Melcor Developments Ltd. — Annual Report 2020

Mar 17, 2021

MELCOR DEVELOPMENTS LTD. 2021

Annual Information Form March 17, 2021

Date of Information

All information contained in this annual information form is as at December 31, 2020 unless otherwise stated.

Other Information

Additional information about Melcor Developments Ltd. (Melcor), including our information circular, annual and quarterly reports, and all documents incorporated by reference in the Annual Information Form (AIF) are available on our website at Melcor.ca and on SEDAR at www.sedar.com .

Forward-looking Statements

In order to provide our investors with an understanding of our current results and future prospects, our public communications often include written or verbal forward-looking statements.

Forward-looking statements are disclosures regarding possible events, conditions, or results of operations that are based on assumptions about future economic conditions, courses of action and include future-oriented financial information.

This AIF and other materials filed with the Canadian securities regulators contain statements that are forward-looking. These statements represent Melcor’s intentions, plans, expectations, and beliefs and are based on our experience and our assessment of historical and future trends, and the application of key assumptions relating to future events and circumstances. Future-looking statements may involve, but are not limited to, comments with respect to our strategic initiatives for 2021 and beyond, future development plans and objectives, targets, expectations of the real estate, financing and economic environments, our financial condition or the results of or outlook of our operations.

By their nature, forward-looking statements require assumptions and involve risks and uncertainties related to the business and general economic environment, many beyond our control. There is significant risk that the predictions, forecasts, valuations, conclusions or projections we make will not prove to be accurate and that our actual results will be materially different from targets, expectations, estimates or intentions expressed in forward-looking statements. We caution readers of this document not to place undue reliance on forward-looking statements. Assumptions about the performance of the Canadian and US economies and how this performance will affect Melcor’s business are material factors we consider in determining our forward-looking statements. For additional information regarding material risks and assumptions, please see the discussion “Business Environment & Risks” in our annual MD&A for the year ended December 31, 2020, which is incorporated by reference.

Readers should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Except as may be required by law, we do not undertake to update any forward-looking statement, whether written or oral, made by the company or on its behalf.

		Table of Contents
Corporate Structure	2	Community Development	6	AUDIT COMMITTEE	14
Name, Address and Incorporation	2	Property Development	7	Audit Committee Charter	14
Intercorporate Relationships	2	Melcor REIT	8	Composition of the Audit Committee	14
General Development of the Business	3	Investment Properties	9	Preapproval Policy	14
Description of the Business	5	Recreational Properties	10	External Auditor Fees	14
General Information	5	**Dividends	Capital Structure	Market**	11
		for Securities
Products and Services	5	Directors & Officers	12	APPENDIX BPosition Description – Audit	19
				Committee Chair
Specialized Skill and Knowledge	5	Additional Information	13
Competitive Conditions	5	Transfer Agent & Registrar	13
Financing	5	Legal Proceedings & Regulatory Actions	13
Environmental Protection	6	Interest in Material Transactions	13
Employees	6	Names & Interests of Experts	13
Risk Factors	6	Material Contracts	13
		Additional Information	13

Melcor Developments Ltd. 2020 ANNUAL INFORMATION FORM

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CORPORATE STRUCTURE

Name, Address and Incorporation

Melton Real Estate Ltd. was amalgamated under the Companies Act of Alberta on August 1, 1967 and changed its name to Melcor Developments Ltd. on June 4, 1976. Melcor amalgamated with a wholly owned subsidiary on January 2, 1981, and again on December 31, 1992. In both instances it continued under the name Melcor Developments Ltd. On January 7, 1986, Melcor received a Certificate of Continuance pursuant to the Business Corporations Act of Alberta.

On April 13, 2006, the Certificate of Amalgamation was amended by dividing each authorized and unissued common share into ten common shares, so that after giving effect to the division, Melcor’s authorized capital consisted of 100,000,000 common shares and 50,000,000 non-voting First Preferred shares.

On April 19, 2007, the shareholders approved an amendment to Melcor’s Articles to change the authorized common voting shares from 100,000,000 to an unlimited number; the number of First Preferred shares authorized to be issued from 50,000,000 to an unlimited number; and to create a new class of common non-voting shares authorized to an unlimited number.

Intercorporate Relationships

Our corporate structure as at March 17, 2021 is depicted in the diagram below. Certain subsidiaries have been excluded on the basis that the subsidiary does not have assets or revenues greater than 10% of Melcor’s total consolidated assets or revenues. The combined assets or revenues of all omitted subsidiaries do not exceed 20% of Melcor’s total consolidated assets or revenues.

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1. Held through Melcor Holdings Limited Partnership, a whollyowned subsidiary of Melcor Developments Ltd.

On May 1, 2013, Melcor formed the Melcor Real Estate Investment Trust (the "Melcor REIT") through an initial public offering of Melcor REIT Units. Units of the Melcor REIT trade on the TSX under the symbol "MR.UN". As part of this transaction Melcor sold interests in a portfolio of income-producing properties to the Melcor REIT. Melcor currently has a 55.3% effective interest in the Melcor REIT and continues to manage, administer and operate the Melcor REIT and its properties under an asset management agreement and property management agreement. Melcor reflects the public’s 44.7% interest in the Melcor REIT as a financial liability on its financial statements.

Melcor’s head office and registered office is located at:

Melcor Developments Ltd. 900, 10310 - Jasper Avenue Edmonton, Alberta T5J 1Y8

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GENERAL DEVELOPMENT OF THE BUSINESS

Three-Year History

The significant events affecting Melcor’s business during the last three financial years and to the date of this AIF are summarized below:

2018

• On January 12, 2018, we announced the closing of the $80.875 million sale of 5 properties to Melcor REIT.

• On March 28, 2018 Melcor announced that the TSX had accepted its notice of intention to make a normal course issuer bid. 57,156 shares were purchased and cancelled in 2018.

• At Melcor's special meeting of shareholders on May 10, 2018, shareholders approved changes to Melcor's 2007 stock option plan and approved a new restricted share unit plan.

• On October 1, 2018 Melcor celebrated 50 years as a public company. Shares were originally listed on the Vancouver Stock Exchange and began trading on the Toronto Stock Exchange in 1972. Melcor paid dividends to shareholders every year except for three during the recession of the 1980s. Founded in 1923, Melcor also celebrated its 95th year of business.

• The Community Development division acquired 200.21 acres of land for future development in strategic growth corridors in . Acquisitions included 134.63 acres in the Edmonton area adjacent to current land inventory and 62.00 acres adjacent to current land inventory in the Phoenix area.

• The Property Development division completed 65,990 square feet of leasable space in 2018 (5 buildings).

• In the third quarter we acquired a 130,400 sf office property consisting of two buildings in Glendale, Arizona for $24.53 million (US$18.91 million). This property was 85% occupied on closing.

