WALTON ONTARIO LAND L.P. 1. ANNUAL REPORT 2013 For the years ended December 31, 2013 and December 31, 2012

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1 WALTON ONTARIO LAND L.P. 1 ANNUAL REPORT 2013 For the years ended December 31, 2013 and December 31, 2012

2 TABLE OF CONTENTS CEO MESSAGE TO UNITHOLDERS MANAGEMENT S DISCUSSION AND ANALYSIS FINANCIAL STATEMENTS WALTON GROUP OF COMPANIES Ottawa

3 CEO MESSAGE TO UNITHOLDERS Included in this report are the 2013 fiscal results for Walton Ontario Land L.P. 1 (the Partnership ). Launched in January 2010, the Partnership s objective is to maximize returns to limited partners through the management and concept planning of the Ottawa Property (the Property ), which consists of 300 acres adjacent to the southwest urban boundary of Ottawa. The Partnership continues to conceptually plan the Property while management continues to participate in the 2014 Official Plan review process to support and position the Ottawa lands in future expansions to Ottawa s urban boundary. Management believes that the Property is well-suited for inclusion in an urban boundary expansion because of its potential employment and mixed-use attributes. While the City of Ottawa has ruled on its Official Plan and did not include the Property in any boundary expansion, management reserved its right to appeal the decision to the Ontario Municipal Board. Notwithstanding the challenges associated with having the Property included in the urban boundary, overall the Partnership is performing as expected by management and consistent with the Partnership s intention to achieve the highest return from the land. The timeline disclosed in the prospectus is anticipated to be revised as management continues with its concept planning and evaluates a variety of strategies to include the Property in the urban boundary. Additionally, the Partnership has revised its methodology for determining the fair value of the Ottawa Property. The new methodology is based on a market approach which uses comparable market sales obtained from an independent valuator to assess the value as is. This differs from the previously employed discounted cash flow model which incorporated assumptions around conditions, prices, and entitlements at the time of exiting the Property. In applying the market approach method, the fair value of the Ottawa Property as of December 31, 2013, was estimated to be approximately $25,450,000 (December 31, $24,841,745). The fair value as reported in the third quarter of 2013 was estimated to be approximately $43,695,749 in circumstances where the discounted cash flow approach was applied. While the new methodology resulted in a decreased estimated fair value for the Ottawa Property, it remains higher than the carrying costs of the land as of December 31, Walton Ontario Land L.P. 1, Ottawa Property Annual Report 2013 Walton Ontario Land L.P. 1 3

4 Top: Walton Ontario Land L.P. 1, Alliston Property (Sold in October of 2012) Plan. Bottom: Walton Ontario Land L.P. 1, Ottawa Property Outline 4 Walton Ontario Land L.P. 1 Annual Report 2013

5 MARKET ENVIRONMENT Ottawa-Gatineau s real Gross Domestic Product ( GDP ) is expected to grow by 1.4% in In January 2014, the Ottawa-Gatineau Census Metropolitan Area ( CMA ) unemployment rate was at 6.3%, which was lower than the national average of 7.2%. 1 Between January 2013 and January 2014, population growth in Ottawa-Gatineau CMA expanded by 1.1% to reach a population of million people. 1 Ottawa-Gatineau s population is forecast to increase to million by This growth is driving the need for new housing. During 2013, new home construction expanded 8.9% over This activity moved yearly total starts in 2013 to close to 6% above both the five and ten-year averages. Year-over-year annual starts were strengthened by the revitalization in low-rise construction. 2 Walton believes that the residential and commercial development activity currently occurring near the Property demonstrates the strength of the new home and commercial market in the area, and that the Partnership s land is well positioned for future development. Our belief is supported by the growth of the following neighbouring developments in the area: Monahan Landing, a subdivision comprised of single-family and townhouse units, located just inside Ottawa s urban boundary and directly adjacent to the Property, has launched Phase 2 of its development; Blackstone and Fernbank Crossing, two communities consisting of single-detached homes, townhouses, and low rise condominiums, located northwest of the Property, are in their first of several phases of development; and The new SmartCentres Kanata Retail Plaza, approximately 2 km northwest of the Ottawa Property, includes a Walmart Supercentre and many other retail outlets. Walton believes strongly in the quality of our assets and is proud to offer our clients and investors the opportunity to participate in our land-based real estate projects. We will continue to work with municipal governments and other stakeholders in the planning and development of our projects to realize the most effective use of our lands to attain our investment goals. Thank you for investing in the Partnership, and for your support and confidence in the Walton Group of Companies. Best regards, WILLIAM K. DOHERTY Chief Executive Officer Walton Ontario Land 1 Corporation, General Partner of Walton Ontario Land L.P Conference Board of Canada, Metropolitan 2. Winter 2014 CMHC, Housing Now, Ottawa, January 2014 Annual Report 2013 Walton Ontario Land L.P. 1 5

6 MANAGEMENT S DISCUSSION & ANALYSIS For the years ended December 31, 2013 and December 31, 2012 April 29, 2014 The following management s discussion and analysis ( MD&A ) is a review of the financial condition and results of operations of Walton Ontario Land L.P.1 (the Partnership ) for years ended December 31, 2013 and December 31, The MD&A should be read in conjunction with the Partnership s audited financial statements for the years ended December 31, 2013 and December 31, All financial information is reported in Canadian dollars and has been prepared in accordance with the International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). In limited situations, IFRS has not issued rules and guidance applicable to the real estate investment and development industry. In such instances, the Partnership has followed guidance issued by the Real Property Association of Canada to the extent that such guidance does not conflict with the requirements under IFRS or the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the IFRS framework. Additional information about the Partnership is available on SEDAR at CRITICAL ACCOUNTING ESTIMATES The preparation of financial information in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and equity at the date of the financial statements, and the reported amount of revenues and expenses during the year. The estimates and assumptions which have the most significant effect on the financial statements and note disclosures are related to the recoverability of land and the fair value of land, which are determined using a market approach using comparable market data through the use of an independent valuator to assess the value as is. This requires management to use its judgment to assess the highest and best use of the investment property. Changes in these estimates and assumptions could cause the actual results to differ materially from those estimates. REVISION OF PRIOR PERIOD BALANCES For the year ended December 31, 2013 the Partnership has revised the prior period financial statements for offering costs, which were previously charged to the profit and loss. The Partnership has determined that these costs are directly related to the issuance of partner s capital. As a result $537,000 of accumulated deficit has been reclassified to partner s capital as at January 1, 2012 and December 31, For the year ended December 31, 2013 the Partnership has revised the prior period financial statements presentation relating to the sale of the Alliston property as a gain on disposal of investment property. The gain on disposal of investment property does not include the performance fee of $1,896,189 and disposal fee of $360,675 previously included in cost of sales in the prior period. The performance and disposal fee have been presented as management fees in the prior period. 6 Walton Ontario Land L.P. 1 Annual Report 2013

7 The revisions and the change in presentation have resulted in the following changes to the financial statements as at December 31, 2012 and January 1, 2012: Previously Reported Adjustment Adjusted Amount Impact as at January 1, 2012: $ $ $ Partner s Capital 33,831,050 (537,000) 33,294,050 Accumulated Deficit (2,030,095) 537,000 (1,493,095) Impact as at December 31, 2012: Partner s Capital 33,831,050 (537,000) 33,294,050 Accumulated Deficit (15,381,494) 537,000 (14,844,494) Revenue (24,045,000) 24,045,000 - Cost of sales 15,006,542 (15,006,542) - Gain on land disposal - (11,295,322) (11,295,322) Management fee 665,880 2,256,864 2,922,744 Cash provided by operating activities 20,571,441 (23,892,077) (3,320,636) Cash used for investing activities (315,491) 23,892,077 23,576,586 There was no impact on net loss, net loss per unit and equity of the Partnership as a result of these changes. FORWARD-LOOKING STATEMENTS Certain information set forth in this material is based on the Partnership s current expectations, intentions, plans, and beliefs, which are based on experience and the Partnership s assessment of historical and future trends. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond management s control. These risks and uncertainties include, but are not limited to, the timing of approval by municipalities, and the business and general economic environment. These uncertainties may cause the Partnership s actual performance, as well as financial results in future periods, to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Investors are cautioned against attributing undue certainty to forward-looking statements because actual results could differ materially from management s targets, expectations or estimates. See also Risk Factors in this MD&A. The forward-looking statements contained in this MD&A are given as of the date hereof. Except as otherwise required by law, the Partnership does not intend to, and assumes no obligation to, update or revise these or other forwardlooking statements it may provide, whether as a result of new information, plans or events or otherwise. RESPONSIBILITY OF MANAGEMENT This MD&A has been prepared by, and is the responsibility of, the management of the general partner of the Partnership, Walton Ontario Land 1 Corporation (the General Partner ). The General Partner is a subsidiary of Walton G.P. Holdco Ltd., a wholly owned subsidiary of Walton International Group Inc. ( WIGI ). WIGI is a wholly owned subsidiary of Walton Global Investments Ltd.( Walton Global ). All or substantially all of the shares of Walton Global are owned by or for the benefit of the Doherty family, including William K. Doherty, the Chief Executive Officer and director of Walton Global. APPROVAL BY THE BOARD OF DIRECTORS The MD&A was authorized for issue by the board of directors of the General Partner (the Board of Directors ) on April 29, Annual Report 2013 Walton Ontario Land L.P. 1 7

8 BUSINESS OVERVIEW The Partnership was established on October 2, 2009, for the purpose of acquiring and syndicating undeveloped strategically-located land within Ontario growth corridors. The Partnership s investment objective is to maximize returns to its limited partners through the acquisition, management, concept planning and sale of two properties, consisting of an aggregate of 455 acres of undeveloped land in southern Ontario (the Properties ). The Properties which were acquired by the Partnership consist of: Toronto Area: The property was located near Toronto in Alliston, Ontario (the Alliston Property ) and was made up of two parcels of land, comprised of 155 acres. These parcels were designated as Urban Industrial Holding (UM*H), and are adjacent to the Honda Canada manufacturing facility. City of Ottawa: The property is located in the southwest quadrant of the City of Ottawa (the Ottawa Property ) and is made up of a single parcel of land, comprised of 300 acres. This land was designated as Agriculture Resource Area. It is adjacent to an existing residential subdivision, and is immediately south of Ottawa s current urban area boundary. On October 12, 2012, the Partnership sold the Alliston Property. As a result, the interest in the Ottawa Property is the remaining investment held by the Partnership as at December 31, The Partnership is managed by WIGI. The project manager is Walton Development and Management (Alberta) LP (formerly Walton Development and Management L.P. ) ( WDM ). It is the current intention of the Partnership to hold its interest in the Ottawa Property as an investment and to dispose of it prior to its physical development. If the limited partners determine that the Partnership should participate in the development of the Ottawa Property (other than pre-development concept planning), the activities of the Partnership also may include the partial or full development of the Ottawa Property prior to its sale. The net proceeds from the disposition of the Ottawa Property, after satisfaction of liabilities and payment of, or provision for, all fees and expenses, including any amounts that the General Partner reasonably considers necessary to retain in order to replenish the refundable expense reserve, will be distributed by the Partnership. Included in such fees and expenses is a performance fee payable to WIGI, provided that the limited partners receive distributions equal to the amount of their purchase price allocation, plus an amount equal to an 8% annual cumulative return on contributed capital that has not been paid to the limited partners in respect of previous distributions. Net income, if any, earned from the Property prior to, or between its sales has not been, and is not anticipated to be, significant. As a result, the Partnership is not expected to distribute a significant amount of cash to unitholders other than at such time that the Property is sold. The address of the registered office of the General Partner is 23rd Floor, 605 5th Avenue SW, Calgary, Alberta, T2P 3H5. 8 Walton Ontario Land L.P. 1 Annual Report 2013

