ANNUAL REPORT 2022 WHAT’S INSIDE FINANCIAL DATA 3 4 8 10 12 14 15 Key Metrics Letter from the Executive Chair & CEO Letter from the COO & CFO Environmental, Social Responsibility & Governance ($000s except as noted) 2022 2021 Change Revenue 241,747 315,628 (23)% Gross margin (%)1 49% 44% Fair value adjustment on invest- ment properties Net income Net margin (%)1 21,554 19,370 89,354 56,311 37% 18% Funds from operations2 60,859 81,327 Shareholders’ equity 1,178,336 1,116,469 Total assets 2,167,050 2,113,927 10% 11% 59% 108% (25)% 6% 3% Corporate Governance Cash from operations 18,351 72,822 (75)% 5 Year Performance Metrics Company Information Share Data (000s) 2022 2021 Change Basic (weighted average) 32,453 33,039 Common shares issued at December 31 31,249 32,961 (2)% (5)% Per Share Data ($) 2022 2021 Change Basic earnings Diluted earnings Funds from operations3 2.75 2.74 1.88 1.70 1.70 2.46 62% 61% (24)% Book value3 37.71 33.87 11% 1. Supplementary financial measure. 2. Non-GAAP financial measure. 3. Non-GAAP financial ratio. Refer to the Non-GAAP and Non-Standard Measures section on page 39 of our annual MD&A (available on SEDAR.com and at Melcor.ca/Investors) for further information. BUILDING COMMUNITY Since 1923, our focus has been the business of real estate. While the specifics of our business have Arizona and Colorado. With over 170 communities and changed over the years to reflect the times, real commercial projects developed across western Canada estate is fundamental to who we are. Today, we since the 1950s and over 2.5 million square feet in are a diversified real estate development and asset commercial projects built, we have helped to shape management company. We transform raw land into much of Alberta’s landscape. We manage 4.8 million high-quality residential, commercial and mixed-use square feet in commercial real estate assets and real estate. We develop and manage master-planned 476 residential rental units in the United States and residential communities, business and industrial Canada. We are committed to building communities parks, office buildings, retail commercial centres and that enrich quality of life – communities where people golf courses. Melcor owns a diversified portfolio of want to live, work, shop and play. We have been assets in Alberta, Saskatchewan, British Columbia, publicly traded since 1968 (TSX:MRD) R E V E N U E 2022 241,747 2021 315,628 2020 226,818 2019 207,971 2018 267,434 K E Y M E T R I C S A S S E T S 2022 2,167,050 2021 2,113,927 2020 2,001,285 2019 2,096,047 2018 2,023,076 F U N D S F R O M O P E R A T I O N S S H A R E H O L D E R S E Q U I T Y 2022 60,859 2021 81,327 2020 51,424 2019 38,265 2018 56,127 2022 1,178,336 2021 1,116,469 2020 1,077,429 2019 1,080,257 2018 1,067,565 R E V E N U E B Y D I V I S I O N 48% 48+ COMMUNITY DEVELOPMENT 39% 39+ COMMUNITY DEVELOPMENT 5% 5+ PROPERTY DEVELOPMENT 16% 16+ INVESTMENT PROPERTIES 27% 27+ REIT 4% 4+ RECREATIONAL PROPERTIES G R O S S M A R G I N B Y D I V I S I O N 3% 3+ PROPERTY DEVELOPMENT 59% 59+ INVESTMENT PROPERTIES 58% 58+ REIT 41% 41+ RECREATIONAL PROPERTIES 52 + O 61 + O 95 + O 97 + O 84 + O 41 + O 73 + O 42 + O 96 + O 59 + O LETTER FROM THE EXECUTIVE CHAIR AND CEO TIMOTHY C. MELTON 2 0 2 3 i s a s i g n i f i c a n t m i l e s t o n e f o r M e l c o r a s w e c e l e b r a t e 1 0 0 y e a r s o f o p e r a t i o n s i n t h e r e a l e s t a t e i n d u s t r y . M y g r a n d f a t h e r , L o u i s T i m o t h y ( L T ) M e l t o n , s t a r t e d a s m a l l r e a l e s t a t e b r o k e r a g e i n 1 9 2 3 w i t h a n e a r l y f o c u s o n t h e w e s t e n d o f E d m o n t o n a n d p a r t i c u l a r l y w h a t w a s a t t h e t i m e t h e t o w n o f J a s p e r P l a c e w h i c h l a t e r a m a l g a m a t e d w i t h E d m o n t o n . T h e o r i g i n a l c o m p a n y , S t a n l e y I n v e s t m e n t C o m p a n y , w a s n a m e d a f t e r L T ’ s o l d e s t s o n a n d m y f a t h e r , S t a n l e y L o u i s M e l t o n . A f t e r r e t u r n i n g f r o m d i s t i n g u i s h e d s e r v i c e i n W o r l d W a r I I i n 1 9 4 5 , S t a n h e l p e d h i s f a t h e r w i t h t h e b u s i n e s s n o w c a