• On December 3, 2018, we acquired a 24,500 commercial building at a purchase price of $2.69 million in Lethbridge, AB.

• The Investment Property division managed a portfolio of 4.13 million sf gross leasable area in commercial space (at 100% ownership) and 609 residential units.

2019

• On March 28, 2019 Melcor announced that the TSX had accepted its notice of intention to make a normal course issuer bid. 69,100 shares were purchased and cancelled as of March 11, 2020.

• On October 10, 2019, Melcor announced that it would complete a private placement of between $10 million and $15 million worth of Class B LP units from the REIT.

• Melcor acquired 470.60 acres of land in strategic growth corridors. The acquired land is primarily allocated to residential development and includes 72.57 acres acquired in the US. While active development has slowed, we continue to move land use approvals through the municipal approval process to increase our supply of shovel ready assets.

• Our Property Development division completed and transferred 8 buildings (99,794 sf) in 2019 with a further 96,797 sf under development and 47,688 sf completed and awaiting lease up at year end.

• The REIT completed the following third-party acquisitions during the year:

• a 56,084 sf single tenant retail building with warehouse space in Calgary, AB for $12.45 million on April 24, 2019

• a 283,235 sf power shopping centre in Grande Prairie, AB for $54.8 million on November 12, 2019.

• We completed the following dispositions of US assets during the year:

• a residential unit in Pheonix, AZ was sold for $0.31 million (US$0.24 million) net of transaction costs on March 12, 2019.

• an office property in Denver, CO was sold for $8.76 million (US$6.32 million) net of transaction costs on December 31, 2019.

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2020

• On March 25, 2020, Melcor announced a number of measures taken in response to the COVID-19 global pandemic and the drastic drop in the price of Alberta oil, including:

• 17% reduction to Melcor's dividend

• reduced board remuneration

• temporary lay-off of approximately 25% of full-time staff

• wage roll-back for named executive officers and reduced remuneration of remainder of staff. At the end of the year, Melcor was successful in accessing the Canada Emergency Wage Subsidy Program (CEWS), receiving $2.51 million in funding under this program, from which we were able to roughly "make whole" the salaries of all continuing employees.

• deferred capital spending

• On March 30, 2020 Melcor announced that the TSX had accepted its notice of intention to make a normal course issuer bid. 109,416 shares were purchased and cancelled as of March 17, 2021.

• Active development, while slow and cautious at the beginning of the year with the uncertainty of the COVID-19 impact on home sales, was ramped up by the end of the year as we began running out of inventory in certain communities. We developed 459 new single-family lots and sold 770. With a year-end inventory of 648, we have less than 1 year of inventory based on 2020 sales velocity. We also continued to move land use approvals through the municipal approval process to increase our supply of shovel ready assets.

• Our Property Development division completed and transferred 11 buildings (132,498 sf) in 2020 with a further 84,606 sf under development and 51,158 sf completed and awaiting lease up at year end.

See also Melcor REIT’s 2021 Annual Information Form, which is incorporated by reference and is located at www.sedar.com.

Melcor Developments Ltd. 2020 ANNUAL INFORMATION FORM

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DESCRIPTION OF THE BUSINESS

General Information

Melcor is a real estate development and asset management company that traces its history back to 1923. We have operated and prospered for over 95 years due to stable and committed ownership and loyal and dedicated staff who are focused on the real estate industry. Melcor trades on the Toronto Stock Exchange under the symbol “MRD.”

Our main operations are in Alberta, specifically in the metropolitan areas of Calgary, Edmonton, Grande Prairie, Lethbridge and Red Deer. We also hold and operate assets across Western Canada (British Columbia and Saskatchewan) and the United States (Arizona and Colorado). We have five primary business segments: Community Development, Property Development, Melcor REIT, Investment Properties and Recreational Properties.

The following information applies in general to each of Melcor’s segments. Where individual segment characteristics differ, those differences are noted under the segment descriptions below.

Products and Services

We believe that we have the necessary capabilities to execute our strategic initiatives and achieve the performance targets set out in our business plan. Our management team is focused on ensuring a disciplined approach and hands-on management of our projects, assets, and capital.

Our depth of experience in the real estate industry provides a competitive advantage. Our business model is focused on sustainable returns over the long-term.

Specialized Skill and Knowledge

Melcor employs management and administrative personnel to manage our business. We use third-party contractors to carry out development and construction activities (such as planning, design, engineering, architecture, utilities servicing).

We also contract property management services for some assets in our Investment Properties and Melcor REIT divisions and we employed approximately 183 seasonal staff in our Recreational Properties division over the golf season.

Competitive Conditions

The real estate development and management industry is highly competitive, with a large number of well-financed companies operating in the same markets as Melcor. Our operations and assets are concentrated in and around major population and employment centers. We develop long-term relationships with the municipalities, construction industry, financial institutions and the people who live in these communities.

Our competitive position is shaped by our:

• Financial strength and proven track record

• Solid asset base, including raw land holdings

• Experienced personnel

The majority of our assets are located in Alberta, where oil and gas activity is a significant economic driver. While our direct reliance on oil and gas is minimal, our business is reliant on overall market conditions and consumer confidence.

Melcor maintains a strong financial position and is poised to take advantage of purchase opportunities that a softer real estate market may provide.

Financing

We maintain strong relationships with our major lenders. Our capital structure and liquidity allow continued access to financing in spite of fluctuations to credit markets and the economic environment.

Melcor uses fixed rate, long-term mortgages on its revenue producing assets to raise capital for acquisitions, development activities, and other business expenditures. As such, most of Melcor’s borrowings are in the form of long-term financings secured by specific assets.

Operations are supplemented by a syndicated operating line of credit with Canadian chartered banks, which margins Melcor’s land development assets (raw land inventory, land under development and agreements receivable). We also use fixed rate, long-term mortgage financing on our revenue producing assets to raise capital for acquisitions, development activities, and other business expenditures. As such, most of our borrowings are in the form of long-term, property specific financings such as mortgages or project financings secured by specific assets. Melcor also has project specific financings

Melcor Developments Ltd. 2020 ANNUAL INFORMATION FORM

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on residential community and commercial development projects.

Environmental Protection

Melcor’s development activities are subject to laws and regulations concerning the protection of the environment. For example, environmental laws or local bylaws may apply to a development site based on its environmental condition, present and former uses, and its adjoining properties. Environmental laws and conditions may result in delays, cause Melcor to incur significant compliance and other costs, and can severely restrict or prevent development in environmentally sensitive regions or areas. We employ a rigorous due diligence process prior to acquiring raw land, development sites or investment properties to mitigate our exposure to these potential issues.

