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ANNUAL REPORT Management fee is contingent on an 8.00 % hurdle rate Future Accounting Changes Effective January 1, 2011, Canadian GAAP for publicly accountable enterprises converged with IFRS. In December 2011, the Accounting Standards Board of the Canadian Institute of Chartered Accountants required investment companies applying Accounting Guideline 18 to further defer adoption of IFRS until fiscal years beginning on or after January 1, 2014 by extending the mandatory requirement for all Canadian publically accountable enterprises to prepare their financial statements in accordance with IFRS as issued by the International Accounting Standards Board. e Fund will adopt IFRS for its fiscal year beginning March 1, 2014, and will issue its first financial statements in accordance with IFRS, including comparative IFRS information for the previous fiscal period, for the year ending February 28, 2015. e Manager continues to monitor changes to IFRS and is assessing the impact for the Fund. Related Party Transactions Fund's Manager e Manager is related to the Fund because Aleem Virani, Shafin Kanji and Jonathan Herman are officers of both KV Capital Inc. and the Fund and Aleem Virani and Shafin Kanji are directors of both KV Capital Inc. and the Fund. e Manager is responsible for the day-to-day operations, including administration of the Fund's mortgage loan investments. In respect of these services, the Fund pays to the Manager a management fee (see discussion in "Management and Service fees" for a summary of the services provided by the Manager). For the year ended February 28, 2014, the Fund incurred management fees of $191,015 (2013 - $81,045), of which $66,209 (2013 - $22,230) remains payable at year end. On June 1, 2012, the Fund and the Manager mutually agreed to revise the management fee on a go-forward basis. Subsequent to June 1, 2012, the management fee paid by the Fund is equal to 7.50% of the Fund's revenue, and is calculated monthly and paid quarterly. e Manager's eligibility to receive the management fee for any month is subject to the Fund generating an increase in net assets from operations, after accounting for the management fee, that is sufficient to provide a minimum 8.00% annualized return on the opening monthly capital of the Fund. Prior to June 1, 2012 the Manager's management fee was calculated as 10.00% of the Fund's revenue and was not subject to achieving a hurdle rate. $Nil (2013 - $881) is payable by the Fund to the Manager at February 28, 2014 for the reimbursement of Fund operating expenses paid by the Manager. $5,000 (2013 - $nil) was incurred by the Manager on behalf of the Fund for a refundable loan application fee. In respect of capital raised, the Fund incurred $237,648 (2013 - $85,596) in service fees to the Manager during the Year, of which $72,204 (2013 - $27,083) remains payable at year end. 24

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