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2015 ANNUAL REPORT Future Accounting Changes IFRS 9 Financial Instruments In July 2014, the International Accounting Standards Board ("IASB") issued IFRS 9 Financial Instruments to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on classification and measurement of financial instruments. In addition, IFRS 9 includes a single expected-loss impairment model and a reformed approach to hedge accounting. is standard is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. e Fund intends to adopt IFRS 9 in its financial statement for the annual period beginning March 1, 2018. e impact of adopting this standard has not yet been determined. IAS 1 Presentation of Financial Statements In December 2014 the IASB issued amendments to IAS 1 Presentation of Financial Statements as part of its major initiative to improve presentation and disclosure in financial reports. ese amendments will not require any significant change to current practice, but should facilitate improved financial statement disclosures. e amendments are effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. e Fund intends to adopt these amendments in its financial statements for the annual period beginning on March 1, 2016. e impact of adopting this standard has not yet been determined. Related Party Transactions Fund's Manager e Manager is related to the Fund because Aleem Virani, Shafin Kanji and Jonathan Herman are officers and the beneficial owners of voting shares 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, 2015, the Fund incurred management fees of $397,754 (2014 - $191,015), of which $113,333 (2014 - $66,209) remains payable at year end. e 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 net income and comprehensive income, after accounting for the management fee, sufficient to provide a minimum 8.00% annualized return on the opening monthly capital of the Fund. In respect of capital raised, the Fund incurred $353,394 (2014 - $237,648) in service fees to the Manager during the Year, of which $99,291 (2014 - $72,204) remains payable at year end. As at year end, the Manager held $20,536 (2014 - $2,095) in trust on behalf of the Fund from the payment of interest made by third party borrowers in which the Fund holds a syndicated mortgage interest. Subsequent to year-end, the Manager disbursed the proceeds to the Fund in accordance with the terms of its normal mortgage servicing operations. 28

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