E-Delivery

Effective September 1, 2013 Paul Allard accepted an appointment to the Fund's board of directors and its lending review committee e Manager has an established, professional reputation within the industry that has resulted in significant new origination volumes occurring from repeat borrowers and a growing network of referrals. e Manager remains focused on identifying lending opportunities that require the expertise of its professional staff, local insights and hands-on management style. Given the current availability of loans that are consistent with the Funds investment objectives, we do not expect to modify the Fund's asset allocation model during fiscal 2015. The Manager is exploring the feasibility and desirability of securing a line of credit for KV Mortgage Fund. As of February 28, 2014 a $5,000 refundable commitment fee has been paid by the Manager to a potential lender that as of the date of this MRFP is engaged in the underwriting of the mortgage portfolio. The intent of the line of credit is to manage the timing of cash f lows within the Fund in the interest of maintaining efficient capital deployment into mortgages while balancing the ability of the Fund to access cash as it is required for redemptions, new opportunities and principal repayments. Should the Manager recommend a credit facility that it is able to negotiate on behalf of the Fund, the approval of the independent board of directors would be required. Independent Board of Directors and Independent Lending Review Committee Effective September 1, 2013 Paul A llard accepted an appointment to the Fund's board of directors and its lending review committee. Mr. Allard deals at arm's length with the Manager, and accordingly Mr. Allard is an independent director and independent member of the Fund's lending review committee. The Fund and Manager appreciate Mr. Allard's involvement with KV Mortgage Fund and believe that his real estate expertise and experience as a former director of a public company will further strengthen the corporate governance of the Fund. Subsequent to February 28, 2014 Cameron Brinkman resigned from the Fund's board of directors and lending review committee because he will no longer be dealing at arms length with the Manager, and accordingly would not be independent going forward. During his tenure with the Fund Mr. Brinkman served as chairman of the board, a director of the Fund and a member of the Fund's lending review committee. The Fund, Manager and board of directors thank Mr. Brinkman for his significant involvement and oversight in establishing the independent governance framework of KV Mortgage Fund, and his dedicated service over the last two fiscal years. As of the date of the MRFP, and under the guidance of its board of directors, KV Mortgage Fund has begun the process of identifying and recruiting another independent director. Paul Allard will hold the office of interim chairman until a replacement director is recruited, at which time the board will elect a permanent chairman in accordance with its term limits. 23

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