Relationship disclosure information form

Last updated May 2024

1. Relationship disclosure document

This Relationship Disclosure Information form (“RDI”) sets out important information for your benefit, including:

Information on KV Capital Inc. (“KVC” or “KV Capital”);
The nature of the relationship between you and KVC;
Cost and risks associated with investing through KVC in its related corporations, including but not limited to KV Mortgage Fund Inc. (“KVMF”);
Disclosures of relationships and existing and reasonably foreseeable material conflicts of interest;
The financial products KVC offers; and
How KVC is compensated for its services.

If there is a significant change to the information contained in this document, we will provide you with updated information as soon as possible by sending an updated document by email (if you have consented to electronic delivery of documents from us) or by mail (if you have not provided consent to delivery by email).

If there are any questions or concerns with respect to the content and material provided herein, please contact the Chief Compliance Officer of KVC at nicholas.jeanes@kvcapital.ca or 780-433-1222.

2. About KV Capital Inc. (“KVC”), and its affiliated investment entities including KV Mortgage Fund Inc. (“KVMF”)

KVC was founded in 2006 in the Province of Alberta and is registered with the Alberta Securities Commission as an Exempt Market Dealer (“EMD”), Investment Fund Manager (“IFM”), and Restricted Portfolio Manager (restricted to advising in mortgages) (“RPM”); with the Ontario Securities Commission as an EMD and IFM; and with the British Columbia Securities Commission and the Financial and Consumer Affairs Authority of Saskatchewan as an EMD. KVC is also registered with the various real estate regulatory authorities of Alberta, Ontario, and British Columbia as a mortgage brokerage.

Affiliated investment entities

KVMF was founded in 2009 in the Province of Alberta as a mortgage investment corporation (“MIC”). KVMF was originally known as “The Mortgage Corner Investment Fund” and changed its name to “KV Mortgage Fund Inc.” in 2011.

KV Private Equity Fund Limited Partnership (“KVPEF1”) was founded in 2017 in the Province of Alberta as a limited partnership. It is in the business of acquiring controlling interests of established lower mid-market operating business. KVPEF1 is now closed for new investment and acquisitions and is in the process of divesting of its remaining controlling interests in private operating businesses.

Since the inception of KVPEF1, additional limited partnerships managed by KV Capital that are in the business of acquiring controlling interests of established lower mid-market operating business have been established (the “KV PE Entities”).

KV RE Equity Partners Fund I Limited Partnership (“KVREQ”) was founded in 2022 in the Province of Alberta as a limited partnership. It is a real estate development private equity fund, in the business of acquiring equity interests in real estate development and redevelopment projects in Canada. KVREQ, and any KV real estate development private equity funds that may be established in the future, are referred to collectively as the “KVREQ Funds”.

KVC’s affiliated private equity funds, as currently established (the KV PE Entities and KVREQ Funds), or as may be established in the future, are referred to collectively as “the KVPE Funds”.

KVC is KVMF’s IFM, EMD, and RPM in certain jurisdictions, and is frequently an EMD in connection with the distribution of KVMF’s preferred shares. KVC is also the fund manager of KVPE Funds pursuant to certain separate contractual arrangements related to each fund partnership agreement.

The founders and principals of KVC are also significant investors in KVMF and the KVPE Funds. KVC may also, from time to time, be a significant investor in KVMF and any KVPE Fund.

3. Products and services

The products currently distributed by KVC as an EMD are Class A and Class B preferred shares of KVMF (KVMF Class A Preferred Shares and Class B Preferred Shares referred to collectively as the “Preferred Shares”, or as “KVMF Preferred Shares”). Preferred Shares can be held personally or can be held in a registered account (RRSP, RRIF, RESP and TFSA) through an approved trustee.

In addition, KVC also distributes interests in syndicated mortgages (“Syndicated Mortgage Interests”), the details of which vary by transaction and are provided to prospective investors prior to their participation in a particular mortgage.