9 SUMMARY OF FINANCIAL DATA For the years ended December 31, 2013 December 31, 2012 (Revised) December 31, 2011 Total revenue ($) 82,255 80,249 77,444 Total expenses ($) (973,079) (3,246,755) 1,014,732 Net loss before other items ($) (890,824) (3,166,506) 937,288 (Loss)/gain on land disposal ($) (29) 11,295,322 - Comprehensive (loss)/income ($) (890,853) 8,128,816 - Weighted average units outstanding 1,2 1,961,840 1,961,840 3,580,000 Basic and diluted net income (loss) per unit ($) (0.45) The weighted average units outstanding exclude the general partner unit issued. Based on the terms of the Limited Partnership Agreement, the holder of the general partner unit does not share equally in the income/loss of the Partnership but instead receives 0.001% of the net income/loss. 2 The weighted average units outstanding and net income/(loss) per unit for all periods presented have been restated to reflect the November 15, 2012 unit consolidation, which resulted in a 1,618,160 reduction in the limited partnership units outstanding. As at December 31, 2013 December 31, 2012 December 31, 2011 (Revised) (Revised) Total assets ($) 17,633,260 18,531,875 31,993,457 Total liabilities ($) 74,557 82, ,502 Total equity ($) 17,558,703 18,449,556 31,800,955 Limited partnership units outstanding end of year 1,961,840 1,961,840 3,580,000 REVIEW OF OPERATIONS Summary During 2013, the Partnership continued with the execution of the concept planning phase of its overall investment strategy for the Ottawa Property. During this concept planning phase, engineering, planning and legal professionals will position the land to obtain municipal approval to permit development on the land. To obtain such approvals, the Partnership works with the City of Ottawa planning authorities to conceptually plan the Property for build-out in order to achieve the highest and best development potential. These approvals generally attract an expanded audience of potential buyers. This process is not limited to land-use planning, as the positioning of the parcel incorporates fiscal, environmental, agricultural, and infrastructure solutions in a comprehensive and holistic manner, for the benefit of the parcel, the entire planning region of southwest Ottawa, and all of the City of Ottawa. As such, the Partnership continues to participate in the 2014 Official Plan review process to support and position the Ottawa Property in future expansions to Ottawa s urban boundary. Management believes that the Ottawa Property is well suited for an urban boundary expansion in 2014 from an employment and mixed use perspective, and can become an initial phase in a regional Southwest Ottawa development plan. While the city has indeed ruled on its Official Plan, and not expanded its urban boundary, the completion of the process is not final until the Provincial Minister of Municipal Affairs has made a final ruling and all appeals have been exhausted. The Ottawa Property is surrounded to the north and north-west by residential subdivisions, and is located along two arterial roads based on the City of Ottawa s hierarchy of road networks. These roads have and continue to undergo tremendous development pressure to be widened and/or modified. In 2014, Eagleson Road which fronts the western edge of the property, will see the completion of a traffic roundabout at its current stop sign intersection with Flewellyn Road. Hope Side Road which fronts the northern edge of the property is currently undergoing an EA (Kanata South Class Environmental Annual Report 2013 Walton Ontario Land L.P. 1 9

10 Assessment Study) for its widening to a 4-lane arterial road. The property will be further exposed to land requirements for the widening and 3 proposed roundabouts. During the year ended December 31, 2013, the Partnership realized a net loss of $890,853 compared to a net income of $8,128,816 for the year ended December 31, Of the $9,019,669 decrease year over year, $11,295,322 was a direct result of the gain realized on the sale of the Alliston Property in 2012, net of performance fees and disposition fees of $1,896,189 and $360,675, respectively. Excluding the gain from the land sale in 2012, the net loss of the Partnership was comparable to the year ended December 31, This was consistent with management s expectation because the Partnership is not expected to generate significant revenues, except during periods when either property is sold. The Partnership s expenses are also expected to remain fairly constant throughout the life of the Partnership because the most significant expenses of the Partnership, being the management fees, servicing fees and directors fees, are fixed over the life of their respective contracts. Overall, the Partnership is performing as expected by management and consistent with the Partnership s intention of holding its interest in the Ottawa Property as an investment. ANALYSIS OF FINANCIAL CONDITION As at December 31, 2013, the Partnership had total assets of $17,633,260 (December 31, 2012 $18,531,875), total liabilities of $74,557 (December 31, $82,319) and total partners equity of $17,558,703 (December 31, $18,449,556). The major components of the Partnership s total assets were land of $15,066,849 (December 31, $14,992,521) and cash of $2,554,867 (December 31, $3,398,200). Both the expenses and land development costs of the Partnership are funded through the cash reserve set aside by the Partnership out of the gross proceeds from the Initial public offering offering via prospectus dated January 27, 2010 ( IPO ) and private placement via offering memorandum dated March 19, 2010 ( Private Placement ) (collectively, the Offerings ) and the retained cash of $308,136 from the sale of the Alliston Property in October The cash on hand as at December 31, 2013, is expected by management to be adequate to fund operations over the next 12 months, and anticipated to be sufficient for the Partnership to carry out its investment objectives. LAND The carrying amount of land increased from $14,992,521 at December 31, 2012 to $15,066,849 as at December 31, The increase in the carrying value of the land was a result of the capitalized costs associated with the concept planning for the Ottawa Property throughout the year of This increase in land was offset by the sale of acres to the City of Ottawa. The cost of the acres resulted in a $12,559 decrease to land. Proceeds received for the acres were $12,530 which resulted in a $29 loss on disposal. The acres of Ottawa property was sold to the City of Ottawa in order to construct a fourth leg of what is currently a 3-leg roundabout. The amount of concept planning costs incurred during the year was consistent with the Partnership s expectations. In the current period, the Partnership has revised its methodology for determining the fair value of its land. The model has been revised from a discounted cash flow model, which incorporated assumptions around future conditions, prices, and entitlements at the expected time of exiting the property, to a market approach using comparable market sales adjusted for factors specific to the Partnership s property including sales date, property rights conveyed, financing terms, conditions of sale, location, site area, site utility, planning and development timeframe and a report from an independent valuation firm which holds recognized and relevant professional qualifications and has recent experience in the location and category of the investment property being valued. 10 Walton Ontario Land L.P. 1 Annual Report 2013

11 The current fair value is based on conditions existing at the balance sheet date. Fair value measurements are classified using a three tier fair value hierarchy where each level reflects the significance of the inputs used in making the measurements. In level 1, values are based on unadjusted quoted prices in an active market that are accessible at the measurement date for identical assets and liabilities; level 2 values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability; and level 3 values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Overall, the valuation is considered to fall into level 3 of the fair value hierarchy because of unobservable adjustments reflecting the condition and location of the Partnership s land. In applying this valuation method, the fair value of the remaining Ottawa Property as at December 31, 2013 was estimated to be approximately $25,450,000. The fair value of the remaining Ottawa Property as at December 31, 2012 applying the valuation methodology used in the prior year of $44,669,240 has been revised in the current period to $24,841,745. The fair value as reported in the third quarter of 2013 was estimated to be approximately $43,695,749, in circumstances where the discounted cash flow mechanism applied. While the new methodology resulted in a decreased estimated fair value for the Ottawa Property, it remains higher than the carrying cost of the land as of December 31, 2013 The General Partner is responsible for determining the measurements used to determine fair value as well as reviewing all major inputs and assumptions included in the valuation and reviewing the results of the independent valuator. The General Partner, along with the audit committee, discusses the valuation process and key inputs on a quarterly basis. Assumptions underlying these estimates are limited by the availability of reliable comparable data. By nature, these estimates are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the estimated proceeds from the ultimate sale may change by a material amount and may result in a write-down of the carrying amount of the land. In determining the fair value of our investment property judgment is required in assessing the highest and best use as required under IFRS 13, Fair Value measurement. The property is currently zoned for and is used as agricultural land which is not considered to be its highest and best use. The highest and best use of the property is considered to be property containing residential or commercial buildings. However, it should be noted that the property is not currently zoned for this use. The current fair value is considered to be what a willing market participant would be willing to pay for the property in its current condition as at December 31, The current fair value considers that if the property were to be sold at December 31, 2013 to a market participant, such participant would take into account the potential use of the property as non-agricultural land and the risks associated with obtaining the appropriate permits and zoning for that use. In addition to the fair value analysis discussed above, management also reviews the market value of the Ottawa Property on an as entitled basis. Estimating the market value on an as entitled basis involves analysis of a variety of land transactions within the immediate and surrounding areas of sales of vacant residential lands already designated as residential areas. Using this valuation method of the Ottawa Property as entitled, the fair value of the remaining Ottawa Property as at December 31, 2013, was estimated to be approximately $56,880,000 (December 31, $55,520,568). This as entitled basis does not represent the current fair value of the property, and is a projected value based on certain hypothetical and extraordinary assumptions. The as entitled estimate is the estimate of the market value of real property based on the hypothetical condition and extraordinary assumption that the property in its entirety is located inside the urban boundary and is designated within the Official Plan as residential/mixed-use development land ready for development. There is a risk that such municipal approvals may not be obtained in a timely manner, or at all. MANAGEMENT FEES Under the terms of the Management Services and Fee Agreement between the Partnership and WIGI, the Partnership is required to pay WIGI: Annual Report 2013 Walton Ontario Land L.P. 1 11

12 i) An annual management fee for providing ongoing management and administrative services to the Partnership. The annual management fee of $665,880 (calculated as 2% of $33,294,000, being the net proceeds raised by the Partnership, less offering costs) is payable by the partnership and is due quarterly until all of the properties are disposed. ii) A performance fee equal to 25% of the priority return of 8% divided by 0.75, plus 25% of the balance remaining after the priority return and the above portion of the performance fee. The priority return is calculated on the partners investment amount from the closing date of the Partnership s unit offering, on contributed capital that has not been paid to the limited partners in respect of all dispositions. The performance fee will still be payable to WIGI should the Partnership remove WIGI as manager under the Management Services and Fee Agreement. No performance fee was incurred during the year ended December 31, 2013, as there was no return on the land sale to the City of Ottawa during the year. The performance fee incurred by the Partnership as a result of the sale of the Alliston Property during the year ended December 31, 2012 was $1,896,189. iii) A disposition fee equal to 1.5% of the gross proceeds received by the Partnership when the Partnership sells all or any part of its interest in the Properties. The disposition fee will still be payable to WIGI should the Partnership remove WIGI as manager under the Management Services and Fee Agreement. No disposition fee was incurred during year ended December 31, The Partnership incurred a disposition fee of $360,675 during the year ended December 31, 2012 as a result of the sale of the Alliston Property. SERVICING FEES Servicing fees are paid in accordance with the Agency Agreements between the Partnership and its agents. Under the terms of the Agency Agreements, the Partnership is required to pay a servicing fee equal to 0.50% annually of the net proceeds raised through the IPO and Private Placement, less offering costs. The portion of the servicing fee relating to the Partnership s Private Placement is payable to WIGI, which is responsible for the distribution of the servicing fee to the agents. The servicing fee is calculated and paid semi-annually commencing on June 30, 2010, until the earlier of the dissolution of the Partnership and June 30, TRANSACTIONS WITH RELATED PARTIES WIGI and WDM are related to the General Partner of the Partnership by virtue of the fact that they are all controlled by Walton Global. Walton Alliston Development L.P. is related by virtue of the fact that its general partner is controlled by Walton Global. The balances due from these related parties are outlined in the table below. These amounts are unsecured, due on demand, bear no interest and have no fixed terms of repayment. As at December 31, 2013 As at December 31, 2012 As at December 31, 2011 Walton International Group Inc. - 5,641 5,795 Walton Alliston Development L.P. - 9, ,214 5,795 Included in accounts payable and accrued liabilities are the following amounts which were payable to related parties. These amounts are unsecured, due on demand, bear no interest and have no fixed terms of repayment. 12 Walton Ontario Land L.P. 1 Annual Report 2013