Environmental protection requirements did not have a significant financial or operational effect on our capital expenditures, earnings or competitive position during 2020 and we do not expect significant effects in future years.

For more information on our Environmental, Social Responsibility and Governance (ESG) practices, please refer to the ESG section in our 2020 annual MD&A, incorporated by reference.

Employees

Melcor had 126 employees at December 31, 2020 and employed 183 seasonal employees in the summer months, primarily in the Recreational Properties division.

Total full-time permanent employment was down by 13% compared to December 31, 2019 as a result of staff reductions primarily in the Community and Property Development and Recreational Properties divisions last March as uncertainty related to COVID-19 set in. The following table shows the distribution of staff at the end of the year

	2019	2020	% change
Corporate 32 32 — %
Community Development 26 18 (31) %
Investment Properties 48 45 (6) %
Property Development 11 9 (18) %
Recreational Properties 27 22 (19) %
Total 144 126 (13) %

COMMUNITY DEVELOPMENT

Community Development acquires raw land and plans, services and markets urban communities. The majority of residential lots and parcels are sold to homebuilders that purchase sites through agreements for sale. The Community Development division also plans, services and markets large-scale commercial and industrial centres. In 2020, this segment accounted for 42% of consolidated revenue (2019 – 43%).

The following table summarizes Melcor’s raw land inventory (at Melcor ownership percentage) by region at December 31, 2020. Total raw land inventory was 10,500 acres.

	Commercial/	Commercial/
Region (in acres)	Industrial		Residential		Total
Northern Alberta		508		2,443		2,951
Edmonton		54		503		557
Leduc		232		469		701
Parkland		—		859		859
Spruce Grove		222		275		497
St. Albert		—		337		337
Southern Alberta		592		2,342		2,934
Airdrie		—		558		558
Calgary		49		615		664
Chestermere		—		2		2
Cochrane		—		130		130
Lethbridge		177		560		737
Rockyview		366		477		843
Central Alberta		145		1,633		1,778
Innisfail		129				129
Penhold				112		112
Red Deer				1,327		1,327
Red Deer County		16				16
Sylvan Lake				194		194
BC & Saskatchewan		616		554		1,170
Fraser-Fort George		—		94		94
Kelowna		—		460		460
Regina		616		—		616
USA		48		1,619		1,667
Aurora		42		1,163		1,205
Houston		—		135		135
Phoenix		—		321		321
Tucson		6		—		6
Total		1,909		8,591		10,500
Average cost per acre	$	19,294	$	44,238	$	38,642

Seasonality

Risk Factors

Reference is made to Melcor’s 2020 annual report, under the heading “Business Environment & Risks” which is incorporated by reference.

The Community Development division is seasonal by nature. The cyclical nature of real estate markets, the mix of land sold, and the mix of joint arrangement sales activity can cause period-to-period fluctuations in results.

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The division is also subject to the seasonality of the construction industry. Revenue is recognized when plans are registered, which tends to happen in the fourth quarter when development activity slows down and builders gain possession of lots.

For additional information regarding the Community Development division, see Melcor’s 2020 management’s discussion and analysis incorporated by reference in this AIF and filed on www.sedar.com.

PROPERTY DEVELOPMENT

Property Development acquires prime serviced commercial sites from the Community Development division to develop and lease high-quality retail, office, industrial and multi-family revenue-producing properties that deliver asset appreciation gains and/or stable longterm returns. In 2020, this segment accounted for 15% of pre-consolidated revenue (2019 - 15%).

Once completed and substantially leased, these assets are transferred to the Investment Properties division where they are held and managed. The Property Development division has developed over 2.5 million sf of office, retail and industrial space, with a further 84,606 square feet under current development and 51,158 awaiting leaseup. Participants in commercial projects include companies such as ATB, BMO, Canadian Tire, Canadian Western Bank, Cara, CIBC, Home Depot, Loblaws, McDonald’s, Rona, Royal Bank, Save-On-Foods, Scotiabank, Shoppers Drug Mart, Staples, Starbucks, Subway, TD Bank, Tim Hortons, Wal-Mart, Winners and more.

The following table provides a summary of our active development sites at December 31, 2020 representing 2,628,621 sf of future development potential.

Project	Location	Current Size1	Total Size3
Chestermere Station3, 4	Chestermere, AB	241,600	278,100
A 32-acre regional shopping centre located at Highway 1A and Windermere Blvd. This site is shadow-anchored by Safeway, and includes tenants such as ATB, RBC, TD Bank, Shoppers Drug Mart, Dollarama, Boston Pizza and Tim Hortons. We are currently constructing one CRU, which we anticipate completing in 2021.
Kingsview Market4	Airdrie, AB	200,601	331,000
A 46-acre regional shopping centre located at QEII Highway and Yankee Valley Blvd. This site is shadow-anchored by Home Hardware and includes national tenants such as RBC, Shoppers Drug Mart, Starbucks and ESSO. Two CRUs built in 2019 transferred in 2020.
Kingsview Commercial3	Airdrie, AB	33,500	33,500
A joint venture component of Kingsview Market as noted above. We completed two junior anchors (33,500 sf) in 2020 with tenant's taking possession in early 2021. This project is now complete.
Village at Blackmud Creek4	Edmonton, AB	198,905	550,000

Project Location Current Total Size[3] Size[1]