Limited partnership units in each KV PE Fund are also made available and purchased over the course of the fundraising period of each such fund through each respective KV PE Fund.

Where KVC is dealing securities as an EMD, KVC will provide its clients with the types of disclosures, including information regarding certain types of fees and charges, that are required to be delivered by it to its clients pursuant to applicable law. It is important to note that the identity of the client, and the nature of the security and transaction, will give rise to different disclosures requirements and obligations. As a result, clients should not expect to receive identical disclosures in respect of all securities. If a client has any questions or concerns regarding the information it is receiving, or should be receiving under applicable law, please contact KVC’s CCO.

4. Liquidity of investments

KVC and KVMF are private corporations and therefore the Preferred Shares of KVMF and Syndicated Mortgage Interests do not offer the same liquidity that would be available through the public financial markets. It is important that you fully appreciate the illiquid nature of the Syndicated Mortgage Interests and KVMF Preferred Shares distributed by KVC. In relation to investments in KVMF Preferred Shares please refer to the applicable KV Mortgage Fund Inc. Offering Memorandum dated May 1, 2024 for specific information regarding restrictions on liquidity with these particular investments. Between the period March 17, 2020 to October 1, 2020 KVMF suspended redemptions of its Preferred Shares, in response to the uncertainty with respect to the COVID-19 pandemic.

5. Exempt Market Dealer

KVC generally acts as an EMD only to allow investors to invest in Preferred Shares, and Syndicated Mortgage Interests using exemptions from the prospectus requirements set out in applicable securities laws. KVC may also, depending on the circumstances, act as EMD in respect of other products described in this instrument.

In the case of an investment in Preferred Shares or Syndicated Mortgage Interests, KVC generally does not have the facilities to directly offer any form of registered accounts. Investors may hold their investment(s) in registered accounts through a trustee authorized by KVC. KVC does not maintain any form of discretionary cash accounts on behalf of investors. Assuming all required pre-subscription conditions have been satisfied, all funds received for investment in Preferred Shares of KVMF are released to KVMF in exchange for the issuance by KVMF of Preferred Shares to an investor. Assuming all pre-subscription conditions have been satisfied, all funds received for investment in a Syndicated Mortgage Interest are utilized by KVC for investment in a mortgage, as directed by the investor.

6. Restricted Portfolio Manager

In its capacity as an RPM, KVC makes discretionary mortgage lending decisions for KVMF’s investment portfolio. Each Investment made by KVMF (in accordance with thresholds and guidelines set by KVMF’s lending review committee) will have been reviewed by and received a positive recommendation from KVC.

7. Investment Fund Manager

As the IFM for KVMF, KVC has a relatively broad mandate that includes managing the business, operations and affairs of KVMF, recommending the organization or reorganization, as the case may be, of KVMF and generally managing the investment portfolio of KVMF. In addition, KVC is responsible for all investment administration services, including the following: mortgage accounting, mortgage record keeping, arrears management, foreclosure, verification of proper mortgage insurance, mortgage renewal and detailed financial reporting to shareholders on a quarterly and annual basis.

8. Know Your Client and suitability

KVC is required to take reasonable steps, as defined by securities laws, to establish the identity of a client, to establish whether a client is an insider of a publicly traded company or reporting issuer and to ensure KVC has sufficient information about a client’s investment needs and objectives, personal and financial circumstances, risk profile and risk tolerance, time horizon, and investment knowledge. This information is collected from you prior to your investment as required by law, and generally before your investment in Preferred Shares or Syndicated Mortgage Interests, in a “Know Your Client” (“KYC”) information form.

KVC generally has an obligation to assess whether an investment in any product, including Preferred Shares or Syndicated Mortgage Investments, is suitable for a client prior to the client making the investment. Once account opening documentation is completed, KVC conducts an assessment to ensure that an investment is suitable for you (unless you waive the requirement for KVC to conduct such an assessment). If your proposed investment does not appear to be suitable, we will caution you about it and may either reject the purchase or require your written acknowledgment that we have advised you why the trade is unsuitable, before proceeding with the investment.