13 As at December 31, 2013 As at December 31, 2012 As at December 31, 2011 Walton International Group Inc ,093 Walton Development and Management (Alberta) LP 82 1,996 78,458 Walton Ontario Land 1 Corporation , ,551 Walton International Group Inc. In accordance with the terms of the Management Services and Fee Agreement between the Partnership and WIGI, the Partnership incurred management fees during the year ended December 31, 2013, of $665,880 (December 31, $665,880). In accordance with the Agency Agreements between the Partnership and its agents, the Partnership incurred total servicing fees during year ended December 31, 2013, of $166,470 (December 31, $166,470). The servicing fees are payable to WIGI, which is responsible for the distribution of the servicing fees to the agents. Under the terms of the Management Services and Fee Agreement, the Partnership is also subject to a performance fee equal to 25% of the priority return of 8% divided by 0.75, plus 25% of the balance remaining after the priority return is calculated on the partner s investment amount from the closing date of the Offerings, on contributed capital that has not been paid to the limited partners in respect of all dispositions. The Partnership and WIGI entered into a funding agreement on February 25, 2010 (the Funding Agreement ). In accordance with the Funding Agreement the Partnership established a refundable expense reserve that was equal to multiplied by the Partnership s gross proceeds received. WIGI will pay, for and on behalf of the Partnership, or fund to the Partnership, to a maximum of 5% of the Partnership s gross proceeds (the Maximum Financing Obligation ) any expenses incurred by the Partnership in respect of concept planning and any Partnership administrative expenses that are in excess of the then current balance of the refundable expense reserve, as such reserve may be replenished from time to time in the sole discretion of the directors of the General Partner. The Partnership and WIGI agreed that WIGI may pay the amounts of the Partnership s excess expenses that WIGI determines either from its own funds or help the Partnership to arrange financing for such amounts and the Partnership shall be obligated to agree to such financing provided that such financing is on terms that are commercially reasonable to the Partnership in the reasonable judgment of the Partnership. WIGI may, in its sole discretion, pay for Partnership expenses in excess of the Maximum Financing Obligation. The loan will bear interest at an annual interest rate equal to the prime rate, and if WIGI is no longer manager of the Properties, the loan shall bear interest at an annual rate equal to Prime plus 5%. Walton Development and Management (Alberta) LP In accordance with the Concept Planning Services Agreement with WIGI and WDM, the fees and costs for services provided by WDM in relation to concept planning are divided into the following two categories: i) the services conducted internally by WDM ( WDM Services ), which will be provided at a rate of $25 per acre per year; and ii) the services, with respect to the Properties, coordinated and managed by WDM ( Managed Services ) where outside consultants are engaged by WDM to undertake work in relation to concept planning. The Partnership will be responsible to pay, from the refundable expense reserve, the fees, expenses and cost of the outside consultants engaged by WDM. In addition, WDM will be entitled to receive a fee in an amount equal to 10% of the fees paid to outside consultants engaged by WDM in relation to such Managed Services. Both the WDM Services fee and Managed Services fee are capitalized as part of land. Annual Report 2013 Walton Ontario Land L.P. 1 13

14 During the year ended December 31, 2013, the Partnership incurred total services fees of $7,497 (December 31, $11,370). This was lower than the service fee in 2012 as the fees are based on acres owned. Due to the Alliston Property sale in the fourth quarter of 2012 there were less acres on which to base the service fees on, which explains the decrease in service fees from year to year. This was consistent with management s expectations because the amount of the services fees is based on a fee per acre rate over the life of the Concept Planning Services Agreement. The total services fees incurred during 2013 were consistent with the terms of the Concept Planning Services Agreement and management s expected use of funds. The total Managed Services fee charged to the Partnership during year ended December 31, 2013, was $7,194 (December 31, $35,287). These amounts were charged as 10% of the Managed Services of the Properties during the year. The year over year decrease in Managed Services was due to a decrease in the concept planning work performed during 2013 compared to Walton Alliston Development L.P. On October 12, 2012, Walton Alliston Development L.P. purchased the Alliston Property from the Partnership for $155,199 per acre for total consideration of $24,045,000. As at December 31, 2013, a receivable of $nil (December 31, $9,573) from Walton Alliston Development L.P. was outstanding relating to expenditure adjustments as a result of the sale of the Alliston Property. Key Management Compensation Key management personnel are comprised of the directors and executive officers of the General Partner. The independent directors are paid a fixed amount of compensation for the life of the Partnership, which is payable quarterly in advance. The amount of compensation expense incurred by the Partnership relating to its independent directors was as follows: For the years ended December 31, 2013 December 31, 2012 December 31, 2011 Directors fees ($) 83,613 83,613 83,613 All services performed for the Partnership by its executive officers and its non-independent director are governed by the Management and Services Fee Agreement. The annual management fee that WIGI receives under the Management and Services Fee Agreement has been disclosed above. The compensation of key management does not include the remuneration paid to individuals who are paid directly by Walton Global and WIGI. The Officers of the Partnership are also Officers and Directors of numerous entities controlled or managed by Walton Global and it is not practicable to make a reasonable apportionment of their compensation in respect of each of those entities. 14 Walton Ontario Land L.P. 1 Annual Report 2013

15 Review of Fourth Quarter Operations During the fourth quarter of 2013, the Partnership generated total revenues of $16,912 (December 31, $33,547), total expenses of $245,657 (December 31, $2,509,854), and a comprehensive loss/(income) of $228,744 (December 31, $(8,819,015)). Other than the effects of the sale of land in the fourth quarter of 2012, the total expenses generated by the Partnership during the fourth quarter of 2013 were comparable to those of the fourth quarter of The Partnership s expenses are expected to remain fairly constant throughout the life of the Partnership because the expenses of the Partnership, being the management fees, servicing fees and directors fees, are fixed over the life of their respective contracts. The net loss incurred by the Partnership was consistent with management s expectations because the Partnership is not expected to generate significant revenues, except during periods when property is sold. Summary of Quarterly Results A summary of operating results for the past eight quarters is as follows: December 31, 2013 September 30, 2013 June 30, 2013 Three months ended March 31, 2013 December 31, 2012 (Revised) September 30, 2012 June 30, 2012 March 31, 2012 Total assets ($) 17,633,260 17,862,186 18,046,854 18,486,360 18,531,875 31,180,614 31,410,190 31,623,171 Total liabilities ($) 74,557 74,740 65, ,911 82,319 69,859 66,720 53,751 Total equity ($) 17,558,703 17,787,446 17,981,649 18,216,449 18,449,556 31,110,755 31,343,470 31,569,420 Total revenue ($) 4 16,912 39,778 12,711 12,854 33,547 10,520 19,287 16,895 Total expenses ($) (245,657) (233,950) (247,511) (245,961) (2,509,854) (246,234) (242,237) (248,430) Net income / (loss) before other items (228,745) (194,172) (234,800) (233,107) (2,476,307) (235,714) (222,950) (231,535) ($) (Loss)/gain on land disposal ($) - (29) ,295, Comprehensive (loss)/income ($) (228,745) (194,201) (234,800) (233,107) 8,819,015 (235,714) (222,950) (231,535) Weighted average units outstanding 1,2 1,961,840 1,961,840 1,961,840 1,961,840 1,961,840 1,961,840 1,961,840 1,961,840 Basic and diluted net income / (loss) per unit ($) Limited partnership units outstanding end of year (0.12) (0.10) (0.12) (0.12) 4.50 (0.12) (0.11) (0.12) 1,961, ,961, ,961, ,961, ,961, ,580,000 3,580,000 3,580,000 1 Weighted average units outstanding exclude the general partner unit issued. Based on the terms of the Limited Partnership Agreement, the holder of the general partner unit does not share equally in the income/loss of the Partnership but instead receives 0.001% of the net income/loss. 2 The weighted average units outstanding and net income/(loss) per unit for all periods presented have been restated to reflect the November 15, 2012 unit consolidation, which resulted in a 1,618,160 reduction in the limited partnership units outstanding. 3 Change in limited partnership units outstanding are a result of a unit consolidation on November 15, 2012, immediately following the distribution due to the Alliston sale in Each outstanding unit became approximately of a unit. 4 The presentation of revenue has changed for the year ended December 31, 2012 to present the sale of acres of undeveloped land in Alliston, Ontario as a gain on land disposal. Quarter over quarter the operating results of the Partnership have been consistent with the exception of the fourth quarter of 2012 during which the Partnership sold the Alliston Property and realized a gain on this sale in the amount of $11,295,322. This reasonable consistency is management s expected trending given the Partnership s investment objectives. Annual Report 2013 Walton Ontario Land L.P. 1 15

16 SUPPLEMENTAL INFORMATION Liquidity and Capital Resources The Partnership s capital consist of partners equity and balances due to related parties. The Partnership s objectives when managing capital are to: (i) (ii) (iii) ensure adequate capital is retained by the Partnership to obtain construction loans to fund the ongoing operations of the Partnership; ensure that the Partnership is able to meet all obligations relating to the entity and the management, concept planning and sale and the development of the land; and maximize the rate of return to unit holders. The Partnership manages the capital structure by using short and long term cash flow projections to determine that the amount of cash available to meet on-going obligations is either retained by the Partnership or is available through agreements with related parties. There were no changes to the way we define capital, our objectives, and our policies and processes for managing capital from the prior fiscal year. The Partnership has the following sources of capital to finance its operations: i) Of the gross proceeds raised under the IPO and the Private Placement, approximately 17.9% ($6.4 million) was set aside by the Partnership in a refundable expense reserve. This reserve will be used to fund the annual management fee, the Partnership s ongoing administrative and operating expenses (including the servicing fee, disclosure costs, accounting, audit and legal expenses, investor communications costs and directors fees), and for any concept planning costs incurred with respect to the Properties over the next five years. The balance of the refundable expense reserve at December 31, 2013, was $2,554,867 (December 31, $3,398,200). ii) The Partnership has also entered into a Funding Agreement with WIGI, pursuant to which WIGI will fund as a loan, to a maximum of $1,790,000, (being 5% of the gross proceeds raised by the Partnership in connection with the issuance of units), the ongoing administrative and operational costs of the Partnership, other than the servicing fee. This loan shall bear interest at an annual interest rate equal to Prime. Management regularly reviews the levels of its cash reserves to determine if sufficient cash is available to fund the operating costs, concept planning costs, and management expenses that the Partnership expects to incur over the next twelve months. As at December 31, 2013, no funds have been advanced under the terms of the Partnership s Funding Agreement. As at December 31, 2013, no funds have been advanced under the terms of the Partnership s Funding Agreement. 16 Walton Ontario Land L.P. 1 Annual Report 2013

17 Cash Requirements The following table presents future commitments of the Partnership under the Agency Agreements, Management Services and Fee Agreement, and the Concept Planning Services Agreement. Servicing fee Management fee WDM Services Total $ $ $ $ , ,880 7, , , , , , ,880 7, , ,880 7, ,377 Thereafter - 665,880 7, , ,705 3,329,400 37,485 3,616, Commitments for WDM Services will extend for the length of the project. 2 While the Partnership has set aside adequate reserves in the refundable expense reserve for management fees until June 30, 2015, this fee will continue until the project is complete, any amount due will not be payable until the final distribution. The Partnership s intention is to meet short-term liquidity requirements through cash from the refundable expense reserve. Sources and uses of cash The Partnership s primary use of capital includes paying operating expenses. The Partnership believes that the cash available within the refundable expense reserve will be sufficient to cover the Partnership s normal operating expenditures. The following table summarizes the Partnership s cash flows from (used in) operating, and financing activities as reflected in the Statement of Financial Position. Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities $ $ (767,062) (3,320,636) (76,271) 23,576,586 - (21,480,215) Off-Balance Sheet Arrangements There were no off-balance sheet arrangements as at December 31, Financial Instruments The Partnership's financial instruments consist of accounts receivable, due from related parties, cash, and accounts payable and accrued liabilities. Accounts receivable, due from related parties and cash have been classified as loans and receivables, and are carried at amortized cost using the effective interest rate method. Accounts payable and Annual Report 2013 Walton Ontario Land L.P. 1 17

18 accrued liabilities has been classified as other financial liabilities, and is carried at amortized cost using the effective interest rate method. The fair value of these financial instruments approximates their carrying value due to the shortterm nature of these items. Although it is management s opinion that the financial instruments of the Partnership do not give rise to significant credit, interest or currency risk, the Partnership is exposed to liquidity risk. Liquidity risk arises from the possibility that the Partnership will encounter difficulties in meeting its financial obligations as they become due. The Partnership manages its liquidity risk by continuously monitoring the adequacy of its capital resources and by managing cash receipts and payments as discussed above. Refer to Analysis of Financial Condition for the Partnership s plan for settling existing liabilities. Outstanding Units As of the date of this MD&A, the Partnership had 1,961,840 limited partnership units outstanding. FUTURE CHANGES IN ACCOUNTING POLICY Financial instruments In November 2009, as part of the IASB project to replace International Accounting Standard ( IAS ) 39 Financial Instruments: Recognition and Measurement, the IASB issued the first phase of IFRS 9 Financial Instruments. It contained requirements for the classification and measurement of financial assets, and was updated in October 2010 to incorporate financial liabilities. In November 2013, the IASB issued amendments to include the new general hedge accounting model and to postpone the mandatory effective date of this standard indefinitely. The full impact of this standard will not be known until the amendments addressing impairments, classification and measurement have been completed. When these projects are completed, an effective date will be added by the IASB. Offsetting Financial Assets and Liabilities IAS 32 Financial Instruments - Presentation ( IAS 32 ) was issued with amendments in December The amendments clarify certain aspects of the existing guidance on offsetting financial assets and financial liabilities. The amendments to IAS 32 are effective for annual periods beginning on or after January 1, The Partnership has assessed that there will be no impact of the adoption on the financial statements currently or retrospectively. Levies IFRIC 21 is an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability to pay a levy imposed by government, other than income tax. The interpretation requires the recognition of a liability when the event, identified by the legislation as triggering the obligation to pay the levy occurs. This standard is required to be applied for accounting periods beginning on or after January 1, The Partnership has not yet determined the impact of IFRIC 21 on its financial statements. 18 Walton Ontario Land L.P. 1 Annual Report 2013