Project	Location Current Size1	Location Current Size1	Total Size3
A 33-acre regional business park located at Ellerslie Road and Calgary Trail. Tenants include: Fountain Tire, RBC Dominion Securities, CPA Western School of Business, Kids & Co, BBA engineering. Planning for commercial & mixed-use residential on remaining site; however timelines are not set.
West Henday Promenade4	Edmonton, AB	116,300	515,000
A 25-acre regional mixed-use commercial centre located at Anthony Henday Drive and 87thAvenue. Tenants include Sobeys, RBC, CIBC, Petro Canada, Sobeys Liquor, BrightPath, Edmonton Public Library and Shoppers Drug-Mart. Planning for commercial & mixed-use residential on the remaining 12.5 acres continues.
Telford Industrial4	Leduc, AB	143,118	500,000
An 80-acre industrial park with a 90,000 sf manufacturing facility, a 44,000 sf multi-national pipeline inspection company and a 10,000 sf scaffolding company. Melcor continues to compete on build to suit opportunities.
The District	Calgary, AB	563,768	1,285,000
A 115-acre regional business/industrial park located at QEII Highway and Country Hills Blvd SE. Approximately 8 acres has been sold to office/industrial developers and make up the bulk of the sf developed to date. We have recently completed 4 buildings totalling 51,000 sf, with 2 buildings transferred in 2020 and tenant possessions to be finalized in 2021 on the other 2.
Campsite Industrial	Spruce Grove, AB	13,700	170,000
A 280-acre industrial park located at Campsite Road & Highway 16A, including a 15-acre industrial campus for Northern Alberta Institute of Technology.
Clearview Market 2	Red Deer, AB	3,010	80,000
Phase 2 of the regional shopping centre located at 67th Street and 30th Avenue, consisting of 10.5-acres acquired following a road realignment. This site is shadow-anchored by Loblaws and includes national tenants such as RBC, TD Bank, Servus, CIBC and Shoppers Drug Mart. Phase 1 was fully built out in 2015. We recently completed two retail buildings totaling 11,000 sf and anticipate completing two additional buildings totaling 10,000 sf in 2021.
Shoppes at Jagare Ridge3	Edmonton, AB	105,000	105,000
A 12-acre regional shopping centre located at 141stStreet and 28th Avenue. The centre is shadow anchored by Save-On Foods. Tenants include RBC, Liquor Depot, Dairy Queen, Kids & Co and various medical and professional services. We completed and transferred 39,000 sf in 2020 which completes all construction on this site.
Jensen Lakes Crossing	St. Albert, AB	95,713	150,000
A 17-acre regional shopping centre located on St. Albert Trail and Jensen Lakes Blvd. The site is anchored by Landmark Cinemas which opened in 2018. We completed and transferred 2 CRUs in 2020 and are currently under construction on another CRU (4,400 sf).
Woodbend Market	Leduc, AB	3,000	140,000
A 14-acre neighbourhood shopping centre located on 50th Ave and 69th St. We completed and transferred a gas station in 2019. We recently completed a 10,000 sf multi-bay CRU building with possession anticipated for 2021.
Greenwich Village	Calgary, AB	—	325,000
A 17-acre mixed-used shopping centre and office park located at Highway 1 and 83rdStreet NW. The site now has access off of Highway 1 and is serviced. Construction has commenced on 62,000 sf with tenant possession to take place in late 2021.
Vista Ridge3	Sylvan Lake, AB	—	20,000
A 5.5-acre neighbourhood shopping centre located at Highway 20 and Memorial Trail. The project is expected to commence in mid-2021 with a 3,500 sf CRU.

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1. Current size equals existing total leasable square footage in the project, including buildings sold to retailers.

2. Total project size represents the estimated total square footage to be developed in the project when fully built out. This includes sites that may be individually sold to retailers or end-users.

3. Joint arrangement projects are at 100%.

4. Certain completed buildings have been acquired by Melcor REIT.

The following table summarizes Melcor’s future property development sites. Note that projected/anticipated commencement dates and project GLA are subject to a number of factors, included pre-lease thresholds and may not materialize as scheduled or may be adjusted to reflect market conditions.

Project Location	Project Location	Total Project Size (Sf)1
Laredo	Red Deer, AB	10,000
A 4-acre neighbourhood shopping centre located at 22ndStreet and 20thAvenue. This project is scheduled to commence in 2022.
Mattson2	Edmonton, AB	75,000
A 9-acre neighbourhood shopping centre located at 66 Street and 25th Avenue. Planning is underway with a projected commencement in 2024+.
Secord	Edmonton, AB	75,000
A 9-acre neighbourhood shopping centre located in West Edmonton. Planning is underway with project commencement expected in 2022.
Rosenthal	Edmonton, AB	30,000
A 9-acre mixed-use urban village located in West Edmonton. Planning is underway with project commencement expected in 2024+.
Rollyview	Leduc, AB	75,000
A 10-acre neighbourhood shopping centre located at Rollyview Road & Black Gold Drive in Leduc. Planning is in progress and the project is scheduled to commence 2024+.
Westview Commercial	Calgary, AB	150,000
A 15-acre neighbourhood shopping centre located at Highway 1 and Old Banff Coach Road. This project is scheduled for 2024+.
Keystone Common	Calgary, AB	700,000
An 80-acre regional power centre located at Stoney Trail and 11th Street NE. This project is scheduled to commence in 2023.
The Shoppes at Canyons	Lethbridge, AB	105,000
A 12-acre regional shopping centre located at University Drive and Chinook Trail West. This project is scheduled to commence in 2023.
West Pointe Marketplace	Lethbridge, AB	750,000
An 85-acre regional power centre located at Highway 3 and University Drive West. This project is scheduled for 2024+.
Sora	Calgary, AB	60,000
An 8-acre neighbourhood shopping centre located in south Calgary. Planning is in progress and the project is scheduled to commence 2024+.

Seasonality

The Property Development division is seasonal by nature. Construction activity is highly weather dependent. Delays may increase the cost of construction.

For additional information regarding the Property Development division, see Melcor’s 2020 management’s discussion and analysis incorporated by reference in this AIF and filed on www.sedar.com.

MELCOR REIT

Melcor REIT is an unincorporated, open-ended real estate investment trust that owns 3.21 million sf of GLA throughout western Canada. See Melcor REIT’s 2020 Annual Information Form, which is incorporated by reference and is located at www.sedar.com.

In 2020, this segment accounted for 27% of consolidated revenues (2019 - 25%).

1. Total project size represents the estimated total square footage to be developed in the project when fully built out. This includes sites that may be individually sold to retailers or end-users.

2. Joint arrangement project.

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INVESTMENT PROPERTIES

Melcor acquires and owns a portfolio of high-quality residential, office, retail, and industrial properties, which are held as long-term investments. The Investment Properties division manages and leases these Melcorowned properties in addition to the 39 assets held in the Melcor REIT. In total, Investment Properties manages 4.63 million sf GLA in commercial revenue-generating properties and 604 residential units located across Western Canada and the southern United States. In 2020, this segment accounted for 14% of consolidated revenues (2019- 14%).

The following tables detail Melcor’s investment property holdings at December 31, 2020:

Commercial Properties Year Acquired Type GLA (JV%)2	% Leased3
	2019 2018
CANADA 478,359	79 84
Campsite 2016 Industrial 13,654	100 100
Clearview Market1 2012-20 Retail/ Office 39,395	95 96
Jensen Lakes 2018 Retail 76,695	94 83
Kingsview Market 2020 Retail 18,701	38 —
Kingsview Commercial1 2020 Retail 17,066	69 —
McKenzie Industrial 2014 Retail 67,273	88 88
Robertson Gallery 2008 Retail 6,000	100 100
Shoppes of Jagare Ridge1 2018 Retail 34,662	80 87
Stafford Common 2018 Retail 39,500	62 62
Stoneycreek1 2014 Retail/ Office 66,528	91 95
The District 2019 Retail 35,173	11 100
Village at Blackmud Creek 2019 Office 56,524	85 63
Woodbend 2019 Retail 3,130	100 100
Yardstick1 2016 Office 4,058	100 100
USA 519,056	88 88
Chauncey 2014 Office 34,807	89 89
Evans 2015 Office 47,666	92 92
Glendale 2018 Office 130,414	92 92
Inverness 2016 Office 95,127	83 83
Promenade 2016 Office 128,383	81 81
Syracuse 2016 Office 82,659	91 91
Total @ 100% ownership 1,291,278	82 86
Total net of JV ownership 997,414	81 86