KVC also has an on going obligation to make reasonable efforts to ensure that the information contained in the KYC form is current. KVC meets this requirement by reviewing this information with you on a periodic basis or at the time a trade is conducted in your account.

9. Fees and charges

KVC earns a broker commission at the time of funding a syndicated mortgage, which is paid by the borrower. KVC earns a commitment fee at the time of underwriting a syndicated mortgage, which is also paid by the borrower. For a syndicated mortgage, KVC may earn a mortgage administration fee equal to the difference between monthly interest that the borrower pays and the monthly interest that the investor receives. KVC receives a trailing commission of 1% annually for each trade of Preferred Shares that KVC refers to KVMF. KVC receives a trailing commission between 1% and 2% annually (depending on Class of limited partnership unit) for each trade of limited partnership unit that KVC referred to KVPEF1.

In consideration for the provision of management and administration services (the “Management Fee”) KVMF pays KVC compensation for the services it receives as follows. The Management Fee is calculated as follows: (i) on a monthly basis, 0.083% of the total assets of KVMF (the “Base Fee”); and (ii) on an annual basis, 20% of any portion of KVMF’s net income that exceeds the level of net income required to provide KVMF with an Internal Rate of Return (“IRR”) equal to the average of the 2 year Government of Canada benchmark bond yield (series V122538), plus 450 basis points (the “Performance Fee”). For calculating the Base Fee, a simple average of KVMF’s opening and closing total assets is calculated using the un-audited monthly statements of financial position. Base Fees include applicable taxes, and are disbursed to KVC on a monthly basis. The Performance Fee is calculated using KVMF’s annual audited statement of comprehensive income, including the Base Fee as an expense in such calculation. Performance Fees include applicable taxes, and are disbursed to KVC on an annual basis.

In the event all of the real estate security of an investment by KVMF has been monetized and the nominal aggregate cash flows of such investment to KVMF are negative, KVC will pay to KVMF a reimbursement (the “Reimbursement”) that is calculated as the lesser of: i) the amount required to bring KVMF’s nominal aggregate cash flows of such investment to zero; and ii) two times that portion of the associated fees paid to KVC by the applicable borrower in respect of such investment by KVMF. Any amounts recovered from such an investment on which KVMF has received payment of a Reimbursement will first be paid to KVMF until such time as its nominal aggregate cash flows, calculated inclusive of the Reimbursement, are zero, then paid to KVC in an amount equal to the Reimbursement, with any residual amounts paid to KVMF.

KVC may charge KVMF from time to time administrative fees, non-sufficient funds (NSF) fees and similar fees to applicable borrowers with respect to mortgage loan transactions.

For more information on fees charged by KVC to KVMF please see the following items contained in the May 1, 2024 Offering Memorandum of KVMF: Item 2.7.1 The Management and Advisory Agreement, Item 2.7.2 Dealer Agreement and Item 7 Compensation to be Paid to Sellers and Finders.

In respect of Preferred Shares that are held in a registered account (i.e. RRSP, TFSA, RIF, RESP or LIRA), the trustee for the account may charge an annual administration fee. Please speak with the trustee handling your account if you have any questions about such charges.

KVC in its capacity as a mortgage brokerage does not earn any fees, commissions or other charges from KVMF or the KVPE Funds. KVC in its capacity as a commercial mortgage brokerage is paid a fee by its borrower clients upon successfully obtaining mortgage financing for the applicable borrower client, and may receive such a fee from one of the investments made by one of the KVPE Funds or a borrower of a mortgage funded by KVMF or Syndicated Mortgage Interest. KVC in its capacity as a residential mortgage brokerage, when applicable, receives fees from the lender providing residential mortgages to its clients.