l l e d L T M e l t o n R e a l E s t a t e . T h e p o s t w a r p e r i o d a n d S t a n ’ s u n i q u e s t r a t e g i e s b r o u g h t g r o w t h a n d e x p a n s i o n t h r o u g h o u t w e s t e r n C a n a d a . S t a n a c q u i r e d t h e c o m p a n y f r o m h i s f a t h e r i n 1 9 4 7 . U n d e r S t a n ’ s l e a d e r s h i p , M e l t o n R e a l E s t a t e p r o s p e r e d a n d d i v e r s i f i e d i n t o a f u l l y i n t e g r a t e d r e a l e s t a t e c o m p a n y a n d i n c l u d e d c o m p l e m e n t a r y s u b s i d i a r i e s o f f e r i n g m o r t g a g e s , i n s u r a n c e , h o m e c o n s t r u c t i o n a n d l a n d d e v e l o p m e n t . I n 1 9 6 8 , M e l t o n R e a l E s t a t e w e n t p u b l i c a s S t a n f i r m l y a d v o c a t e d f o r t h e i d e a t h a t e m p l o y e e s s h o u l d h a v e t h e o p p o r t u n i t y t o h o l d a s t a k e i n t h e c o m p a n y t h e y c o n t r i b u t e t o . T h i s l e g a c y c o n t i n u e s t o d a y t h r o u g h o f f e r i n g s s u c h a s t h e e m p l o y e e s h a r e p u r c h a s e p l a n , w h i c h i s a c c e s s i b l e t o a l l s t a f f m e m b e r s . F r o m t h e l a t e 1 9 5 0 s t h r o u g h t o t h e 1 9 7 0 s , M e l t o n R e a l E s t a t e e x p a n d e d a c r o s s w e s t e r n C a n a d a t o a p e a k o f 4 0 b r a n c h o f f i c e s a n d o v e r 5 0 0 s a l e s a g e n t s , b e c o m i n g t h e l e a d i n g b r o k e r i n w e s t e r n C a n a d a w i t h s a l e s o f $ 2 2 2 m i l l i o n . S t a n M e l t o n d i e d s u d d e n l y i n 1 9 7 3 i n t h e p r i m e o f h i s b u s i n e s s l i f e . H i s v i s i o n w a s c o m p e t e n t l y c a r r i e d o n b y d e d i c a t e d s t a f f a n d d i r e c t o r s . I n r e s p o n s e t o c h a n g i n g t r e n d s i n t h e b r o k e r a g e b u s i n e s s , t h e c o m p a n y m a d e t h e d i f f i c u l t , b u t p r u d e n t d e c i s i o n t o d i v e s t o f t h e b r o k e r a g e d i v i s i o n . T h e s a l e t o A E L e p a g e w a s c o m p l e t e d i n 1 9 7 6 f o r $ 4 . 2 5 m i l l i o n . T h e b o a r d o f d i r e c t o r s a p p o i n t e d m e , T i m o t h y C h a r l e s M e l t o n , p r e s i d e n t i n 1 9 7 5 . 1932 The company name is changed to LT Melton Real Estate. The photo is LT Melton at Jasper Place, 1926. 1923 Stanley Investment Company was founded in Edmonton by LT Melton. The real estate company sold lots for $100. LT rode his bike to meet with buyers. The Melton family lived on the second floor of the office building, located at 101 St & 102 Ave, the present-day location of City Centre mall. 4 2022 Annual Report A s a r e s u l t o f t h e M e l t o n R e a l E s t a t e b r o k e r a g e s a l e , a n d w i t h t h e g r o w i n g f o c u s o n t h e l u c r a t i v e l a n d d e v e l o p m e n t b u s i n e s s , t h e c o m p a n y n a m e w a s c h a n g e d t o M e l c o r D e v e l o p m e n t s L t d . T h e c o m p a n y b e g a n a c q u i r i n g a n d b u i l d i n g a p a r t m e n t s , c o m m e r c i a l a n d o f f i c e b u i l d i n g s i n t h e 1 9 6 0 s w i t h i n t h e I n v e s t m e n t P r o p e r t i e s d i v i s i o n a n d a t o n e p o i n t , M e l c o r ’ s p o r t f o l i o i n c l u d e d o v e r 1 . 2 m i l l i o n s f o f s u b u r b a n a n d d o w n t o w n o f f i c e s p a c e , i n d u s t r i a l p r o j e c t s , r e t a i l c e n t r e s a n d l o w - r i s e r e s i d e n t i a l c o n s t r u c t i o n . M a n y o f t h e s e a s s e t s w e r e s o l d d u r i n g t h e r e c e s s i o n o f t h e 1 9 8 0 s t o m a n a g e c a s h f l o w a n d s e r v i c e d e b t . B y 1 9 9 8 , t h e c o m p a n y h a d 3 6 0 , 0 0 0 s f o f l e a s a b l e s p a c e . I n t h e e a r l y 2 0 0 0 s , M e l c o r o n c e a g a i n e m b a r k e d o n i t s g r o w t h p r o g r a m a n d r e s u m e d d e v e l o p m e n t o f c o m m e r c i a l a s s e t s i n A l b e r t a . I n t o t a l , M e l c o r a n d p r e d e c e s s o r c o m p a n i e s h a v e b u i l t o v e r 2 . 