1. Owned through joint arrangement. GLA at Melcor %.

2. Gross leasable area is updated periodically, typically as leases renew.

3. Based on gross leasable area.

dl				% Leased	% Leased
Resientia Properties	Location		Units	2020	2019
Brownstones at Biltmore	Phoenix, AZ 2011		10 100 90
Dakota at Camelback	Phoenix, AZ 2009		113 96 99
Edward Street Apartments	Edmonton, AB 2006		11 27 100
Northridge Apartments	St. Albert, AB 2016		72 96 92
The Edge at Grayhawk2	Scottsdale, AZ 2011		88 100 99
The Shores	Scottsdale, AZ		2 n/a n/a
Watergrove1	Calgary, AB 1995		308 100 100
Total			604 97 98

1. Watergrove is a land lease community that Melcor manages for Melcor REIT.

2. We sold 4 units from The Edge in 2020 for $1.11 million Canadian (US$0.84 million).

		Year	Number
Parking Lots	Location	Acquired	of Stalls
104th Street	Edmonton, AB	2001	28
102nd Street	Edmonton, AB	2009	45
Executive Terrace	Regina, SK	2007	59
Melcor Centre	Lethbridge, AB	2007	497
Richter Street	Kelowna, BC	2007	26
Royal Bank	Edmonton, AB	2005	330
Northridge Place	St. Albert, AB	2016	85
Yardstick	Edmonton, AB	2015	6
Village at Blackmud Creek	Edmonton, AB	2013/2016	432
Stoney Creek	Fort McMurray,	2013	445
	AB
Total			1,953

		Year	Size
Development Sites	Location	Acquired	(Sf)
124 Street Area	Edmonton, AB	1999		7,740
Jasper Avenue Park	Edmonton, AB	2005		24,000
Market Tire Site	Edmonton, AB	2011		15,000

For a list of Melcor REIT owned properties that Investment Properties manages under Property Management and Asset Management agreements, refer to the Melcor REIT 2020 Annual Information Form, incorporated by reference.

Seasonality

The Investment Properties division enters long-term leases and is not subject to seasonal variations.

For additional information regarding the Investment Properties division see the Melcor and Melcor REIT 2020

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management’s discussion and analysis incorporated by reference in this AIF and filed on www.sedar.com.

RECREATIONAL PROPERTIES

Melcor owns and manages three 18-hole championship golf courses in Alberta and British Columbia, and has a 50% interest in a fourth course managed by a third party as follows:

Golf Course	Ownership	Location
The Links at Spruce Grove	100%	Spruce Grove, AB
Black Mountain Golf Club	100%	Kelowna, BC
Lewis Estates Golf Course	60%	Edmonton, AB
Jagare Ridge Golf Club1	50%	Edmonton, AB

1. Managed by third party.

Competitive Conditions

The number of golf courses in the Edmonton region has grown substantially over the past 25 years, leading to pressure to remain competitively priced and offer a great golf experience. In spite of challenging competitive conditions and unpredictable weather conditions over the golf season, Melcor’s golf courses remain profitable.

Our competitive advantage is that our golf courses are optimized to balance consistent playing conditions and player experience while paying close attention to the bottom line.

Seasonality

This division is significantly impacted by weather conditions. Revenue is highly dependent on the number of golf rounds that can be sold throughout the golf season and maintenance and operations costs can be impacted by precipitation and weather patterns throughout the whole year as well as severe weather events.

For additional information regarding the Recreational Properties division, see Melcor’s 2020 management’s discussion and analysis, incorporated by reference in this AIF and filed on www.sedar.com.

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DIVIDENDS | CAPITAL STRUCTURE | MARKET FOR SECURITIES

Dividends

In setting dividends, Melcor’s Board of Directors considers relevant factors such as company performance and financial condition, earnings, availability of cash and capital requirements. The board determines the timing and amount of future dividends on Melcor’s common shares based on these factors.

The following table sets forth the cash dividends paid out per common share:

Per common share	2020	2019	2018
Payable on or before March 31	$0.10	$0.13	$0.13
Payable on or before June 30	$0.08	$0.13	$0.13
Payable on or before September 30	$0.08	$0.13	$0.13
Payable on or before December 31	$0.08	$0.13	$0.13
Total	$0.34	$0.52	$0.52

General Description of Capital Structure

Market For Securities

Melcor’s common shares are listed on The Toronto Stock Exchange (TSX) under the symbol “MRD”. Trading information (TSX platform only) for the period January 1, 2020 to December 31, 2020 is set out below:

	High	Low	Close	Volume
January	13.45	12.51	12.78	60,369
February	13.00	11.71	12.17	65,637
March	12.46	5.58	7.30	215,938
April	7.52	6.55	6.99	179,206
May	7.75	5.95	7.45	126,433
June	8.90	6.25	7.53	148,843
July	8.04	7.26	7.42	81,947
August	7.80	6.55	6.60	267,965
September	6.67	5.77	5.83	233,659
October	6.19	5.83	5.93	337,178
November	8.07	5.95	7.93	645,060
December	10.00	7.92	9.42	280,170

Melcor has the following share capital:

• Unlimited Voting Common Shares (33,091,061 issued and outstanding as at December 31, 2020)

• Unlimited Non-Voting Common Shares (none issued)

• Unlimited Non-Voting First Preferred Shares (none issued)

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DIRECTORS & OFFICERS

Directors

Each director holds office from the date of election until the next annual general meeting of the shareholders. The following table lists the directors of Melcor, their province of residence, period of service as a director and their principal occupation during the five preceding years:

Name and	Position	Principal	Director
Municipality of Residence	with Melcor	Occupation	Since
Gordon J. Clanachan,	Director	Corporate Director	2009
FCA, ICD.D2		and Consultant
Edmonton,Alberta
Ross A. Grieve	Director	Vice Chair,	2003
Edmonton, Alberta		PCL Construction
		Holdings Ltd.
Andrew J. Melton1	Director	Corporate Director	1985
Calgary, Alberta		2017-19: REIT CEO
		pre 2017: Vice-
		Executive Chair,
		Melcor
		Developments
Kathleen M. Melton1	Director	Development	2016
Calgary, Alberta		Manager, Chute Lake Road
Timothy C. Melton1	Chairman	Chair, Melcor	1973
Edmonton, Alberta		Developments Ltd.
Catherine M. Roozen	Director	Director &	2007
Edmonton, Alberta		Secretary,
		Cathton
		Investments Ltd.
Allan E. Scott2	Lead	Corporate Director	2007
Edmonton, Alberta	Director
Ralph B. Young	Director	Corporate Director	1976
Edmonton, Alberta

1. Mr. T.C. Melton, Mr. A.J. Melton and Ms. K.M. Melton are not considered independent based on their positions or relationship to Melcor executives.