KVC, in its capacity as fund manager for the KVPE Funds, earns management fees for the management and administration of such entities, pursuant to the applicable management agreements. These fees, and any other compensation that may be payable to KVC or its affiliates pursuant to partnership agreements of the KVPE Funds, are paid to KVC by the KVPE Funds, as applicable, and do not relate to KVMF or any Syndicated Mortgage Interests. For more information on these fees, please refer to the partnership materials of the applicable KVPE Fund.

10. Investment risk

When making an investment decision it is important to be aware of the risks associated with investing in Preferred Shares or Syndicated Mortgage Interests or any other products offered by KVC. It is important to understand that KVC does not guarantee the return which an investment in any product, including Preferred Shares or Syndicated Mortgage Interests, can provide or the security of your principal investment. KVC does not obtain any mortgage insurance on any of its lending and hence a loss of principal is possible. None of the products dealt by KVC are listed on any stock exchange which could restrict an investor’s ability to resell them. There could be a lockup period or other transfer restrictions that apply to the security which restricts an investor from trading, selling or transferring the security. Securities dealt by KVC will be illiquid investments for which there is no public market.

It is possible for mortgage loans contained in KVC’s investment portfolio to become impaired, from time to time.

The following is a general summary of the risks you should consider before making a decision to invest in Preferred Shares or Syndicated Mortgage Interests. Please note that this list is not exhaustive and is provided to give you an indication of general risk factors that can affect the value of your investment. For a list of more detailed and specific risk factors related to Preferred Shares and Syndicated Mortgage Interests, please refer to Item 9 Risk Factors, contained in the May 1, 2024 Offering Memorandum of KVMF.

Liquidity Risk – Preferred Shares are subject to redemption restrictions and all of the Preferred Shares and Syndicated Mortgage Interests are subject to resale restrictions. These restrictions are based on legal, regulatory and compliance requirements, external market conditions or situations where the equity value may be negatively impacted. Refer to the section above titled “Liquidity of Investments” for further detail;
Redemption Risk – Preferred Shares and Syndicated Mortgage Interests are not publicly traded and you may be unable to sell or redeem such shares or interests in a timely manner, or at all. Please refer to the section above titled, “Liquidity of Investments”;
Insurance Risk – Preferred Shares and Syndicated Mortgage Interests are not insured against loss through the Canada Deposit Insurance Corporation. Further, the securities offered by KVC are not eligible for mortgage default insurance and, as such, do not carry any form of mortgage default insurance coverage;
Market Risk – Real estate markets and business cycles will fluctuate based on a variety of factors including general economic and market conditions, interest rates, commodity prices, political and geopolitical developments, investor sentiment and borrower specific changes. These fluctuations may impact the value of the Preferred Shares and Syndicated Mortgage Interests;
Borrower Risk/Default Risk – Cash flow derived from Preferred Shares and Syndicated Mortgage Interests are subject to the borrowers’ ability and willingness to make timely mortgage payments. The higher the number of mortgages in the investment portfolio managed by KVC (both in terms of mortgages held in KVMF’s portfolio and Syndicated Mortgage Interests) which are in default, the higher the risk to the investor, since this risk can affect interest income and can tie up capital (or result in a loss of capital) which could otherwise be used to invest in performing mortgages, honor redemption requests made by investors holding Preferred Shares, pay dividends on Preferred Shares and make interest payments to holders of Syndicated Mortgage Interests. There is also increased risk to the investor with a mortgage in default as a mortgage in default may ultimately result in a foreclosure and/or overall loss to KVMF and/or the investor holding Syndicated Mortgage Interests.
Leverage Risk – KVC’s investment strategy allows for the capacity to use a combination of capital and debt (i.e. bank financing) to purchase mortgage assets. This would be done in order to achieve a higher rate of return for KVMF. This leveraging strategy may decrease returns if the interest rate charged on the bank financing ever exceeds the net yield of KVMF. Furthermore, leverage increases risk to capital as loss of principal on mortgage investments made with borrowed funds must be paid out of KVMF’s equity.
Foreclosure Risk – The investment portfolio managed by KVC (both in terms of mortgages held in KVMF’s portfolio and Syndicated Mortgage Interests) may incur additional costs on properties recovered through the foreclosure process. These include: property taxes, costs of settling other mortgages on the property, insurance costs, and repair and maintenance costs.