19 CORPORATE GOVERNANCE Board of Directors The mandate of the Board of Directors is to oversee the management of the business of the General Partner and the Partnership, with a view to maximizing the Partnership s unitholder value, and ensuring corporate conduct in an ethical and legal manner via an appropriate system of corporate governance and internal control processes and procedures. The Board of Directors facilitates its exercise of independent supervision over management of the General Partner through, among other things: a) The adoption by the Board of Directors of a written mandate requiring that a majority of the members of the Board of Directors be independent of management; and b) The requirement, in the Board of Directors written mandate for its audit committee, that the audit committee be comprised solely of directors that are independent of management. The Board is comprised of Clifford H. Fryers, Jon N. Hagan and Richard R. Singleton. Within the meaning of National Instrument Audit Committees ( NI ), Jon N. Hagan and Richard R. Singleton are independent of management of the General Partner, while Clifford H. Fryers is not independent as his spouse is the Corporate Secretary of the General Partner. Mr. Fryers is the Chairman of the Board of Directors. The only standing committee of the Board of Directors is the audit committee (the Audit Committee ), which consists of Jon N. Hagan and Richard R. Singleton. Mr. Hagan is the Chairman of the Audit Committee. Personal Profiles Clifford H. Fryers Mr. Fryers is the Chairman and Chief Executive Officer of White Iron Inc. and Stampede Entertainment Inc., both entertainment companies. He recently retired as the Chair of the Board of the Manning Centre for Building Democracy and the Manning Foundation for Democratic Education. He is also former Chairman of the Board of Directors for ENMAX Corporation. Mr. Fryers is on the board of directors of several companies in the Walton Group, including the following reporting issuers: Walton Big Lake Development Corporation, being the general partner of Walton Big Lake Development L.P.; Walton Edgemont Development Corporation; Walton Yellowhead Development Corporation; and Walton Westphalia Development Corporation. He was on the Board of Advisors of Walton Global Investments Ltd. for eight years, retiring as Vice Chairman in November of From 1997 until 2000, Mr. Fryers was Chief of Staff to the Leader of Her Majesty s Official Opposition in the House of Commons. Prior to that, he was a Senior Tax Partner and Managing Partner with the law firm of Milner Fenerty (now Dentons LLP) which he joined in He worked in the Tax Litigation Section of the Department of Justice, Ottawa from 1971 to 1977 and then as General Tax Counsel for Mobil Oil Canada, Ltd. until Mr. Fryers holds the ICD.D certification granted by the Institute of Corporate Directors. Jon N. Hagan Mr. Hagan has been the principal of JN Hagan Consulting since December He provides assistance to major corporations regarding real estate capital markets, and acquisition and disposition transactions covering situations in Canada, the United States of America, Mexico and China. Mr. Hagan is also a director and member of the audit and executive committees of the board of directors of First Capital Realty Inc., which is a reporting issuer in Canada. He is Chair of the board and the Compensation, Nomination, and Governance Committee, and on the Audit Committee of Regal Lifestyle Communities Inc., which is a reporting issuer in Canada. He was formerly a director and member of the audit, human resources, corporate governance and investment committees of Bentall Kennedy Group from 2001 to He was a trustee of Sunrise Senior Living Real Estate Investment Trust from 2004 to 2007, and was the chair of the audit committee thereof. He was the Chairman of Teranet Income Fund from 2006 Annual Report 2013 Walton Ontario Land L.P. 1 19

20 to He was a director and on the audit committee of the board of directors of The Mills Corporation for the first three months of 2007 to assist in the sale of The Mills Corporation. Mr. Hagan is also on the board of directors and Chair of the Audit Committee of the following reporting issuers within the Walton Group: Walton Big Lake Development Corporation, being the general partner of Walton Big Lake Development L.P.; Walton Edgemont Development Corporation, Walton Yellowhead Development Corporation; and Walton Westphalia Development Corporation. Mr. Hagan has held a number of executive finance positions in the real estate industry, beginning with Oxford in the 1970s. His career took him to Cambridge Shopping Centres in 1980, where he eventually became Senior Vice-President, Corporate Group and Chief Financial Officer. He then joined the Empire Company Limited where he was Executive Vice-President, Finance and Corporate Development. From 1996 through 2000, he was Executive Vice President and Chief Financial Officer of Cadillac Fairview Corporation. Mr. Hagan's experience spans corporate strategy, corporate and real estate finance, real estate acquisition and disposition, compensation programs, computer systems, financial reporting, forecasting and budgeting. Mr. Hagan is a chartered accountant. He holds a BSc in Mechanical Engineering from the University of Saskatchewan and attended the Executive MBA program at the University of Alberta. Richard R. Singleton Mr. Singleton was one of the lead architectural partners with Cohos Evamy Partners, Architects, Engineers, Planners (now called Dialogue Design) for 36 years. He primarily focused on larger commercial projects and planning work in Alberta and throughout Canada. Mr. Singleton has been retired since 2008, and, during that time, he has consulted and provided assistance to developers in various planning and building projects. During his career, Mr. Singleton s work included major land planning and land parcel development projects primarily in Alberta and other major commercial projects in other parts of Canada. His experience spanned land use project financial proforma analyses, budgeting for land use and development projects, concept design and approval agency policy planning initiatives. Mr. Singleton is also on the board of directors of the following reporting issuers within the Walton Group: Walton Big Lake Development Corporation, being the general partner of Walton Big Lake Development L.P.; Walton Edgemont Development Corporation; Walton Yellowhead Development Corporation; and Walton Westphalia Development Corporation. Mr. Singleton is a past director of the National Music Centre (Cantos Foundation), a member of the Advisory Board of Thermal Systems KWC Ltd., a past member of the Calgary Arts Development Authority, Member of the board of Kahanoff Center of Charitable Activities and sits on its building committee, Member of the building Committee of the YWCA Calgary and a board member of a private real estate investment group. He was previously a member of the board of advisors of Walton Global Investments Ltd. Mr. Singleton holds a Bachelor of Architecture from the University of Manitoba and is LEED (Leadership in Energy and Environmental Design) accredited. LEED is a set of rating systems for the design, construction and operation of high performance green buildings, homes and neighbourhoods. Compensation The Partnership has agreed to pay to each of the directors who are independent within the meaning of NI , an annual retainer of $40,000 per year, paid quarterly in advance. This amount was determined by the General Partner and the directors prior to the retention of the directors. The executive officers of the General Partner do not receive any compensation from the General Partner or the Partnership. 20 Walton Ontario Land L.P. 1 Annual Report 2013

21 Orientation and Continuing Education New directors will attend a briefing with existing directors on all aspects of the nature and operation of the Partnership s business from the existing directors and the senior management of the General Partner. Directors will be afforded the opportunity to attend and participate in seminars and continuing education programs and are encouraged to identify their continuing education needs through a variety of means, including discussions with senior management of the General Partner and at meetings of the directors. Outside experts may be retained, as appropriate, to provide directors with ongoing education on specific subject matters. Nomination of Directors The original members of the Board of Directors were appointed by the shareholder of the General Partner. If and when a director resigns, the remaining directors will identify a new director with a view to ensuring overall diversity of experience and skill. The new director may be appointed by the remaining directors or by the shareholder of the General Partner. Assessments The directors will regularly assess themselves with respect to their effectiveness and contribution. Audit Committee The primary function of the Audit Committee is to assist the Board of Directors in fulfilling their responsibility of oversight and supervision of the Partnership s accounting and financial reporting practices and procedures, the adequacy of internal controls and procedures, and the quality and integrity of its financial statements. In addition, the Audit Committee will be responsible for directing the auditors examination of specific areas, for the selection of the Partnership s independent auditors and for the approval of all non-audit services for which its auditors may be engaged, including the fees for such services. The Audit Committee currently consists of Jon N. Hagan and Richard R. Singleton. Each member of the Audit Committee is independent as contemplated by NI and each is financially literate, meaning that each has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the financial statements of the Partnership. Ethical Business Conduct Directors who have, or may be reasonably perceived to have, a personal interest in a transaction or agreement being contemplated by the Partnership are required to declare such interest at any meeting at which the matter is being considered and, where appropriate, leave the meeting during the discussion and abstain from voting on such matter. The directors encourage and promote a culture of ethical business conduct by expecting each director, as well as the officers of the General Partner, to act in a manner that exemplifies ethical business conduct. The Partnership has established a Code of Business Conduct and Ethics to which all directors, officers and employees of the General Partner are required to adhere. This code requires that all such individuals conduct themselves in a professional and ethical manner, and that they must not condone or encourage unethical conduct. This code also requires that any individuals who are aware of dishonest activities or conduct to report the conduct to the President and CEO of the General Partner. Annual Report 2013 Walton Ontario Land L.P. 1 21

22 Whistleblower Policy The Partnership has established a Whistleblower Policy to ensure the integrity of the accounting records and financial statements of the Partnership and its compliance with applicable laws. Under the whistleblower policy, any employee who becomes aware of any questionable accounting, internal accounting controls, auditing matters or potential violations of law are encouraged to contact their immediate supervisor, their immediate supervisor s manager, or the President of the General Partner. Employees also have the option of reporting such matters directly to the chair of the Audit Committee or the chair of the Board of Directors of the General Partner. Appropriate procedures are then undertaken to ensure that the report is promptly and thoroughly investigated. RISK FACTORS Risks of Real Property Ownership Real estate investments are generally subject to varying degrees of risk depending on the nature of the property. Such risks include the highly competitive nature of the real estate industry, changes in general economic conditions (such as the availability and cost of mortgage funds), local conditions (such as the supply of office, industrial, retail space or warehousing or the demand for residential real estate in the area), government regulation and changes therein (such as planning, zoning, taxation of property and environmental legislation), changes in governments and the political environment in the applicable jurisdictions and the attractiveness of the property to potential purchasers and developers. In addition, each segment in the real estate development industry is capital intensive and is typically sensitive to interest rates and general economic conditions. The income generated by real estate properties, if any, is dependent upon general economic conditions and, accordingly, the return in investment may be affected by changes in those conditions. There is also no assurance that the Ottawa Property can be expected to be developed profitably by a third party developer that may wish to acquire the Ottawa Property. Economic conditions also may affect the municipalities and their ability and willingness to fund infrastructure projects necessary to support development. The market for real property can be affected adversely by economic factors, which may be regional, national or international in scope. Throughout Canada, the real estate market has been experiencing increased weakness and volatility. The recent recession in Canada and the United States and the increased default rates on subprime mortgages in the U.S. and the effect of these increased default rates on the mortgage backed securities market in U.S. and Canada has significantly reduced the amount of debt financing available for real estate projects, in particular, residential real estate projects in the U.S., but in Canada as well. Some experts believe that as a consequence of significant drops in prices in the real estate sector, the current value of real estate investments could considerably decrease. This could mean that the development of the Ottawa Property may not turn out as planned or that the Ottawa Property may even decrease in value. These factors may have a negative impact on the value of the Partnership s interests in the Ottawa Property, on the length of time the Partnership will be required to hold the Ottawa Property and on the purchase price of the Ottawa Property when they are eventually sold. The Partnership will be required to make certain expenditures in respect of its activities, including, but not limited to, the payment of property taxes, maintenance costs, insurance costs and related charges, regardless of whether the Ottawa Property are producing sufficient income to service such expenses. If the Partnership is unable or unwilling to meet such payment obligations, losses could be sustained as a result of the exercise by creditors of rights of foreclosure or sale. 22 Walton Ontario Land L.P. 1 Annual Report 2013