5 m i l l i o n s f o f c o m m e r c i a l b u i l d i n g s . T h e s e p r o p e r t i e s a r e t r a n s f e r r e d t o I n v e s t m e n t P r o p e r t i e s f o r l o n g - t e r m i n c o m e g e n e r a t i o n a n d s e r v e t o p r o v i d e a s t a b l e r e v e n u e s t r e a m i n c o n t r a s t t o t h e c y c l i c a l l a n d d e v e l o p m e n t b u s i n e s s . T o d a y , M e l c o r o w n s a n d m a n a g e s a t o t a l o f 4 . 7 m i l l i o n s f o f c o m m e r c i a l a s s e t s a n d 4 7 6 r e s i d e n t i a l u n i t s . W i t h g r o w t h i n c o m m e r c i a l a s s e t s v i a n e w p r o p e r t i e s b u i l t b y P r o p e r t y D e v e l o p m e n t a n d a c q u i r e d b y t h e I n v e s t m e n t P r o p e r t i e s d i v i s i o n , t h e d e c i s i o n t o c a r v e o u t c o m m e r c i a l a s s e t s a s a 1940s This prominent billboard proclaims: “Organized for Service... Specialized for Value.” The cars below provide a sense of scale for the huge billboard. s e p a r a t e R e a l E s t a t e I n v e s t m e n t T r u s t w a s m a d e , a n d M e l c o r R E I T h a d i t s i n i t i a l p u b l i c o f f e r i n g i n M a y 2 0 1 3 . I n t e n d e d t o b e a g r o w t h e n g i n e b y a c c e s s i n g t h e c a p i t a l m a r k e t s t o a c q u i r e n e w p r o p e r t i e s d e v e l o p e d b y M e l c o r a s w e l l a s t h i r d p a r t y p r o p e r t i e s , t h e R E I T g r e w f r o m a n i n i t i a l 1 . 6 m i l l i o n s f t o 3 . 1 m i l l i o n s f a n d $ 7 4 m i l l i o n i n r e v e n u e a n d p r o v i d e s u n i t h o l d e r s w i t h a s t e a d y m o n t h l y d i s t r i b u t i o n . T h e R E I T — c e l e b r a t i n g i t s 1 0 t h a n n i v e r s a r y i n 2 0 2 3 — h a s p a i d o u t o v e r $ 5 . 9 8 p e r u n i t i n d i s t r i b u t i o n s t o u n i t h o l d e r s . M a n y o f t h e e a r l y c h a r a c t e r i s t i c s o f t h e c o m p a n y r e m a i n i n p l a c e t o d a y : i n t e g r i t y a n d h o n o u r , t h e v a l u e o f r e l a t i o n s h i p s w i t h a l l s t a k e h o l d e r s , a n d t r e a t i n g e v e r y o n e w i t h r e s p e c t . T h e c o m p a n y ’ s i m p a c t , p a r t i c u l a r l y o n A l b e r t a , h a s b e e n s i g n i f i c a n t . W e h a v e d e v e l o p e d o v e r 1 7 0 c o m m e r c i a l p r o j e c t s a n d r e s i d e n t i a l n e i g h b o u r h o o d s , p r o v i d i n g s h e l t e r f o r o v e r 4 0 , 0 0 0 A l b e r t a f a m i l i e s . O u r l o n g e v i t y i s a t e s t a m e n t t o o u r a b i l i t y t o a d a p t t o c h a n g i n g m a r k e t c o n d i t i o n s . W e h a v e s t r a t e g i c a l l y e x p a n d e d o u r o p e r a t i o n s i n t o t h e U n i t e d S t a t e s t w i c e – i n t h e 1 9 8 0 s a s a c o u n t e r t o t h e N a t i o n a l E n e r g y P r o g r a m a n d a g a i n f r o m 2 0 0 8 t o p r e s e n t a s a c o u n t e r t o A l b e r t a ’ s r e l i a n c e o n t h e o i l i n d u s t r y . 1945 Stanley Melton returns from distinguished service in WWII with a wife, Peggy, and son, Timothy Charles Melton. In spite of a desire to own a farm, he joins his father’s company and soon proves to have a keen sense for expanding the real estate brokerage business with unique concepts such as neighbourhood offices and the Melton Guaranteed Sales plan. 1947 Stan acquires the company from LT, whose health is failing. LT dies in 1951. 5 2022 Annual Report M a n y o f t h e U S r e s i d e n t i a l r e n t a l a s s e t s h a v e n o w b e e n s o l d , w h i l e t h e l a n d a s s e t s a r e u n d e r a c t i v e d e v e l o p m e n t . I n c o n j u n c t i o n w i t h o u r a n n u a l r e s u l t s , w e a n n o u n c e d t h e a p p o i n t m e n t o f N a o m i S t e f u r a a s C h i e f O p e r a t i n g O f f i c e r ( C O O ) o f t h e c o m p a n y . N a o m i h a s b e e n a n e x c e p t i o n a l C F O , a n d w e a r e c o n f i d e n t t h a t s h e w i l l e x c e l i n h e r n e w r o l e w h i l e c o n c u r r e n t l y h o l d i n g h e r p o s i t i o n a s C F O . D u r i n g h e r 1 4 y e a r t e n u r e w i t h M e l c o r , N a o m i h a s d e m o n s t r a t e d a n u n w a v e