E-Delivery

record are expected to be competitive advantages for lenders providing financing to these borrowers over fiscal 2016. e Fund and Manager are well regarded in the mortgage market and the Manager is actively pursuing the mortgage lending opportunities that have become available from sophisticated borrowers that have previously accessed lower cost financing. is strategy is expected to provide an attractive risk adjusted return, is consistent with the mandate of the Fund and will facilitate continued growth. Consistent with the KV lending philosophy and past practice, the Manager will continue its active monitoring and servicing of all loans within the Fund's portfolio. is approach, combined with the local knowledge and expertise of the Manager, permits the Fund to leverage the short terms to maturity of its investments in the interest of maintaining meaningful equity buffers in the real estate that secures the mortgages. To further actively manage exposures, the board of directors has temporarily increased the portfolio oversight of the independent lending review committee to formally provide the Fund with more frequent access to the experience of its members during the current cycle. Subsequent to year end, the Fund has successfully secured a $3,000,000 revolving line of credit facility with a term of one year and interest rate equal to TD Prime + 5.50% per annum (as of this MRFP TD Prime is 2.85% per annum) with no additional costs. e line of credit will permit the Manager to proactively manage the timing of the Fund's cash flows in the interest of maintaining efficient capital deployment through new capital raises, borrower repayments, redemptions and new mortgage fundings. Over the course of fiscal 2016 the Fund, via the Manager, expects to continue providing returns to investors in excess of its benchmark (average Government of Canada 2 year bond yield (series V122538) plus 550 basis points), building flexibility into the portfolio and participating in real estate secured lending transactions that provide meaningful capital protection characteristics. Independent Board of Directors and Independent Lending Review Committee During the third quarter, Ralph Young accepted an appointment to the Fund's board of directors and its lending review committee. Mr. Young deals at arm's length with the Manager, and accordingly Mr. Young is an independent director and independent member of the Fund's lending review committee. Mr. Young brings extensive real estate experience across multiple economic cycles, along with operational and governance expertise gained through his past and current oversight positions with various public entities. Effective February 28, 2015, Shane Stevenson's term with the Fund's board of directors ended as scheduled. e Fund, Manager and board of directors thank Mr. Stevenson for his significant involvement and oversight in establishing the independent governance framework of KV Mortgage Fund, and his dedicated service over the last three and a half fiscal years. During the third quarter, Ralph Young accepted an appointment to the Fund's board of directors and its lending review committee 27

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