23 Regulatory Approvals The desirability of the Ottawa Property to potential developers who may wish to acquire them from the Partnership will depend on the ability to obtain amendments to municipal plans, approvals for zoning and subdivision plans and other approvals from municipal and provincial government agencies through the efforts of WDM. For example, for the Ottawa Property to be attractive for development by a future developer, the Partnership and WDM may choose to update municipal plans and zoning designations to fit market conditions and obtain other associated required approvals. The process of obtaining such approvals may take a significant period of time and the costs of holding the Ottawa Property will accrue while regulatory approvals are being sought. There are no assurances that any such amendments or approvals or any appeals to any decisions made in connection therewith will be obtained or will be successful or obtained in a manner that is acceptable to the Partnership or future developers of the Ottawa Property, including that no conditions will be attached to any approval that are not acceptable to the Partnership or such developers. There is also a possibility that additional approvals to those described above may be necessary due to new legislation or for other reasons. Failure to obtain acceptable approvals in a timely manner could have a significant negative affect on the value of the Ottawa Property. In addition, there is always the potential for the discovery of archaeological sites on the Ottawa Property, which may require the Partnership to preserve the site at its expense and refrain from developing all or a portion of the Ottawa Property. Funding Agreement In the event that, WIGI is unable to provide funding under the Funding Agreement to the Partnership or the obligations of WIGI under the Funding Agreement terminate, the Partnership will have to find other sources of funding to finance their ongoing costs and expenses, which other sources of funding may not be available or may not be available under terms that are acceptable to the Partnership. The inability of the Partnership to obtain adequate funding for its operations could have a material adverse effect on the Partnership and the value of the Ottawa Property. Environmental Matters and Other Concerns There can be no assurances that environmental contamination on the Ottawa Property from any activity on, or occupation of, the Ottawa Property or farming, other operations or other occupation on adjacent parcels of land. There can be no assurances that if such environmental contamination does occur that it will not be significant or will not significantly reduce the value of the Ottawa Property. Under various environmental laws, ordinances and regulations, the current or previous owners or operators of the Ottawa Property, may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in the Ottawa Property. These costs could be substantial. Such laws could impose liability whether or not the Partnership knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of hazardous or toxic substances, or the failure to remove or remediate such substances, if any, or restrictions imposed by environmental laws on the manner in which the Ottawa Property may be operated or developed, could adversely affect the Partnership s ability to sell lots from the Ottawa Property or to borrow using the Ottawa Property as collateral and also could potentially result in claims against the Partnership. Environmental laws provide for sanctions for non-compliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of, and exposure to, hazardous substances into the air. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could be substantial. Annual Report 2013 Walton Ontario Land L.P. 1 23

24 The Partnership may be subject to liability for undetected pollution or other environmental hazards against which it cannot insure, or against which it may elect not to insure where premium costs are disproportionate to the General Partner s or WAM s or WDM s perception of relative risk. Political and Economic Climate The Province of Ontario, and more specifically, the City of Ottawa and the County of Simcoe, present social, economic and political conditions that are reasonably stable. However, these levels of government and the federal government could implement legislation and policies that would have an adverse effect on the value of the Units. Examples of such policies are tax reform, zoning restrictions, land ownership restrictions, transportation policies, development moratoriums, annexation proceedings or other adverse economic and/or monetary policies. Finally, the Ontario economy may not attain levels of growth that it has achieved in the past and projections regarding future growth may not be accurate. Changes in Legislation and Policies There can be no assurances that provincial, county or municipal legislation will not be implemented or policies and frameworks will not be implemented by the applicable municipal bodies or other government regulators having jurisdiction over the Ottawa Property which places restrictions on the ability to develop the Ottawa Property or which generally has the effect of significantly reducing the value, or the potential value, of the Ottawa Property. Competition The Partnership competes with other investors, developers, and owners of Ottawa Property for the sale of desirable real estate properties. Some of the commercial, retail and residential properties of the competitors of the Partnership are newer, better located or more developed than the Ottawa Property. Certain of these competitors have greater financial and other resources and greater operating flexibility than the Partnership. The existence of competing developers and owners could have a material adverse effect on the ability of the Partnership and WIGI to market the Ottawa Property, and could adversely affect the profitability of the Partnership. Single Asset The Partnership was formed solely for the development of all or a portion of the Ottawa Property. The Ottawa Property will represent the only significant assets of the Partnership and, therefore, the Partnership s financial performance will be directly tied to the value of the Ottawa Property. 24 Walton Ontario Land L.P. 1 Annual Report 2013

25 FINANCIAL STATEMENTS Walton Ontario Land L.P.1 For the Years Ended December 31, 2013 and December 31, 2012 (Expressed in Canadian dollars) Annual Report 2013 Walton Ontario Land L.P. 1 25

26 April 29, 2014 Independent Auditor s Report To the Partners of Walton Ontario Land L.P. 1 We have audited the accompanying financial statements of Walton Ontario Land L.P. 1 which comprise the Statements financial position as at December 31, 2013 and 2012, and the statements of comprehensive income/(loss), changes in partners equity and cash flows for the years then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Walton Ontario Land L.P. 1 as at December 31, 2013 and 2012 and their financial performance and their cash flows for the years then ended in accordance with International Financial Reporting Standards. Chartered Accountants PricewaterhouseCoopers LLP th Avenue SW, suite 3100, Calgary, Alberta, Canada T2P 5L3 T: , F: , PwC refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership. 26 Walton Ontario Land L.P. 1 Annual Report 2013

27 December 31, 2013 $ December 31, 2012 $ (Revised note 3) ASSETS Land (note 6) 15,066,849 14,992,521 Prepaid expenses GST recoverable 8, ,271 Accounts receivable 2,554 3,336 Due from related parties (note 7) - 15,214 Cash (note 8) 2,554,867 3,398,200 TOTAL ASSETS 17,633,260 18,531,875 LIABILITIES Accounts payable and accrued liabilities (note 7) 74,557 82,319 PARTNERS EQUITY 17,558,703 18,449,556 TOTAL LIABILITIES AND EQUITY 17,633,260 18,531,875 The accompanying notes to the financial statements are an integral part of these statements. Approved on behalf of the Board of Directors of the General Partner Director Clifford H. Fryers Director Jon N. Hagan Annual Report 2013 Walton Ontario Land L.P. 1 27

28 WALTON ONTARIO LAND L.P. 1 Statements of Comprehensive (Loss)/Income For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) REVENUE December 31, 2013 $ December 31, 2012 $ (Revised note 3) Interest income 35,523 65,397 Other revenue (note 6) 46,732 14,852 82,255 80,249 EXPENSES Management fees (note 6 and 7) 665,880 2,922,744 Servicing fees (note 11) 166, ,470 Directors fees (note 7) 83,613 83,613 Office and other 33,870 49,296 Professional fees 23,246 24, ,079 3,246,755 NET LOSS BEFORE OTHER ITEMS 890,824 3,166,506 (Loss)/gain on land disposal (note 6) (29) 11,295,322 NET AND COMPREHENSIVE (LOSS)/INCOME (890,853) 8,128,816 Basic and diluted net income (loss) per unit specifically attributable to limited partnership units (note 10) (0.45) 4.15 The accompanying notes to the financial statements are an integral part of these statements. 28 Walton Ontario Land L.P. 1 Annual Report 2013

29 WALTON ONTARIO LAND L.P. 1 Statements of Changes in Partner s Equity For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Limited Partnership Units General Partnership Unit Accumulated Deficit Total (note 10)( Revised note 3) (note 10) (Revised note 3) # of Units $ # of Units $ $ $ JANUARY 1, ,580,000 33,294, (1,493,095) 31,800,955 Net and comprehensive income for the year ,128,816 8,128,816 General partner distribution (215) (215) Limited partnership distributions (21,480,000) (21,480,000) Units consolidation (1,618,160) DECEMBER 31, ,961,840 33,294, (14,844,494) 18,449,556 Net and comprehensive loss for the year (890,853) (890,853) DECEMBER 31, ,961,840 33,294, (15,735,347) 17,558,703 The accompanying notes to the financial statements are an integral part of these statements. Annual Report 2013 Walton Ontario Land L.P. 1 29

30 WALTON ONTARIO LAND L.P. 1 Statements of Cash Flows For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) CASH PROVIDED BY (USED IN) December 31, 2013 $ December 31, 2012 $ (Revised Note 3) OPERATING ACTIVITIES Comprehensive (loss)/income for the year (890,853) 8,128,816 Adjustment for: Interest income (35,523) (65,397) Loss/(gain) on land disposal 29 (11,295,322) Changes in non-cash items Increase/(decrease) in prepaid expenses (31) 49 Decrease/(increase) in GST recoverable 113,645 (112,619) Decrease/(increase) in due from related parties 15,214 (9,419) Decrease in accounts payable and accrued liabilities (5,848) (33,722) Interest received 36,305 66,978 (767,062) (3,320,636) INVESTING ACTIVITIES Proceeds on land disposal (note 6) 12,530 24,045,000 Land improvements (88,801) (468,414) (76,271) 23,576,586 FINANCING ACTIVITIES Distributions paid to Partners - (21,480,215) Decrease in cash (843,333) (1,224,265) Cash Beginning of year 3,398,200 4,622,465 Cash End of year 2,554,867 3,398,200 SUPPLEMENTAL NON-CASH INFORMATION Included in accounts payable is $82 (December 31, $1,996) of land improvements included in land. The accompanying notes to the financial statements are an integral part of these statements. 30 Walton Ontario Land L.P. 1 Annual Report 2013

31 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) 1. NATURE OF BUSINESS Walton Ontario Land L.P. 1 (the "Partnership") was formed on October 2, 2009, when the certificate of limited partnership was filed under the Partnership Act (Alberta). The Partnership was formed to issue a maximum of 3,580,000 limited partnership units at $10 per unit to raise proceeds for the purchase of interests in properties comprised of approximately 155 acres of undeveloped land in Alliston, Ontario (the Alliston Property ) and approximately 300 acres of undeveloped land (the Ottawa Property ) located in the southwest quadrant of Ottawa, Ontario (collectively, the "Properties"), holding that interest as an investment, and eventually selling or otherwise disposing of that interest with a view to making a profit, and performing such other activities as may be incidental to, or arising from, the foregoing purposes as may be reasonably determined by the General Partner, including, without limitation, participating in "concept planning" with respect to the Properties. On October 12, 2012, the Alliston Property was sold. The Partnership owns 100% of the Ottawa Property as an investment and plans to eventually dispose of it prior to physical development. Should the partners of the Partnership determine that it would be appropriate for the Partnership to participate in the development of the Ottawa Property (other than pre-development concept planning), the activities of the Partnership may also include the partial or full development of the Ottawa Property prior to the sale thereof. The net proceeds from the disposition of the Ottawa Property, after satisfaction of liabilities and payment of, or provision for, all fees and expenses, including any amounts that the General Partner reasonably considers necessary to retain in order to replenish the refundable expense reserve, will be distributed by the Partnership. Included in such fees and expenses is a performance fee payable (see note 7) to Walton International Group Inc. ( WIGI ), provided that the limited partners receive distributions equal to an amount equal to their purchase price allocation, plus an amount equal to an 8% annual cumulative return on contributed capital that has not been paid to the limited partners in respect of previous distributions. The address of the registered office is 23rd Floor, 605 5th Avenue SW, Calgary, Alberta, T2P 3H5. These financial statements were authorized for issue by the Board of Directors on April 27, BASIS OF PREPARATION Statement of Compliance These financial statements, including comparatives, have been prepared in full compliance with International Financial Reporting Standards ( IFRS ) and using accounting policies that are consistent with IFRS as issued by the International Accounting Standard Board ( IASB ). Annual Report 2013 Walton Ontario Land L.P. 1 31