r i n g c o m m i t m e n t t o t h e c o m p a n y ’ s v a l u e s , a n d h a s g a i n e d a d e e p u n d e r s t a n d i n g o f o u r o p e r a t i n g d i v i s i o n s . N a o m i ’ s p r o m o t i o n t o C O O i s a t e s t a m e n t t o h e r h a r d w o r k , e x p e r t i s e , a n d l e a d e r s h i p s k i l l s . I t i s m y p l e a s u r e t o w o r k w i t h N a o m i , a n d t h e e n t i r e M e l c o r t e a m , t o a c h i e v e o u r o b j e c t i v e s . W e a r e p r o u d o f o u r r e c o r d o f s u c c e s s a n d a c k n o w l e d g e t h e o u t s t a n d i n g c o n t r i b u t i o n o f a l l t h o s e w h o h a v e g u i d e d a n d w o r k e d f o r t h e c o m p a n y o v e r t h e p a s t c e n t u r y . W e h a v e a l w a y s b e l i e v e d t h a t o u r s t r e n g t h a n d s u c c e s s i s a r e s u l t o f t h e d e d i c a t e d e f f o r t o f t h e g o o d p e o p l e w h o h a v e w o r k e d f o r a n d w i t h t h e c o m p a n y t h r o u g h o u t o u r h i s t o r y . O n b e h a l f o f t h e b o a r d a n d a l l s h a r e h o l d e r s , I w i s h t o a c k n o w l e d g e t h e e n t i r e M e l c o r t e a m f o r t h e i r h a r d w o r k a n d c o m m i t m e n t t o s e r v i n g a l l c o m p a n y s t a k e h o l d e r s a n d p r o d u c i n g g o o d r e s u l t s f o r t h e c o m p a n y . R i s i n g i n t e r e s t r a t e s , c o m b i n e d w i t h g e n e r a l i n f l a t i o n a n d g e o p o l i t i c a l c o n f l i c t p r o v i d e d s o m e p a u s e i n 2 0 2 2 ; h o w e v e r , w e r e m a i n c o n f i d e n t t h a t o u r p r o v e n t r a c k r e c o r d o f s u c c e s s f u l l y a d a p t i n g t o c h a n g i n g e c o n o m i c t i m e s p o s i t i o n t h e c o m p a n y t o c o n t i n u e t o n a v i g a t e c y c l e s a n d t r e n d s a s w e h a v e d o n e f o r t h e p a s t 1 0 0 y e a r s . T h e o u t l o o k f o r A l b e r t a i s r e l a t i v e l y p o s i t i v e f o r 2 0 2 3 a n d w e b e l i e v e i t w i l l b e a n o t h e r s a t i s f a c t o r y y e a r f o r t h e c o m p a n y . O u r r e c o r d o f p a s t p e r f o r m a n c e , s i g n i f i c a n t a s s e t b a s e a n d f i n a n c i a l s t r e n g t h a r e r e a s o n s w e r e m a i n c o n f i d e n t i n a b r i g h t f u t u r e f o r t h e c o m p a n y . I n c l o s i n g , M e l c o r w i s h e s t o t h a n k s h a r e h o l d e r s f o r t h e i r c o n t i n u e d s u p p o r t a n d c o n f i d e n c e . W e r e m a i n c o m m i t t e d t o p r o t e c t i n g a n d e n h a n c i n g y o u r i n v e s t m e n t i n t h e c o m p a n y . 1950s The local sales offices provided Melton Real Estate with competitive advantage in the hottest neighbourhoods, and sales almost tripled between 1950 and 1952. The graphic below depicts Melton Sales Figures as presented in the 75th anniversary history book. 1953 The catchy slogan “Call a Melton Man and Start Packing” dots yard signs and billboards throughout Edmonton. Home sales are handled out of 16 local Edmonton offices. 6 2022 Annual Report Melton Homes 1950s Melton Homes, first established under the name Sillton, provided exclusive listings for the brokerage division and ensured a pipeline of listings for the sales agents that no one else could offer. 1973 Stan Melton suffers a fatal heart attack at the CFL western final game. The Board appoints Garry Holmes president of the company. The Sillton Homes brochure below is a reminder of home prices of this bygone era. The “Glenora” bungalow shown below sold for $12,871. With $2,600 down, the monthly interest and principal payment was $83. 1975 The Board appoints Timothy Charles Melton president of the company. 1976 The brokerage business was sold to A.E. Lepage, the company name was changed to Melcor Developments, and the focus shifted to land development. 