Director	Audit Committee	Compensation & Governance Committee
Gordon Clanachan	ü Chair
Ross Grieve		ü
Andrew Melton	—	—
Kathleen Melton	—	—
Timothy Melton	—	—
Catherine M. Roozen	ü
Allan Scott	ü	ü Chair
Ralph Young		ü

Executive Officers

The following table lists the executive officers of Melcor as at December 31, 2020, their province of residence, period of service as an executive officer and their principal occupation during the five preceding years

Name and	Position	Prior 5 Years	Since
Municipality of Residence	with Melcor
Timothy C. Melton	Chair	Chair	1973
Edmonton, Alberta
Darin A. Rayburn	President &	REIT CEO	2005
Edmonton, Alberta	Chief Executive	(2013-2017)
	Officer
Naomi M. Stefura CA	Chief	VP Finance (2013 –	2008
Edmonton, Alberta	Financial Officer	2016)

The Directors and Executive Officers, as a group, beneficially owned, directly or indirectly, or exercised control or direction over 59% of Melcor’s outstanding common shares as at March 17, 2021.

2. Mr. Clanachan and Mr. Scott will not be seeking re-election at the AGM.

All of the directors have held the principal occupation indicated above for the previous 5 years.

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ADDITIONAL INFORMATION

Transfer Agent & Registrar

AST Trust Company (Canada) is Melcor’s transfer agent and registrar. AST Trust Company (Canada) provides services to Melcor shareholders through its offices in Calgary, Alberta.

Material Contracts

Melcor did not enter into any material contracts outside the ordinary course of business in 2020.

Additional Information

Legal Proceedings & Regulatory Actions

Melcor is involved in various claims and litigation as a regular part of its business. Management believes that the resolution of these claims and litigation (which in certain cases are covered by insurance, subject to applicable deductibles) will not have a material adverse effect on its financial position or results of operations.

Interest Of Management & Others in Material Transactions

To Melcor’s knowledge, no director or executive officer of Melcor, or any of their associates or affiliates has any material interest, directly or indirectly, in any transaction within the three most recently completed fiscal years that has materially affected or will materially affect Melcor.

Names & Interests of Experts

PricewaterhouseCoopers LLP, Chartered Accountants, 22nd Floor, 10220 103 Avenue NW, Edmonton, Alberta, T5J 0K4 are Melcor’s independent external auditors. PricewaterhouseCoopers LLP are independent of Melcor in accordance with the Rules of Professional Conduct of the Chartered Professional Accountants of Alberta.

Altus Group Limited, Suite 780, 10180 - 100 Street NW, Edmonton, Alberta, T5J 3S4, are Melcor’s independent valuators. Altus Group Limited, a member of the Appraisal Institute of Canada, prepares and certifies a report with respect to the valuation of Melcor’s investment properties as required to be presented in accordance with International Financial Reporting standards. Altus Group Limited is independent of Melcor in accordance with the Canadian Uniform Standards of Professional Appraisal Practices, which regulates the Appraisal Institute of Canada.

Additional information relating to Melcor’s business is available on SEDAR at www.sedar.com or under the ‘Investor Relations’ tab on Melcor’s website at www.melcor.ca.

Additional financial information about Melcor is provided in the comparative consolidated financial statements and management’s discussion and analysis in the annual report for the year ended December 31, 2020.

You will find information on directors’ and officers’ remuneration, the principal holders of Melcor shares, and the number of shares that are authorized for issuance under our equity compensation plans in our 2020 information circular.

Copies of these documents and any other documents incorporated by reference, additional interim financial statements for periods subsequent to December 31, 2020 and additional copies of this Annual Information Form are available on request.

Please direct your request for materials to:

By Mail: Investor Relations 900, 10310 Jasper Avenue Edmonton, Alberta T5J 1Y8 By Phone: 1-855-673-6931 x 4707 By Fax: 780-426-1796 By Email: ir@melcor.ca

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AUDIT COMMITTEE

==> picture [66 x 66] intentionally omitted <==

GORDON CLANACHAN

==> picture [65 x 66] intentionally omitted <==

ALLAN SCOTT

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CATHERINE ROOZEN

Audit Committee Charter

The Audit Committee Charter is attached as Appendix A. The Audit Committee Chair Position Description is attached as Appendix B.

Composition of the Audit Committee

The Board of Directors believes that the current composition of the Audit Committee reflects a high level of financial literacy and expertise. Each member of the Audit Committee has been determined by the Board to be “financially literate” and “independent” as defined under NI 52-110.

The Audit Committee is currently comprised of:

Member	Relevant Education & Experience
Gordon	Mr. Clanachan is a graduate of Glasgow
Clanachan, FCA,	University, Scotland. He is a Fellow Chartered
ICD.D	Accountant and holds the ICD.D designation.
Chair	During the past 5 years, Mr. Clanachan has been a corporate director and consultant providing
Member since 2009	business advisory services. He is a member of the advisory board for a number of companies. From 1994 to 1999, he served as President & CEO of
Independent	RaiLink Ltd., a TSX-listed public company and Canada’s largest regional railway. Mr. Clanachan
Financially Literate	is Chair of the Board of Trustees of the Edmonton Pipe lndustry Pension and Health and Welfare
	Funds.
Catherine	Ms. Roozen is a graduate of the University of
Roozen	Alberta where she served as a Governor from
Member since 2007	1998 to 2005. Since 1981, she has been a Director and the Corporate Secretary of Cathton Investments Ltd. and The Allard Foundation Ltd.
Independent	Ms. Roozen also currently serves as a director of Corus Entertainment Inc. and EPCOR Utilities.
Financially
Literate
Allan Scott	Mr. Scott is a graduate of the University of
Member since 2020	Alberta and holds an MBA from York University. Mr. Scott brings a broad range of executive experience from both the public and private
Independent	sector. During his business career, he served as President & CEO of Edmonton Economic
Financially Literate	Development Corporation and as President & COO of Telus Communications. He currently serves on the boards and advisory boards of
	several private companies.

Preapproval Policy

The Audit Committee pre-approves the annual audit plan and non-audit services performed by the independent auditor in order to ensure that the provision of such services does not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received general preapproval, it will require specific pre-approval by the Audit Committee. Any proposed service exceeding preapproved cost levels requires specific pre-approval by the Audit Committee.