32 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Basis of Presentation The Partnership s financial statements have been prepared on the historical cost basis, except for certain financial instruments which are initially measured at fair value, as explained in the accounting policies set out in note 5. The statements of financial position have been prepared using a liquidity based presentation because the operating cycle of the Partnership revolves around the sale of land, the timing of which is uncertain. As a result, presentation based on liquidity is considered by management to provide information that is more reliable and relevant to the users of the financial statements. With the exception of land (note 6), all assets and liabilities are current in nature and are expected to be settled in less than twelve months. Change in Presentation In the Statement of Cash Flows, the treatment of interest income/receivable and interest paid/payable has been changed to be consistent with the current year presentation. For the year ended December 31, 2013 the Partnership has revised the prior period financial statements presentation relating to the sale of the Alliston property (note 6) as a gain on disposal of investment property. The gain on disposal of investment property does not include the performance fee of $1,896,189 and disposal fee of $360,675 previously included in cost of sales in the prior period. The performance and disposal fee have been presented as management fees in the prior period. 3. REVISION OF PRIOR PERIOD BALANCES Revision of presentation of offering costs For the year ended December 31, 2013 the Partnership has revised the prior period financial statements for offering costs, which were previously charged to the profit and loss. The Partnership has determined that these costs are directly related to the issuance of partner s capital. As a result, $537,000 of accumulated deficit has been reclassified to partner s capital as at January 1, 2012 and December 31, The revisions and the change in presentation (note 2) have resulted in the following changes to the financial statements as at December 31, 2012 and January 1, 2012: 32 Walton Ontario Land L.P. 1 Annual Report 2013

33 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Previously Reported Adjustment Adjusted Amount Impact as at January 1, 2012: $ $ $ Partner s Capital 33,831,050 (537,000) 33,294,050 Accumulated Deficit (2,030,095) 537,000 (1,493,095) Impact as at December 31, 2012: Partner s Capital 33,831,050 (537,000) 33,294,050 Accumulated Deficit (15,381,494) 537,000 (14,844,494) Revenue (24,045,000) 24,045,000 - Cost of sales 15,006,542 (15,006,542) - Gain on land disposal - (11,295,322) (11,295,322) Management fee 665,880 2,256,864 2,922,744 Cash provided by operating activities 20,571,441 (23,892,077) (3,320,636) Cash used for investing activities (315,491) 23,892,077 23,576, GENERAL PARTNER Walton Ontario Land 1 Corporation (the General Partner ) was incorporated on October 1, 2009 under the laws of the Province of Alberta to act as the General Partner and manage the affairs of the Partnership and is a subsidiary of Walton G.P. Holdco Ltd., a wholly owned subsidiary of WIGI. WIGI is a wholly owned subsidiary of Walton Global Investments Ltd. ( Walton Global ). All or substantially all of the shares of Walton Global are owned by or for the benefit of the Doherty family, including William K. Doherty, the Chief Executive Officer and director of Walton Global. 5. ACCOUNTING POLICIES Use of Estimates and judgments The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and equity at the date of the financial statements and the reported amount of revenue and expenses during the year. The estimates and assumptions which have the most significant effect on the financial statements and note disclosures are related to the recoverability of land and the fair value of land, which are determined using a market approach using comparable market data prepared by an independent valuator to assess the value as is (note 6). This requires management to use its judgment to assess the highest and best use of the investment property. While management has disclosed its best estimate of the fair value for the Ottawa Property, changes in the estimates and assumptions could cause the actual proceeds from the sale of the Ottawa Property to differ materially from that estimate. Annual Report 2013 Walton Ontario Land L.P. 1 33

34 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Cash-generating Units Investment property is assessed for indicators of impairment and tested for impairment on a cash-generating unit basis. A cash-generating unit is a group of assets which generate cash flows that are largely independent of the cash inflows from other assets or group of assets. Management has determined that the Ottawa Property is a cashgenerating unit. Land Land is accounted for as investment property under International Accounting Standard 40: Investment Property, based on the intent of the Partnership to hold the Ottawa Property for appreciation of value. Investment property under IFRS can be accounted for using the fair value model or the cost model. The Partnership has selected the cost model. Upon acquisition, land is initially measured at cost, and is not depreciated due to its indefinite life. Each reporting period, land is assessed for indicators of impairment. Where indicators of impairment are identified, the carrying value of the land is compared against the recoverable amount and any excess is recorded as an impairment loss. The recoverable amount is calculated as the greater of fair value less costs to sell or value in use. Any impairment loss is recognized in the statement of comprehensive loss in the period the impairment is identified. Recoveries in the fair value of land are recognized to the extent of any previously recognized impairment losses. Financial Instruments Financial instruments are any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party. Financial assets and liabilities are recognized when the Partnership becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have been transferred and the Partnership has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the obligation specified in the contract is discharged. Financial instruments are recognized initially at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. At each reporting period, the Partnership will assess whether there is any objective evidence that a financial asset, other than those classified as fair value through profit or loss, is impaired. Impairment, if any, is recorded in net income. 34 Walton Ontario Land L.P. 1 Annual Report 2013

35 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) The following table lists the Partnership s financial instruments and the method of measurement subsequent to initial recognition: Financial Instrument Category Measurement method Accounts receivable Loans and receivables Amortized cost Due from related parties Loans and receivables Amortized cost Cash Loans and receivables Amortized cost Accounts payable and accrued liabilities Other financial liabilities Amortized cost Cash Cash consists of amounts in demand deposits at financial institutions. Partners Capital Both the General Partner unit and the Limited Partnership units have been classified as equity because the units represent a residual interest in the Partnership after the payment of all liabilities and do not provide the holder of the unit with the right to put the unit back to the Partnership. Costs directly attributable to the issuance of such units are recognized as a deduction from equity. Accumulated Deficit Accumulated deficit comprises the accumulated balance of income less losses arising from the operation of the Partnership, after taking into account distributions declared by the Partnership. Allocation of Partnership Income or Loss Income or loss is allocated to the limited partners and to the General Partner. These financial statements include only the assets, liabilities, and operations of the Partnership, and do not include the assets, liabilities, revenues or expenses of the limited partners or the General Partner. Net income or net loss of the Partnership for a fiscal year will be allocated as follows: (a) the General Partner will be allocated, in its capacity as General Partner, 0.001% of the net income or net loss; and (b) the balance of the net income or net loss will be allocated to limited partners of record on the last day of such fiscal year in accordance with their respective sharing ratios at that time. Revenue Recognition The Partnership recognizes interest income on an accrual basis in the period when it is earned. Annual Report 2013 Walton Ontario Land L.P. 1 35

36 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) The Partnership recognizes other income from rental income on a straight line basis in accordance with the lease agreement and income from property tax recovery when the expense is incurred by the Partnership and collection is reasonably assured. Income Taxes No provision has been made for income taxes of the Partnership, the liability for which is the responsibility of the partners. Current Changes in Accounting Policies The accounting policies used in the preparation of these financial statements are consistent with those which were disclosed in the Partnership s audited financial statements for the year ended December 31, 2012, except as explained below. IFRS 13: Fair value measurement The Partnership adopted IFRS 13: Fair Value Measurement ( IFRS 13 ) for the annual year beginning on January 1, IFRS 13 is a comprehensive standard for fair value measurement and disclosure for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received upon sale of an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. The standard also requires an increase in the disclosure around valuation methods and inputs used in measuring fair value in the notes financial statements. The Partnership does not carry any assets, liabilities or equity at fair value. The adoption of IFRS 13 has resulted in increased disclosure around fair value contained in note 6 of these financial statements. IAS 32: Offsetting Financial Assets and Liabilities IAS 32 Financial Instruments - Presentation ( IAS 32 ) was issued with amendments in December The amendments clarify certain aspects of the existing guidance on offsetting financial assets and financial liabilities. The IASB also amended IFRS 7 Financial Instruments - Disclosure ( IFRS 7 ) to require information about all recognized financial instruments that are set off in accordance with IAS 32. The amendments also require disclosure of information about recognized financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under IAS Walton Ontario Land L.P. 1 Annual Report 2013

37 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Future Changes in Accounting Policies Financial instruments In November 2009, as part of the IASB project to replace International Accounting Standard ( IAS ) 39 Financial Instruments: Recognition and Measurement, the IASB issued the first phase of IFRS 9 Financial Instruments. It contained requirements for the classification and measurement of financial assets, and was updated in October 2010 to incorporate financial liabilities. In November 2013, the IASB issued amendments to include the new general hedge accounting model and to postpone the mandatory effective date of this standard indefinitely. The full impact of this standard will not be known until the amendments addressing impairments, classification and measurement have been completed. When these projects are completed, an effective date will be added by the IASB. Offsetting financial assets and liabilities IAS 32 Financial Instruments - Presentation ( IAS 32 ) was issued with amendments in December The amendments clarify certain aspects of the existing guidance on offsetting financial assets and financial liabilities. The amendments to IAS 32 are effective for annual periods beginning on or after January 1, The Partnership has assessed that there will be no impact of the adoption on the financial statements currently or retrospectively. Levies IFRIC 21 is an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability to pay a levy imposed by government, other than income tax. The interpretation requires the recognition of a liability when the event, identified by the legislation as triggering the obligation to pay the levy occurs. This standard is required to be applied for accounting periods beginning on or after January 1, The Partnership has not yet determined the impact of IFRIC 21 on its financial statements. 6. LAND Land represents the Partnership s original 100% ownership of the Properties which were acquired on June 15, 2010, plus any costs necessary to bring the Properties to the condition intended by the Partnership. The land is reduced by the costs associated with the acres of Alliston Property which was sold on October 12, 2012 and the acres of Ottawa Property which was sold on July 18, The acres of Ottawa property was sold to the City of Ottawa in order to construct a fourth leg of what is currently a 3-leg roundabout. The cost of the acres was $12,559 and the total proceeds were $12,530, resulting in a $29 loss on disposal. The remaining amount in land represents the acres of Ottawa Property and the land improvement costs associated with it. Annual Report 2013 Walton Ontario Land L.P. 1 37

38 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) During the year ended December 31, 2012, the acres of undeveloped land in Alliston, Ontario was sold in a non-arm s-length transaction to Walton Alliston Development L.P. for consideration in the amount of $155,199 per acre or gross proceeds of $24,045,000. In addition, incurred on the sale were disposition fees of $360,675 and performance fees of $1,896,189 which have been included in management fees on the statement of comprehensive (loss)/income. The price per acre under the Agreement is the mid-point of two independent appraisals completed on the Alliston Property. The cost of the acres was $12,749,678, resulting in a $11,295,322 gain on disposal. The carrying amount of land is comprised of the following: December 31, 2013 $ December 31, 2012 $ BALANCE BEGINNING OF YEAR 14,992,521 27,350,246 Land improvements 86, ,953 Land sale - Alliston Property - (12,749,678) Land sale - Ottawa Property (12,559) - BALANCE END OF YEAR 15,066,849 14,992,521 In the current period, the Partnership has revised its methodology for determining the fair value of its land. The model has been revised from a discounted cash flow model, which incorporated assumptions around future conditions, prices, and entitlements at the expected time of exiting the property, to a market approach using comparable market sales adjusted for factors specific to the Partnership s property including sales date, property rights conveyed, financing terms, conditions of sale, location, site area, site utility, planning and development timeframe and a report from an independent valuation firm which holds recognized and relevant professional qualifications and has recent experience in the location and category of the investment property being valued. The current fair value is based on conditions existing at the balance sheet date. Overall, the valuation is considered to fall into level 3 of the fair value hierarchy because of unobservable adjustments reflecting the condition and location of the Partnership s land. In applying this valuation method, the fair value of the remaining Ottawa Property as at December 31, 2013 was estimated to be approximately $25,450,000. The fair value of the remaining Ottawa Property as at December 31, 2012 applying the valuation methodology used in the prior year of $44,669,240 has been revised in the current period to $24,841,745. In determining the fair value of our investment properties, judgment is required in assessing the highest and best use as required under IFRS 13, Fair Value measurement. The property is currently zoned for and is used as agricultural land which is not considered to be its highest and best use. The highest and best use of the property is considered to be property containing residential or commercial buildings. However, it should be noted that the property is not currently zoned for this use. 38 Walton Ontario Land L.P. 1 Annual Report 2013