1968 Melton Real Estate and subsidiary companies amalgamate and begin trading on the Vancouver Stock Exchange. The company graduates to the Toronto Stock Exchange in 1972. The company has paid dividends in all but three years, and has paid dividends for 34 consecutive years. Employee Development Stan was an enthusiastic leader who insisted that developing a skilled management and sales team was a foremost consideration for future growth. Two major management development seminars were presented annually, as well as courses and seminars throughout the year, including specialized training in planning, supervision and motivation. As a result of this focus on training and development, the majority of Melcor and predecessor company promotions have been from within. Biannual management meetings continue to this day. Melton’s in a Nutshell was a 1950s era 20-page new hire manual outlining the company’s guiding principles and values, sales strategies and tips, listing guidelines and an article on the importance of public relations. Recognizing employees valuable contributions to the organization is another tradition that has been upheld since the 1950s. Company service awards are presented to employees for their 5, 10, 15, 20, 25 anniversary and beyond. 7 2022 Annual Report F o l l o w i n g t h i s t r a n s a c t i o n a n d s u b s e q u e n t t o t h e y e a r , w e r e t u r n e d $ 2 4 . 0 1 m i l l i o n ( U S $ 1 8 . 0 0 m i l l i o n ) i n c a s h t o C a n a d a t o r e d u c e b o r r o w i n g s o n o u r c r e d i t f a c i l i t y a s w e n a v i g a t e i n t e r e s t r a t e u n c e r t a i n t y . I n 2 0 2 2 , P r o p e r t y D e v e l o p m e n t p u r c h a s e d 1 1 . 4 7 a c r e s f o r $ 1 3 . 6 9 m i l l i o n f r o m C o m m u n i t y D e v e l o p m e n t , a n d c o m p l e t e d a n d t r a n s f e r r e d 5 b u i l d i n g s ( 3 6 , 8 4 6 s f ) v a l u e d a t $ 1 3 . 6 3 m i l l i o n w i t h a m a r g i n o f 1 7 % ( e l i m i n a t e d o n c o n s o l i d a t i o n ) . T r a n s f e r s t o I n v e s t m e n t P r o p e r t i e s w i l l p o s i t i v e l y i m p a c t r e s u l t s i n f u t u r e y e a r s a s w e c o n t i n u e t o g r o w o u r i n c o m e - p r o d u c i n g a s s e t s f o r l o n g - t e r m h o l d o r f o r s a l e t o t h e R E I T . W e a r e c u r r e n t l y c o n s t r u c t i n g t h e f i n a l b u i l d i n g a t C h e s t e r m e r e S t a t i o n ( C h e s t e r m e r e , A B ) , a p r o j e c t w h o s e f i r s t b u i l d i n g w a s t r a n s f e r r e d 1 7 y e a r s a g o . O u r c o m m e r c i a l i n c o m e d i v i s i o n s , I n v e s t m e n t P r o p e r t i e s a n d R E I T , c o n t r i b u t e d $ 1 1 7 . 1 2 m i l l i o n i n r e v e n u e , u p 4 % o v e r t h e p r i o r y e a r d u e t o g r o w t h i n s q u a r e f o o t a g e o w n e d a n d i m p r o v e d o c c u p a n c y . T h e i r h i g h e r c o n t r i b u t i o n t o r e v e n u e a l s o i m p r o v e d g r o s s m a r g i n f o r t h e y e a r t o 4 9 % f r o m 4 4 % l a s t y e a r . I n v e s t m e n t P r o p e r t i e s m a n a g e s 4 . 7 m i l l i o n s f o f c o m m e r c i a l G L A a n d 4 7 6 r e s i d e n t i a l u n i t s ( i n c l u d i n g p r o p e r t y o w n e d b y t h e R E I T ) . 2010+ Melcor begins acquiring residential rental units and land assets in the United States. A $40 million privately-placed debenture in early 2011 provides the cash to support this growth strategy. The community of Harmony (Aurora, CO) is one outcome of this strategy and is expected to have 3,500 homes at full build out. The Community Center at Harmony won the Denver MAME Award for Best Community Amenity in 2023. At peak (2014), we owned 972 rental units in the US. In 2023, we sold 117 units, generating cash of $35.00 million. These properties were originally purchased for $11.94 million for a gain of $23.06 million. T h e R e c r e a t i o n a l P r o p e r t i e s d i v i s i o n a l s o h a d a v e r y s u c c e s s f u l y e a r d e s p i t e w e a t h e r c o n d i t i o n s l e a d i n g t o a s h o r t e r g o l f s e a s o n t h a n 2 0 2 1 . W e c o n t i n u e t o f o c u s o n s h a r e h o l d e r r e t u r n t h r o u g h o u r d i v i d e n d p a y m e n t s a n d N o r m a l C o u r s e I s s u e r B i d ( N C I B ) p r o g r a m . I n 2 0 2 2 , w e i n c r e a s e d o u r d i v i d e n d 3 2 % t o $ 0 . 