apply, such that the frustration of a Holder’s conversion option would mean
that the parties’ respective rights and obligations under the conversion option are discharged,
but the remaining rights and privileges attached to the Preference Shares remain in full force and
effect? Second, does the doctrine of frustration apply where the events which ultimately occurred
were foreseeable by the parties but were not provided for by them in their contract? We will deal
with each of these questions separately.

    5

    Davis Contractors Ltd. v. Fareham Urban District Council, [1956] A.C. 696 (H.L.),
at 729. English cases are
regularly cited to, and relied upon by, Ontario courts as authoritative expressions of common law
contract principles.
The only exception is where English contract law rules diverge from the rules developed by Canadian courts,
especially the Supreme Court of Canada. That is not the case with respect to the doctrine of frustration.

    6

    National Carriers Ltd. v. Panalpina (Northern) Ltd., [1981] A.C. 675 (H.L.), at 700.

    7

    Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 61 D.L.R. (3d) 385 (Ont. C.A.); Victoria Wood
Development Corporation v. Ondrey (1978), 92 D.L.R. (3d) 229 (Ont. C.A.).

    8

    In its early formulation, the doctrine of frustration was based on an “implied term”.
This was on the theory that the
contract contained an implied term to the effect that if an underlying premise of the parties’
bargain ceased to exist,
then the bargain was frustrated. Modern courts have recognized that the implied term theory is based to a great
extent on a fiction, and thus that theory has given way over time to the “construction theory”.

    9

    G.H.L. Fridman, The Law of Contract in Canada, 4th ed. (Toronto: Carswell, 2000), at 675-77; Chitty on
Contracts, 29th ed. (London: Sweet & Maxwell, 2004), vol. I, at 1319-21.

- 4 -

    B.

    Partial Frustration

          The concept of “partial frustration” exists under Ontario contract law with the result that
if a particular provision in a contract has been frustrated (in the sense described above) and if
such a provision is severable from the rest of the contract and does not form the very essence of
the bargain the parties reached,10 then the provision will be held to have been
frustrated (i.e., the parties will be relieved of their obligations thereunder), but the remaining
provisions will remain in full force and effect:

         Yet in these cases it is clear that the contract as a
whole is not discharged: the argument is the more limited one that
the occurrence of some new circumstance may excuse (perhaps
temporarily) the performance of a particular obligation without
frustrating the whole contract.

         ...

         ...[I]t is suggested that, while there is much to be said for
recognizing that frustration operates within narrow confines, this
should not prevent the courts from recognizing that a contracting
party who, without fault on his part has been disabled from
performing part of his contractual obligations, may be able to rely
on the supervening event as an excuse for that
non-performance.11

          The leading authority on the doctrine of frustration expresses the concept of partial
frustration in the following terms:

         The common law rule is that if