39 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) The current fair value is considered to be what a willing market participant would be willing to pay for the property in its current condition as at December 31, The current fair value considers that if the property were to be sold at December 31, 2013 to a market participant, such participant would take into account the potential use of the property as non-agricultural land and the risks associated with obtaining the appropriate permits and zoning for that use. The General Partner is responsible for determining the measurements used to determine fair value as well as reviewing all major inputs and assumptions included in the valuation and reviewing the results of the independent valuator. The General Partner, along with the audit committee, discusses the valuation process and key inputs on a quarterly basis. Assumptions underlying these estimates are limited by the availability of reliable comparable data. By nature, these estimates are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the estimated proceeds from the ultimate sale may change by a material amount and may result in a write-down of the carrying amount of the land. As at December 31, 2013 and December 31, 2012, the fair value of land exceeded its carrying value, and, as a result, an impairment has not been recognized in the carrying value of the land. The total rental income earned by the Partnership on the Ottawa Property during the year ended December 31, 2013, was $13,000 (December 31, $13,000). The total property tax recoverable earned on the Alliston property during the year ended December 31, 2013, was $nil (December 31, 2012 $1,852). On May 1, 2013, the Partnership entered into an agreement to allow temporary access to a portion of the Ottawa Property. During the year ended December 31, 2013, $33,732 (December 31, $nil) of revenue was earned from the temporary access granted by the Partnership. 7. RELATED PARTY TRANSACTIONS WIGI, Walton Development and Management (Alberta) LP (formerly "Walton Development and Management L.P. ) ( WDM ), and Walton Ontario Land 1 Corporation are related to the Partnership by virtue of the fact that they are controlled by Walton Global. Walton Alliston Development L.P. is related by virtue of the fact that its general partner is controlled by Walton Global. See notes 4,6,9,11,12 and 13 for additional disclosures relating to certain related parties and other related party transactions. Annual Report 2013 Walton Ontario Land L.P. 1 39

40 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) The balances due from these related parties as at the date of these financial statements are outlined in the table below. These amounts are unsecured, due on demand, bear no interest and have no fixed terms of repayment. December 31, 2013 $ December 31, 2012 $ Walton International Group Inc. - 5,641 Walton Alliston Development L.P. - 9,573-15,214 Included in accounts payable and accrued liabilities are the following amounts which were payable to related parties. These amounts are unsecured, due on demand, bear no interest and have no fixed terms of repayment. December 31, 2013 $ December 31, 2012 $ Walton International Group Inc Walton Development and Management (Alberta) LP 82 1,996 Walton Ontario Land 1 Corporation ,211 Walton International Group Inc. As at December 31, 2013, a receivable of $nil (December 31, $5,641) from WIGI was outstanding relating to other revenue collected by WIGI on behalf of the Partnership. In accordance with the Management Services and Fee Agreement between the Partnership and WIGI, the Partnership is required to pay WIGI: i) An annual management fee for providing ongoing management and administrative services to the Partnership. The annual management fee of $665,880 (calculated as 2% of $33,294,000, being the net proceeds raised by the Partnership, less offering costs), is payable by the partnership and is due quarterly until all of the properties are disposed. 40 Walton Ontario Land L.P. 1 Annual Report 2013

41 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) ii) A performance fee equal to 25% of the priority return of 8% divided by 0.75, plus 25% of the balance remaining after the priority return and the above portion of the performance fee. The priority return is calculated on the partners investment amount from the closing date of the Partnership s unit offering, on contributed capital that has not been paid to the limited partners in respect of all dispositions. The performance fee will still be payable to WIGI should the Partnership remove WIGI as manager under the Management Services and Fee Agreement. No performance fee was incurred during the year ended December 31, 2013, as there was no return on the land sale to the City of Ottawa during the year. The performance fee incurred by the Partnership as a result of the sale of the Alliston Property during the year ended December 31, 2012 was $1,896,189 (note 6). iii) A disposition fee equal to 1.5% of the gross proceeds received by the Partnership when the Partnership sells all or any part of its interest in the Properties. The disposition fee will still be payable to WIGI should the Partnership remove WIGI as manager under the Management Services and Fee Agreement. No disposition fee was incurred during year ended December 31, The Partnership incurred a disposition fee of $360,675 (note 6) during the year ended December 31, 2012 as a result of the sale of the Alliston Property. Funding Agreement The Partnership and WIGI entered into a funding agreement on February 25, In accordance with the funding agreement, the Partnership will establish a refundable expense reserve (note 8) that will be equal to multiplied by the Partnership s gross proceeds received. WIGI will pay, for and on behalf of the Partnership, or fund to the Partnership, to a maximum of 5% of the Partnership s gross proceeds (the Maximum Financing Obligation ) any expenses incurred by the Partnership in respect of concept planning and any Partnership administrative expenses that are in excess of the then current balance of the refundable expense reserve, as such reserve may be replenished from time to time in the sole discretion of the directors of the General Partner. The Partnership and WIGI agree that WIGI may pay the amounts of the Partnership excess expenses that WIGI determines hereunder either from its own funds or help the Partnership to arrange financing for such amounts and the Partnership shall be obligated to agree to such financing. WIGI may, in its sole discretion, pay for Partnership expenses in excess of the Maximum Financing Obligation. The loan will bear interest at an annual interest rate equal to the prime rate, and if WIGI is no longer manager of the Properties, the loan shall bear interest at an annual rate equal to Prime plus 5%. The Partnership shall not be entitled to borrow funds from a third party without obtaining the prior written consent of WIGI if WIGI at such time holds an undivided interest in any of the Properties or if WIGI has advanced any amounts under the funding agreement. Any loan, in accordance with the funding agreement, is secured by a debenture recorded against the title to the Ottawa Property in the amount of $6,000,000. That debenture would be discharged upon settlement of all amounts owed to WIGI under the funding agreement which, as at December 31, 2013, was $nil (December 31, $nil). Annual Report 2013 Walton Ontario Land L.P. 1 41

42 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Walton Development and Management (Alberta) LP In accordance with the Concept Planning Services Agreement between the Partnership, WIGI and WDM, the fees and costs for services provided in relation to concept planning on the Properties are divided into the following two categories: i) the services conducted internally by WDM ( Services Fees ), which will be provided at a rate of $25 per acre per year; and ii) the services, with respect to the Properties, coordinated and managed by WDM ( Managed Services ) where outside consultants are engaged by WDM to undertake work in relation to concept planning. The Partnership will be responsible to pay from the Refundable Expense Reserve the fees, expenses and cost of the outside consultants engaged by WDM. In addition, WDM will be entitled to receive a fee in an amount equal to 10% of the fees of the outside consultants engaged by WDM in relation to such Managed Services. During the year ended December 31, 2013, $72,196 (December 31, $345,296) was provided to WDM, in order to pay third party invoices received by WDM related to the services entered into in accordance with the concept planning services agreement. These amounts have been capitalized as part of land (note 6). During the year ended December 31, 2013, $7,497 (December 31, $11,370) was charged by WDM for Services Fees. These amounts have been capitalized as part of land (note 6). During the year ended December 31, 2013, $7,194 (December 31, $35,287) was charged by WDM for Managed Services of the Ottawa Property. These amounts were calculated as 10% of the Managed Services of the Ottawa Property during the period, and have been capitalized as part of land (note 6). Walton Alliston Development L.P. On October 12, 2012, Walton Alliston Development L.P. purchased the Alliston Property from the Partnership for $155,199 per acre for total consideration of $24,045,000 (note 6). As at December 31, 2013, a receivable of $nil (December 31, $9,573) from Walton Alliston Development L.P. was outstanding relating to expenditure adjustments as a result of the sale of the Alliston Property. 42 Walton Ontario Land L.P. 1 Annual Report 2013

43 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Key Management Compensation Key management personnel are comprised of the Partnership s directors and executive officers. The total compensation expense incurred by the Partnership relating to its independent directors was as follows: For the years ended December 31, 2013 $ December 31, 2012 $ Directors fees 83,613 83,613 All services performed for the Partnership by its executive officers and its non-independent director are governed by the Management and Services Fee Agreement. The annual management fee that WIGI receives under the Management and Services Fee Agreement has been disclosed above. The compensation of key management does not include the remuneration paid to individuals who are paid directly by Walton Global and WIGI. The Officers of the Partnership are also Officers and Directors of numerous entities controlled or managed by Walton Global and it is not practicable to make a reasonable apportionment of their compensation in respect of each of those entities. 8. REFUNDABLE EXPENSE RESERVE The operations of the Partnership are funded by the refundable expense reserve of $6,408,165 that was initially set aside out of the net proceeds from the IPO and Private Placement (note 13). The refundable expense reserve, which is presented as cash in the statements of financial position, will be used to pay the annual management fee, the Partnership s ongoing administrative and operating expenses (including the servicing fee, disclosure costs, accounting, audit and legal expenses, investor communication costs and directors fees), and for any concept planning expenses incurred with respect to the Properties. Upon sale of the Alliston Property in 2012, the Partnership retained cash of $308,136 to be maintained in the refundable expense reserve. Any funds set aside for the refundable expense reserve which have not been used by the time the Partnership is terminated and dissolved will be included in the amounts distributed to the limited partners. Annual Report 2013 Walton Ontario Land L.P. 1 43

44 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Included in the table below is a reconciliation of the movement in the refundable expense reserve on a cash basis. This differs from the statements of cash flow, which has been prepared on an accrual basis, using the indirect method. December 31, 2013 $ December 31, 2012 $ REFUNDABLE EXPENSE RESERVE BEGINNING OF YEAR 3,398,200 4,622,465 Add income received (cash basis): GST recovered 113,645 - Other revenue 46,732 13,000 Interest 36,305 66,978 Retained cash from land sales (note 6) 12, ,136 Property tax recovery - 2, , ,120 Less expenses paid (cash basis): Management fees (note 7) 665, ,880 Servicing fees (note 7) 171, ,197 Directors fees (note 7) 83,613 83,613 Land improvements 79, ,987 Property taxes 10,922 19,794 Office and other expense 23,686 32,726 Professional fees 17,671 20,569 GST - 112,619 1,052,545 1,614,385 REFUNDABLE EXPENSE RESERVE END OF YEAR 2,554,867 3,398, Walton Ontario Land L.P. 1 Annual Report 2013

45 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) 9. FINANCIAL INSTRUMENTS The Partnership s financial instruments consist of accounts receivable, due from related parties, cash and accounts payable and accrued liabilities. The following tables set out the Partnership s classification and carrying amount of the financial instruments along with the fair value as at December 31, 2013 and December 31, DECEMBER 31, 2013 Fair Value Amortized Cost Totals Through profit and loss Loans and receivables Other financial liabilities Carrying amount Fair Value Asset (liability): Accounts receivable - 2,554-2,554 2,554 Cash - 2,554,867-2,554,867 2,554,867 Accounts payable and accrued liabilities - - (74,557) (74,557) (74,557) - 2,557,421 (74,557) 2,482,864 2,482,864 DECEMBER 31, 2012 Fair Value Amortized Cost Totals Through profit and loss Loans and receivables Other financial liabilities Carrying amount Fair Value Asset (liability): Accounts receivable - 3,336-3,336 3,336 Due from related parties - 15,214-15,214 15,214 Cash - 3,398,200-3,398,200 3,398,200 Accounts payable and accrued liabilities - - (82,319) (82,319) (82,319) - 3,416,750 (82,319) 3,334,431 3,334,431 Annual Report 2013 Walton Ontario Land L.P. 1 45

46 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) Risk - Overview The Partnership s financial instruments and the nature of the risks to which they may be subject are as set out in the following table. RISK CREDIT LIQUIDITY INTEREST RATE CURRENCY Accounts receivable X Due from related parties X Cash X X Accounts payable and accrued liabilities X i) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk arises from accounts receivable, balances due from related parties and cash held with banks and financial institutions. The maximum exposure to credit risk is equal to the carrying value of these financial instruments. Accounts receivable - The balance of accounts receivable as at December 31, 2013 and December 31, 2012 were outstanding less than 90 days were collected subsequent to year end. Exposure to credit risk relating to these receivables is not significant. Due from related parties - The balance of due from related parties are short-term in nature, and was received during the year ended December 31, As a result, the Partnership s exposure to credit risk from due from related parties is not significant. 46 Walton Ontario Land L.P. 1 Annual Report 2013

47 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) ii) Liquidity risk Liquidity risk arises from the possibility that the Partnership will encounter difficulties in meeting its financial obligations as they become due. The Partnership manages its liquidity risk by continuously monitoring the adequacy of its capital resources (note 13) and by managing cash receipts and payments. The future undiscounted obligations of the Partnership as at December 31, 2013 are as follows: Maturity Analysis of liabilities - As at December 31, 2013 Less than 90 days Between 91 days and 1 year Greater than 1 year Accounts payable and accrued liabilities ($) 48,204 26,353 - Maturity Analysis of liabilities As at December 31, 2012 Less than 90 days Between 91 days and 1 year Greater than 1 year Accounts payable and accrued liabilities ($) 52,049 30,270 - iii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates. The financial instrument of the Partnership which gave rise to interest rate risk is as follows: Cash - Changes in market interest rates will cause fluctuations in the future interest earned on cash balances. Any resulting impact on the Partnership s financial results would not be considered material. iv) Currency risk The Partnership does not engage in foreign currency denominated transactions. As a result, it has no exposure to currency risk. Annual Report 2013 Walton Ontario Land L.P. 1 47