5 8 p e r s h a r e . F o r t h e f i r s t q u a r t e r o f 2 0 2 3 , o u r d i v i d e n d i n c r e a s e d a f u r t h e r 7 % . I n 2 0 2 2 , w e r e p u r c h a s e d t h e m a x i m u m s h a r e s a l l o w a b l e u n d e r o u r N C I B , t h e r e b y r e d u c i n g s h a r e s o u t s t a n d i n g b y 5 % a n d i n c r e a s i n g e a c h s h a r e h o l d e r s ’ o w n e r s h i p p o s i t i o n . W i t h c o m m i t m e n t a n d d e d i c a t i o n , o u r t e a m ’ s b u i l t n e w c o m m u n i t i e s a n d a d d e d n e w p h a s e s t o e x i s t i n g o n e s , b u i l t a n d l e a s e d n e w c o m m e r c i a l i n c o m e - g e n e r a t i n g p r o p e r t i e s , m a i n t a i n e d r e l a t i o n s h i p s w i t h o u r t e n a n t s a n d h e l p e d g o l f e r s e n j o y s u m m e r . I a m i n c r e d i b l y p r o u d o f a n d g r a t e f u l t o o u r t e a m f o r t h e i r s t r e n g t h a n d s p i r i t . 2013 The REIT is spun off as a separate public company as part of Melcor’s growth strategy for income-generating assets. Brian Baker is appointed president & CEO. 2017 Darin Rayburn is appointed president & CEO. 2022 Tim Melton is appointed CEO. 2023+ Naomi Stefura is appointed COO. For more of the Melcor story, check out our 100th Anniversary website at Melcor100.ca For information on current projects, please visit Melcor.ca 9 2022 Annual Report ENVIRONMENTAL, SOCIAL RESPONSIBILITY & GOVERNANCE O U R C O M M I T M E N T At Melcor, we are deeply committed to sustainable practices that benefit our environment, society, and our stakeholders. We recognize that our actions have a significant impact on the world around us, and therefore, we prioritize ethical, responsible and transparent behaviour in all aspects of our business. Our pursuit of excellence drives us to continuously strive for best practices in all areas of our operations. We build our strong foundation on the genuine values of a family-run organization, which has enabled us to cultivate long-lasting relationships with our clients, business partners, employees, and communities. We take pride in leaving a positive and lasting impact on the environment and society. Through our sustainable business practices, we are committed to creating a brighter, healthier future for generations to come. E N V I R O N M E N T RELATIONSHIP FOCUSED RESIDENTIAL DEVELOPMENT COMMERCIAL DEVELOPMENT PROPERTY MANAGEMENT COMMUNITY INVESTMENT Our development approach is to use the natural landscape as much as possible in community design, including intelligent storm water management facilities. We build efficient and sustainable buildings, and landscape with xeriscaping to reduce or eliminate the need for supplemental water by using native plants and trees. Our communities are filled with community gathering spaces – parks, playgrounds, community gardens and orchards. We reduced greenhouse gas emission intensity by 45% since 2012, the CO2 equivalent of 12,400 tonnes. 100% of our office properties use LED lights and have active recycling programs. 80% of buildings have motion sensing lights. S O C I A L R E S P O N S I B I L I T Y RELATIONSHIP FOCUSED PEOPLE STRATEGY DIVERSITY & INCLUSION Melcor has been built on relationships since 1923. Treating others with respect has always been a core value. We cultivate and greatly value our relationships with employees, tenants, clients, contractors, shareholders and the communities where we operate. Our people are the heart of our strategy and one of our three core values is to “empower and care for our exceptional team.” In 2021 and 2022, managers participated in The Working Mind, a training program for recognizing and managing mental health challenges in the workplace. Presently, 50% of Melcor’s Vice President’s are women, and 48% of our overall team. 38% of our Directors are women. Visible minorities make up 18% of our workforce. G O V E R N A N C E PROPERTY MANAGEMENT COMMUNITY INVESTMENT Being invested in the communities where we do business is an important part of who we are. As we pursue excellence in our business, we also want the communities where we do business to be the best they can be. We give where we live to build strong communities. Our giving and involvement focuses on key pillars of strong