External Auditor Fees

PricewaterhouseCoopers LLP (or their predecessors) have been Melcor’s Auditors since the company went public in 1968. During the past 2 years, Melcor has paid the following fees to its auditors:

	2020	2019
Audit fees	$ 281,500	$ 210,500
Audit-related fees1	174,850	174,850
Tax fees2	80,500	107,000
Internal Controls Compliance	4,000	4,000
All other fees3	9,570	34,100
Total	$ 550,420	$ 530,450

1. Audit related fees include fees for subsidiary companies, joint arrangements, and building operating statements and homeowners associations.

2. Tax fees include tax compliance services and tax advisory and planning services.

3. All other fees include additional fees related to the 2019 audit for actual amounts billed.

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APPENDIX A AUDIT COMMITTEE CHARTER

The term " Company " refers to Melcor Developments Ltd. and its subsidiaries and the term " Board " refers to the board of directors of the Company.

PURPOSE

The Audit Committee (the " Committee ") is a standing committee appointed by the Board to assist the Board in fulfilling its oversight responsibilities with respect to the Company’s financial reporting including responsibility to:

• oversee the integrity of the Company’s consolidated financial statements and financial reporting process, including the audit process and the Company’s internal accounting controls and procedures and compliance with related legal and regulatory requirements;

• oversee the performance, qualifications, independence and compensation of the Company’s external auditors;

• oversee the work of the Company’s financial management and external auditors in these areas;

• provide an open avenue of communication between the external auditors, the Board and the officers (collectively, " Management ") of the Company.

In addition, the Committee will review and/or approve any other matter specifically delegated to the Committee by the Board.

COMPOSITION AND PROCEDURES

In addition to the procedures and powers set out in any resolution of the Board, the Committee will have the following composition and procedures:

1. Composition

The Committee shall consist of no fewer than three members. None of the members of the Committee shall be an officer or employee of the Company or any of its subsidiaries and each member of the Committee shall be an "independent director" (in accordance with the definition of "independent director" established from time to time under the requirements or guidelines for audit committee service under applicable securities

laws and the rules of any stock exchange on which the Company’s shares are listed for trading).

2. Appointment and Replacement of Committee Members

Any member of the Committee may be removed or replaced at any time by the Board and shall automatically cease to be a member of the Committee upon ceasing to be a director. The Board may fill vacancies on the Committee by election from among its members. The Board shall fill any vacancy if the membership of the Committee is less than three directors. If and whenever a vacancy shall exist on the Committee, the remaining members may exercise all its power so long as a quorum remains in office. Subject to the foregoing, the members of the Committee shall be elected by the Board annually and each member of the Committee shall hold office as such until the next annual meeting of shareholders after his or her election or until his or her successor shall be duly elected and qualified. The Chair of the Committee shall be designated by the Board.

3. Meetings

Regular meetings of the Committee are held at least 4 times each year. Committee meetings may be called by the Committee Chair or by a majority of the Committee members. At any meeting of the Committee, a quorum of at least two committee members must be present for the Committee to exercise any of its powers. Meetings may be conducted with members present, or by telephone or other communication facilities which permit all persons participating in the meeting to communicate with each other.

4. Financial Literacy

All members of the Committee must be "financially literate" (as that term is interpreted by the Board in its reasonable judgment or as may be defined from time to time under the requirements or guidelines for audit committee service under securities laws and the rules of any stock exchange on which the Company’s shares are listed for trading) or must become financially literate within a reasonable period of time after his or her appointment to the Committee.

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5. Chair

The Chair of the Committee shall have the duties and responsibilities set forth in Appendix “II”.

6. Separate Executive Meetings (in camera sessions)

The Committee meets at least once every quarter, and more often as warranted, with the Chief Financial Officer and with the external auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believes should be discussed privately.

7. Professional Assistance

The Committee may retain special legal, accounting, financial or other consultants to advise the Committee at the Company’s expense.

8. Review of Charter and Audit Committee Disclosures

The Committee will periodically review and reassess the adequacy of this Charter as it deems appropriate and recommend changes to the Board. The Committee will evaluate its performance with reference to this Charter.

The Committee will approve the form of disclosure of this Charter and any Audit Committee information, where required by applicable securities laws or regulatory requirements, in the annual proxy circular or annual report of the Company.

9. Delegation

The Committee may delegate from time to time to any person or committee of persons any of the Committee's responsibilities that lawfully may be delegated.

10. Reporting to the Board

The Committee will report through the Committee Chair to the Board following meetings of the Committee on matters considered by the Committee, its activities and compliance with this Charter.

SPECIFIC MANDATES OF THE COMMITTEE

The Committee shall have authority over, and shall be responsible for the following specific matters:

I. External Auditors

• (a) Oversee the work and review the performance and qualifications of the external auditors of the Company who are accountable to the Committee and the Board as the representatives of the shareholders of the Company, and make recommendations to the Board as to the reappointment or appointment of the external auditors of the Company to be proposed in the Company’s proxy circular for shareholder approval

and shall have authority to terminate the external auditors. In performing this oversight and review, the Committee will:

• i. At least annually, obtain and review a report by the external auditors describing (A) the external auditors’ internal quality control procedures; (B) any material issues raised by the most recent internal quality control review, or peer review, of the external auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditors, and any steps taken to deal with any such issues; and (C) (to assess the auditors’ independence) all relationships between the external auditors and the Company;

• ii. Take into account the opinions of management; and

• iii. Review and evaluate the Lead Partner of the external auditors.

• (b) review the reasons for any proposed change in the external auditors of the Company which is not initiated by the Committee or Board and any other significant issues related to the change, including the response of the incumbent auditors, and enquire as to the qualifications of the proposed replacement auditors before making its recommendation to the Board;

• (c) approve the annual audit plan, terms of engagement and the compensation to be paid by the Company to the Company’s external auditors;

• (d) review the independence of the Company’s external auditors, including a written report from the external auditors respecting their independence and consideration of applicable auditor independence standards;

• (e) adopt policies and procedures for the pre-approval of all audit and permitted non-audit services to be provided to the Company or any of its affiliates by the external auditors or any of their affiliates, subject to any de minimus exception allowed by applicable law; the Committee may delegate to one or more designated members of the Committee the authority to grant pre-approvals required by this subsection;

• (f) review the disclosure with respect to its preapproval of audit and non-audit services provided by the Company’s external auditors;

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• (g) approve any hiring by the Company or its subsidiaries of employees or former employees of the Company’s external auditors;

• (h) review a written or oral report describing:

• i. critical accounting policies and practices to be used in the Company’s annual audit,

• ii. alternative treatments of financial information within generally accepted accounting principles that have been discussed with the Company’s management and that are significant to its consolidated financial statements, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditors, and