48 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) 10. PARTNERS CAPITAL Authorized: 1 general partner unit Unlimited number of ordinary limited partnership units Outstanding: December 31, 2013 December 31, 2012 Number of units Amount $ Number of units Amount (Revised Note 3) $ General partner unit Limited partnership units 1,961,840 35,800,000 3,580,000 35,800,000 Issuance costs - (2,506,000) - (2,506,000) Units consolidation - - (1,618,160) - 1,961,841 33,294,050 1,961,841 33,294,050 Per Unit Amount Basic and diluted net loss per unit is calculated by dividing the Partnership s net loss by the weighted average number of limited partnership units outstanding during the year. The weighted average number of limited partnership units outstanding for the years ended December 31, 2013, and December 31, 2012, were adjusted to reflect the unit consolidation on November 15, The weighted average number of limited partnership units outstanding as at December 31, 2013, was 1,961,840 (December 31, ,961,840). The weighted average number of limited partnership units outstanding excludes the general partner unit issued. Based on the terms of the Limited Partnership Agreement, the holder of the general partner unit does not share equally in the income/loss of the Partnership but instead receives 0.001% of the net income/loss (note 5). The Partnership does not issue debt or equity instruments which could result in the issuance of additional Partnership units. As a result, the weighted average units outstanding are equal to the weighted average diluted units outstanding. Unit Issuance Price The Limited Partner units outstanding for the Partnership were issued at a price of $10/unit. The General Partner unit issued and outstanding for the Partnership was issued at a price of $50/unit. 48 Walton Ontario Land L.P. 1 Annual Report 2013

49 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) 11. SERVICING FEES The Partnership has entered into Agency Agreements with various agents, whereby the Partnership will pay the agents, a servicing fee equal to 0.50% annually of the net proceeds raised under the Initial Public Offering and Private Placement, less offering costs. The portion of the servicing fee relating to the Partnership s Private Placement is payable to WIGI, which is responsible for the distribution of the servicing fee to the agents in accordance with the Management Services and Fee Agreement. The servicing fee is calculated and paid semi-annually out of the Refundable Expense Reserve commencing on June 30, 2010, until the earlier of the dissolution of the Partnership and June 30, COMMITMENTS The following table presents future commitments of the Partnership under the Agency Agreements (note 11), Management Services and Fee Agreement (note 7), and the Concept Planning Services Agreement (note 7). It does not include any potential performance fee or disposition fee under the Management Services and Fee Agreement. The amount of any performance fee payable by the Partnership is determined at the time when distributions occur. The amount of the disposition fee is determined at the time land sales are completed. Servicing fee Management fee WDM Services Total $ $ $ $ , ,880 7, , , , , , ,880 7, , ,880 7, ,377 Thereafter - 665,880 7, , ,705 3,329,400 37,485 3,616, Commitments for WDM Services will extend for the length of the project. 2 While the Partnership has set aside adequate reserves in the refundable expense reserve for management fees until June 30, 2015, this fee will continue until the project is complete, any amount due will not be payable until the final distribution. Annual Report 2013 Walton Ontario Land L.P. 1 49

50 WALTON ONTARIO LAND L.P. 1 Notes to Financial Statements For the years ended December 31, 2013 and December 31, 2012 (Expressed in Canadian Dollars) 13. CAPITAL MANAGEMENT The Partnership has the following sources of capital to finance its operations: i) Of the gross proceeds raised under the IPO and the Private Placement, approximately 17.9% ($6.4 million) was set aside by the Partnership in a refundable expense reserve. This reserve will be used to fund the annual management fee, the Partnership s ongoing administrative and operating expenses (including the servicing fee, disclosure costs, accounting, audit and legal expenses, investor communications costs and directors fees), and for any concept planning costs incurred with respect to the Properties over the next five years. The balance of the refundable expense reserve at December 31, 2013, was $2,554,867 (December 31, $3,398,200). ii) The Partnership has also entered into a Funding Agreement (note 7) with WIGI, pursuant to which WIGI will fund as a loan, to a maximum of $1,790,000, (being 5% of the gross proceeds raised by the Partnership in connection with the issuance of units), the ongoing administrative and operational costs of the Partnership, other than the servicing fee. This loan shall bear interest at an annual interest rate equal to Prime. Management regularly reviews the levels of its cash reserves to determine if sufficient cash is available to fund the operating costs, concept planning costs, and management expenses that the Partnership expects to incur over the next twelve months. As at December 31, 2013, no funds have been advanced under the terms of the Partnership s Funding Agreement. 50 Walton Ontario Land L.P. 1 Annual Report 2013

51 NOTES Annual Report 2013 Walton Ontario Land L.P. 1 51

52 WALTON GROUP OF COMPANIES The Walton Group of Companies (Walton) is a family-owned, multinational real estate investment, planning, and development firm concentrating on the research, acquisition, administration, planning and development of strategically located land in major North American growth corridors. With more than 83,000 acres* of land under administration and management, Walton is one of North America s premier land asset administrators and managers. Walton has been in business for over 30 years. We take a long-term approach to land planning and development. Our expertise in real estate investment, land planning and development positions Walton to responsibly transition land into sustainable communities where people live, work and play. Our communities are comprehensively designed in collaboration with local residents for the benefit of community stakeholders. Our goal is to build communities that will stand the test of time: hometowns for present and future generations. *As of December 31, Walton Ontario Land L.P. 1 Annual Report 2013

53 MEMBERS OF THE WALTON GROUP OF COMPANIES INCLUDE: WALTON ONTARIO LAND 1 CORPORATION is the General Partner of the Walton Ontario Land L.P. 1. WALTON INTERNATIONAL GROUP is the manager of Walton Ontario Land L.P. 1. WALTON DEVELOPMENT AND MANAGEMENT is the project manager for Walton Ontario Land L.P. 1. WALTON CAPITAL MANAGEMENT is a registered exempt market securities dealer which distributed limited partnership units for Walton Ontario Land L.P. 1. WALTON ASSET MANAGEMENT is the Walton Group entity responsible for capital sourcing for real estate investments. WALTON GLOBAL INVESTMENTS is the parent company of the Walton Group of Companies. Annual Report 2013 Walton Ontario Land L.P. 1 53

54 BOARD OF DIRECTORS WILLIAM (BILL) DOHERTY Chief Executive Officer Walton Ontario Land 1 Corporation Bill Doherty leads the Walton Group of Companies as Chief Executive Officer of Walton Global Investments Ltd., and as an actively-involved Director and Executive with several Walton Group affiliates. Overseeing an innovative and dynamic enterprise that has grown into a leading North American real estate investment and development group, Bill is deeply involved in Walton s growing array of business relationships with leading international investment banks, broker-dealers, financial advisors and institutional investors. He is central to Walton s strategic direction and expansion and has directed the launch of Walton s Asian, USA and European operations; recruited experienced industry leaders to form Walton Development and Management L.P.; and has overseen the diversification of Walton s real estate portfolio from an original base in Calgary to significant positions in and around Alberta, Ontario, Arizona, Texas, Georgia, Washington D.C., the Carolinas, California and Florida. D. BLAIR NIXON, QC, FCA, ICD.D Chief Financial Officer Walton Ontario Land 1 Corporation Blair Nixon is Chief Financial Officer of Walton Global Investments Ltd., responsible for finance operations across the Walton Group of Companies. Mr. Nixon is both an experienced tax lawyer and a chartered accountant. He was Co-Managing Partner of law firm Felesky Flynn LLP, where he practiced tax law for 20 years. He is ranked as a leading business lawyer by Chambers Global, Lexpert and Martindale-Hubbell. He has been a guest lecturer for the Canadian Tax Foundation, the Institute of Chartered Accountants of Alberta and the Canadian Institute of Chartered Accountants. Mr. Nixon is an elected Member and President of the Council for the Institute of Chartered Accountants of Alberta, and past Chair of the Canadian Bar Association s National Commodity Tax, Customs and Trade Section. He was appointed Queen s Counsel by the Province of Alberta, awarded the FCA designation by the Institute of Chartered Accountants of Alberta, and holds the ICD.D certification granted by the Institute of Corporate Directors. LESLIE L. FRYERS, QC, ICD.D Corporate Secretary Walton Ontario Land 1 Corporation Leslie Fryers, Executive Vice President, Law for Walton Global Investments Ltd., oversees the worldwide legal services for the Walton Group of Companies. Previously, Leslie enjoyed three decades of successful private practice, concentrating on mergers and acquisitions. She has lectured extensively at legal seminars, is a past Chair of the Board of Directors of the Legal Education Society of Alberta and is currently a Member of The Association of General Counsel of Alberta. Leslie was appointed Queen s Counsel by the Province of Alberta, and has been granted the ICD.D distinction from the Institute of Corporate Directors. She is a Member of the Law Society of Alberta, and holds a Law degree from McGill University. 54 Walton Ontario Land L.P. 1 Annual Report 2013

55 CLIFFORD H. FRYERS Director Walton Ontario Land 1 Corporation Clifford H. Fryers is the Chairman and Chief Executive Officer of White Iron Inc. and Stampede Entertainment Inc., both entertainment companies. He recently retired as the Chair of the Board of the Manning Centre for Building Democracy and the Manning Foundation for Democratic Education. He is also former Chairman of the Board of Directors for ENMAX Corporation. Mr. Fryers is on the board of directors of several companies in the Walton Group. He was on the Board of Advisors of Walton Global Investments Ltd. for eight years, retiring as Vice Chairman in November of From 1997 until 2000, Mr. Fryers was Chief of Staff to the Leader of Her Majesty s Official Opposition in the House of Commons. Prior to that, he was a Senior Tax Partner and Managing Partner with the law firm of Milner Fenerty (now Dentons LLP) which he joined in He worked in the Tax Litigation Section of the Department of Justice, Ottawa from 1971 to 1977 and then as General Tax Counsel for Mobil Oil Canada, Ltd. until Mr. Fryers holds the ICD.D certification granted by the Institute of Corporate Directors. JON N. HAGAN Director Walton Ontario Land 1 Corporation Jon N. Hagan is principal of JN Hagan Consulting, providing assistance to major corporations regarding real estate capital markets, and acquisition and disposition transactions covering situations across North America and China. He is also a director and member of the audit and executive committees of the board of directors of First Capital Realty Inc. and is a former director and member of various committees of Bentall Kennedy Group. Previously, he was a trustee of Sunrise Senior Living Real Estate Investment Trust and was the chair of the audit committee thereof. He has also been Chairman of Teranet Income Fund and a director and on the audit committee of the board of directors of The Mills Corporation. In addition to board service, Jon has held a number of executive finance positions with real estate industry leaders including Oxford, Cambridge Shopping Centres, Empire Company Limited and Cadillac Fairview Corporation. Jon is a chartered accountant, holds a BSc in Mechanical Engineering from the University of Saskatchewan and attended the Executive MBA program at the University of Alberta. RICHARD R. SINGLETON Director Walton Ontario Land 1 Corporation Richard R. Singleton was a lead architectural partner with Cohos Evamy Partners, Architects, Engineers and Planners (now Dialogue Design) for 36 years. Since retiring in 2008, he has consulted and provided assistance to developers in various planning and building projects. In addition, Richard is on the board of directors of several companies in the Walton Group. He is presently a director of the National Music Centre (Cantos Foundation), a member of the Advisory Board of Thermal Systems KWC. Ltd, a past member of the Calgary Arts Development Authority and a board member of a private real estate investment group. He is a former member of the Board of Advisors of Walton Global Investments Ltd. Richard holds a Bachelor of Architecture from the University of Manitoba and is LEED accredited. Annual Report 2013 Walton Ontario Land L.P. 1 55

56 Global Head Office Calgary 23 rd Floor, th Avenue SW Calgary, Alberta Canada T2P 3H5 Main: Fax: Auditor PricewaterhouseCoopers LLP Suite 3100, th Avenue SW Calgary, Alberta Canada T2P 5L3 Main: Fax: To learn more about Walton contact your advisor or visit Walton.com W_WOLLP1_AnnualProspectus2013_CMYK_140502