communities: education, health, youth, sports, public gathering places such as libraries, and social programs that lend a helping hand to those in need. SUPPORTING LOCAL Our focus on relationships extends to our service providers as well. The majority of our service providers are small businesses that support our local economies. EFFECTIVE GOVERNANCE The majority of our directors are independent and we have appointed an independent lead director. Directors undertake a self evaluation on the effectiveness of the board and its committees annually. CORPORATE GOVERNANCE We are committed to effective corporate governance S T R A T E G I C P L A N N I N G P R O C E S S practices as a core component of our operating The board ensures that Melcor establishes a solid philosophy. Strong governance practices lay the strategy designed to optimize shareholder value. This foundation for a sustainable company and long-term process includes active consultation with management value creation for our shareholders. As governance on the issues, business environment, assumptions, practices evolve, we periodically review, evaluate and goals and financial budgets that underpin the strategy enhance our governance program. Here are a few and ensures that risk levels are appropriate. To ensure that the board is fully informed and engaged in the strategic issues and critical risks of our business, one meeting each year is dedicated to the review and approval of our strategic plan to manage risk, protect shareholder value and build a sustainable business. A L I G N M E N T W I T H S H A R E H O L D E R I N T E R E S T S Our compensation philosophy is to pay for superior performance. Thus a significant portion of executive compensation is “at risk”: tied directly to results and thus linked to Melcor’s success. This ensures alignment with shareholder interests and a focus on long-term value creation. highlights of our program: I N D E P E N D E N C E The majority of our directors are independent and our committees are comprised of a majority of independent directors. The independent directors meet in camera (without management and related directors) for a portion of each meeting held. As our Chair is related to Melcor, we have appointed a Lead Director, Cathy Roozen, who is independent of the company. Ms. Roozen chairs the in camera sessions and ensures that the board conducts itself in accordance with good governance practices. I N T E G R I T Y : T H E H E A R T O F O U R B U S I N E S S The highest standard of ethical conduct has always been at the heart of Melcor’s operating philosophy. All employees, directors and officers follow our Code of Business Conduct and Ethics, which governs Melcor’s work environment, regulatory compliance and the protection of our assets and reputation. The Code can be found on our website at www.melcor.ca. 12 2022 Annual Report Douglas Goss, Q.C., AOE Edmonton, Alberta, Canada Independent Counsel, Bryan & Company LLP Director Since Attendance Compensation Shareholdings Committees 2021 100% $33,000 2,500 Governance Andrew Melton Calgary, Alberta, Canada Kathleen Melton, ICD.D Calgary, Alberta, Canada Related CEO, Melcor REIT & Corporate Director Related Corporate Director Director Since Attendance Compensation Shareholdings Committees 1985 100% $nil 228,924 Investment Director Since Attendance Compensation Shareholdings 2016 100% $55,500 42,950 Committees Governance, Investment Timothy Melton Edmonton, Alberta, Canada Related Executive Chair & CEO, Melcor Director Since Attendance Compensation Shareholdings Committees 1973 100% $nil 2,301,500 Investment Bruce Pennock Edmonton, Alberta, Canada Janet Riopel, ICD.D Edmonton, Alberta, Canada Independent Partner, Pennock Acheson Nielsen Devaney Independent President & CEO, TREYL Communications Director Since Attendance Compensation Shareholdings Committees 2021 100% $49,500 5,000 Audit (Chair) Director Since Attendance Compensation Shareholdings Committees 2022 100% $34,000 1,750 Audit Catherine Roozen Edmonton, Alberta, Canada Independent | Lead Director Director & Secretary, Cathton Investments Director Since Attendance Compensation Shareholdings 2007 100% $55,000 145,600 Committees