• iii. other material written communication between the Company’s external auditors and the Company’s management, such as any management letter or schedule of unadjusted differences;

• (i) review with the external auditors and the Company’s management the general audit approach and scope of proposed audits of the consolidated financial statements of the Company, the objectives, staffing, locations, co-ordination and reliance upon the Company’s management in the audit, the overall audit plans, the audit procedures to be used and the timing and estimated budgets of the audits;

• (j) if a review engagement report is requested of the external auditors, review such report before the release of the Company’s interim consolidated financial statements;

• (k) discuss with the external auditors any difficulties or disputes that arose with the Company’s management during the course of the audit, any restrictions on the scope of activities or access to requested information and the adequacy of the Company’s management's responses in correcting audit-related deficiencies;

II. Financial Disclosure

• (a) review with the external auditors and the Company’s management:

• i. the Company’s audited consolidated financial statements and the notes and Managements' Discussion and Analysis relating to such consolidated financial statements, the annual report, the annual information form, the financial information of the Company contained in any prospectus or information circular or other disclosure documents or regulatory filings, or any other disclosures

relating to financial information of the Company, the recommendations for approval of these documents from the CEO and CFO of the Company and based on such recommendations provide, where applicable, its own recommendations to the Board for their approval and release to the public;

• ii. the Company’s interim consolidated financial statements and the notes and Managements' Discussion and Analysis relating to such consolidated financial statements and any other disclosures relating to financial information, the recommendations for approval of these documents from the CEO and CFO of the Company and based on such recommendations provide, where applicable, its own recommendations to the Board for their approval and release to the public;

• iii. the quality, appropriateness and acceptability of the Company’s accounting principles and practices used in its financial reporting, changes in the Company’s accounting principles or practices and the application of particular accounting principles and disclosure practices by the Company’s management to new transactions or events;

• iv. all significant financial reporting issues and judgments made in connection with the preparation of the Company’s consolidated financial statements, including the effects of alternative methods in respect of any matter considered significant by the external auditor within generally accepted accounting principles on the consolidated financial statements;

• v. the effect of regulatory and accounting initiatives on the Company’s consolidated financial statements and other financial disclosures;

• vi. any reserves, accruals, provisions or estimates that may have a significant effect upon the consolidated financial statements of the Company;

• vii. the use of special purpose entities and the business purpose and economic effect of off balance sheet transactions, arrangements, obligations, guarantees and other relationships of the Company and their impact on the reported financial results of the Company;

• viii. any legal matter, claim or contingency that could have a significant impact on the consolidated financial statements, the

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  - Company’s compliance policies and any material reports, inquiries or other correspondence received from regulators or governmental agencies and the manner in which any such legal matter, claim or contingency has been disclosed in the Company’s consolidated financial statements;

• ix. any disclosures concerning any weaknesses or any deficiencies in the design or operation of internal controls or disclosure controls made to the Committee by the CEO and CFO during their certification process in documents filed with applicable securities regulators;

• x. review the treatment for financial reporting purposes of any significant transactions that are not a normal part of the Company’s operations;

• xi. the use of any "pro forma" or "adjusted" information not in accordance with generally accepted accounting principles;

• (b) review and resolve disagreements between the Company’s management and its external auditors regarding financial reporting or the application of any accounting principles or practices;

• (c) receive from the CEO and the CFO of the Company a certificate certifying in respect of each annual and interim report the matters such officers are required to certify in connection with the filing of such reports under applicable securities laws;

• (d) review and discuss with management the Company’s guidelines and policies with respect to risk assessment and the Company’s major financial and business risk exposures and the steps taken to monitor and control such exposures;

• (e) review earnings press releases, as well as financial information and earnings guidance provided to analysts and ratings agencies, it being understood that such discussions may, in the discretion of the Committee, be done generally (i.e., by discussing the types of information to be disclosed and the type of presentation to be made) and that the Committee need not discuss in advance each earnings release or each instance in which the Company gives earning guidance (if applicable);

• (f) receive quarterly a report from the Company’s internal auditor (if applicable).

IV. Internal Audit

• (a) review periodically management’s decision related to the need, scope and sourcing for an internal audit function.

• V. Internal Controls

• (a) review the adequacy and effectiveness of the Company’s internal accounting and financial controls based on recommendations from the Company’s management and the external auditors for the improvement of accounting practices and internal controls;

• (b) oversee compliance with internal controls and the Code of Business Conduct, particularly as it relates to financial reporting;

• (c) review and approve the expense accounts of the Chair of the Board. This function may be delegated to the Chair of the Committee.

VI. Compliance

• (a) review with the Company’s Chief Financial Officer, other members of management and the external auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports, which raise material issues regarding the Company’s financial statements or accounting policies;

• (b) review with the Company’s external legal counsel matters that may have a material impact on the financial statements or accounting policies;

• (c) establish procedures for:

• i. the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters;

• ii. the confidential, anonymous submission by employees of the Company with concerns regarding any accounting or auditing matters.

VII. Other Items

• (a) on an annual basis review and assess Committee member attendance and the Committee’s performance and report thereon to the Board and review this Charter and, if required implement amendments to this Charter;

• (b) review, as required, any claims of indemnification pursuant to the by-laws of the Company;

III. Insurance

• (a) review periodically insurance programs relating to the Company and its investments;

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• (c) on a quarterly basis review any related party transactions and the development of policies and procedures related to those transactions;

• (d) on an annual basis review compliance with the Disclosure Policy of the Company; and

• (e) on a periodic basis, review reports on the Company’s information technology systems that support the financial reporting process, including a periodic review of cybersecurity risk.

APPENDIX B POSITION DESCRIPTION – AUDIT COMMITTEE CHAIR

The Chair of the Audit Committee of Melcor Developments Ltd. has the duties and responsibilities described below:

• Provide overall leadership to facilitate the effective functioning of the Committee, including:

• Overseeing the structure, composition, membership and activities delegated to the Committee;

• Foster ethical and responsible decision making by the Committee and its individual members;

• Encourage the Committee to meet in separate, regularly scheduled in camera sessions with the independent auditors, without the presence of management; and.

• Following each meeting of the Committee, report to the Board of Directors on the activities, decisions and recommendations of the Committee.

• Chairing every meeting of the Committee and encouraging free and open discussion at meetings of the Committee;

• Setting the agenda for Committee meetings with input from Committee members and management as appropriate;

• Facilitate the timely distribution of meeting materials and minutes;

• encouraging Committee members to ask questions and express viewpoints during meetings; and

• taking all other reasonable steps to ensure that the responsibilities and duties of the Committee, as outlined in its Charter, are well understood by the Committee members and executed as effectively as possible.

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