Audit, Governance (Chair) Ralph Young Edmonton, Alberta, Canada Independent Corporate Director Director Since 2021 Attendance 2021 Compensation Shareholdings Committees 1976 100% $53,000 1,405,300 Governance FIVE YEAR PERFORMANCE MEASURES 2022 % CHANGE 2021 % CHANGE 2020 % CHANGE 2019 % CHANGE 2018 ASSETS ($000s) 2,167,050 2.5% 2,113,927 5.6% 2,001,285 (4.5)% 2,096,047 3.6% 2,023,076 SHAREHOLDERS’ EQUITY ($000s) 1,178,336 5.5% 1,116,469 3.6% 1,077,429 (0.3)% 1,080,257 1.2% 1,067,565 REVENUE ($000s) 241,747 (23.4)% 315,628 39.2% 226,818 9.1% 207,971 (22.2)% 267,434 GROSS MARGIN1 48.9% ADMINISTRATIVE EXPENSES/REVENUE1 9.5% 44.4% 6.9% 43.3% 8.0% 46.5% 10.8% 46.8% 8.8% BASIC EARNINGS PER SHARE ($) 2.75 61.8% 1.70 400.0% 0.34 1.13 (41.1)% 1.92 NET INCOME ($000s) 89,354 58.7% 56,311 391.2% 11,464 (69.9)% 37,741 (41.3)% 64,273 FFO2 ($000s) 60,859 (25.5)% 81,327 58.1% 51,424 34.4% 38,265 (31.8)% 56,127 FFO PER SHARE3 ($) 1.88 (23.8)% 2.46 58.7% 1.55 34.8% 1.15 (31.5)% 1.68 AVERAGE SHARE PRICE ($) DIVIDEND PER SHARE ($) 13.24 4.0% 12.73 55.1% 8.21 (35.9)% 12.81 (11.1)% 14.41 0.58 31.8% 0.44 29.4% 0.34 (32.0)% 0.50 (3.8)% 0.52 DIVIDEND YIELD4 4.38% 3.5% 4.1% 3.9% 3.6% 37.71 11.3% 33.87 4.0% 32.56 0.2% 32.51 1.6% 32.01 35.46 8.6% 32.66 (1.8)% 33.26 3.6% 32.09 3.5% 31.02 BOOK VALUE PER SHARE3 ($) AVERAGE BOOK VALUE PER SHARE5 ($) AVERAGE MARKET /AVERAGE BOOK6 ($) PRICE/EARNINGS RATIO7 0.37 4.81 RETURN ON EQUITY8 7.58% RETURN ON ASSETS9 4.13% DEBT/EQUITY RATIO10 (EXCLUDING REIT UNITS) 0.78 0.38 7.49 5.04% 2.66% 0.81 0.25 24.15 1.06% 0.57% 0.80 0.40 11.34 3.49% 1.80% 0.84 9.92% 0.46 7.51 6.02% 3.18% 0.80 13.22% ASSET TURNOVER11 11.16% 14.93% 11.33% 1. Supplementary financial measure. Refer to the Non-GAAP and Non-Standard Measures section on page 39 of the annual MD&A for further information. 2. Non-GAAP financial measure. Refer to the Non-GAAP and Non-Standard Measures section on page 39 of the annual MD&A for further information. 3. Non-GAAP financial ratio. Refer to the Non-GAAP and Non-Standard Measures section on page 39 of the annual MD&A for further information. 4. Dividend yield is dividends per share divided by the average share price. 5. 6. Average book value per share is the average of the book values at each quarter end date. Average market/average book is the average share price divided by the average book value per share. 7. Price/earnings ratio is the average share price for the year divided by the basic earnings per share. Return on equity is net income for the year divided by equity at year end. 8. 9. Return on assets is net income for the year divided by assets at year end. 10. Debt/equity ratio is debt, excluding REIT units, divided by shareholders equity. 11. Asset turnover is revenue divided by assets at year end. 14 2022 Annual Report A N N U A L G E N E R A L M E E T I N G C O R P O R A T E I N F O R M A T I O N Melcor Developments Ltd. 900, 10310 Jasper Avenue Edmonton, AB T5J 1Y8 P. 780.423.6931 1.855.673.6931 Exchange Listing Toronto Stock Exchange: MRD Auditors PricewaterhouseCoopers LLP Legal Counsel Bryan & Company LLP Investor Relations P. 1.855.673.6931 ir@melcor.ca We are pleased to invite you to our 54th annual meeting of shareholders. You may attend the meeting in person or via webcast. Both the live and online audience will have the opportunity to ask questions following the meeting. We encourage you to vote in advance of the meeting as per the instructions received in your voting package. Wednesday, April 26, 2023 | 11:00 am MT Fairmont Hotel Macdonald Empire Ballroom 10065 100 Street | Edmonton, AB Online: https://www.gowebcasting.com/12427 PROXY DEADLINE: Monday, April 24, 2023 | 11:00 am MT S H A R E H O L D E R S E R V I C E S For shareholder services, including dividend information, change of address and lost share certificates, please contact: Odyssey Trust Trader’s Bank Building 702 67 Yonge Street Toronto, ON M5E 1J8 1-888-290-1175 https://odysseycontact.com K E Y D A T E S Annual Meeting: April 26, 2023 | 11:00 am MT Earnings Dates: Q1-2023 – May 10, 2023 Q2-2023 – August 10, 2023 Q3-2023 – November 8, 2023 Q4-2023 – TBD Dates are subject to change without notice. 15 2022 Annual Report www.Melcor.ca www.Melcor100.ca