11. Borrowing to invest

If you are considering borrowing money to make investments, or considering providing KVC with borrowed money to make investments on your behalf, you should be aware that the use of borrowed money to purchase securities involves greater risk than a purchase made using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same, even if the value of the securities purchased declines. As a result, your losses would be larger than had you invested using your own money.

KVC discourages borrowing of money to fund participation in any investment and has neither arranged for nor recommended that you borrow money in order to invest in Preferred Shares of KVMF, Syndicated Mortgage Interests offered by KVC, or any other investment opportunity offered by KVC. KVC bears no responsibility or liability whatsoever for borrowing arrangements that you may have made.

12. Conflicts of interest

Under securities regulations, KVC, in each of its registrant roles, is required to identify existing and reasonably foreseeable material conflicts of interest between KVC (including each individual, acting on its behalf) and its clients.

Identifying conflicts of interest is a fundamental registrant obligation. Regulators expect registrants to identify any circumstances where:

The interests of a client and those of a registrant are inconsistent or divergent;
A registrant may be influenced to put their interests ahead of their client’s interests; or
Monetary or non-monetary benefits available to a registrant, or potential detriments to which a registrant may be subject, may compromise the trust that a reasonable client has in their registrant.

Further, if a reasonable investor would expect to be informed of the nature and extent of an identified conflict of interest, KVC must disclose, in a timely manner, the conflict of interest, which includes a description of:

The nature and extent of the conflict of interest;
The potential impact on and risk that the conflict of interest could pose to the client; and
How the material conflict of interest has been, or will be, addressed.

The following outlines the policy on conflicts of interest which KVC has adopted.

KVC expects that all employees will avoid any activity, interest or association which might interfere or appear to interfere with the independent exercise of their judgement in the best interests of KVC, its clients and the public. Employees must avoid any situation in which their personal interests conflict with their duties at KVC. Further, registrants (for securities law purposes) including KV Capital and its registered individuals generally have a duty to deal fairly, honestly and in good faith with their clients.

When an employee knows a material conflict of interest exists or is reasonably foreseeable, all details of the conflict of interest are to be provided to the chief compliance officer (the “CCO”) immediately. If an employee is uncertain as to whether a conflict of interest exists or could arise, the matter should be directed to the CCO. KVC, led by the CCO in this regard, is responsible for addressing conflicts of interest in the best interests of the client. A conflict of interest occurs whenever interests of KVC or an employee could conflict with those of a client, or where KVC or an employee have obligations to more than one party whose interests are different.

Examples of existing or reasonably foreseeable material conflicts of interest include:

connected or related issuers, where KVC might be tempted to recommend the issuer to a client in an effort to earn trailer fees or other compensation rather than because it is a good investment for the client;
director positions of an issuer held by an employee of KVC, where the individual may receive confidential or market sensitive information. In such a case, the employee will have a duty to the issuer to keep the information confidential and not use the information for personal benefit or to benefit clients;
dealing as principal, where the client and KVC have opposite interests in terms of the price of the transaction; and
where the interests of investments made by different funds, including KVMF or any KVPE Fund, might conflict.

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”) takes a principle-based approach to conflicts. Under s. 13.4 of NI 31-103, KVC must take reasonable steps to identify existing and reasonably foreseeable material conflicts that it would expect to arise, between KVC or its employees and a client. All employees who have dealings with customers must report to the CCO any situation that might give rise to a real or perceived conflict of interest, including but not limited to:

outside activities, including but not limited to outside business activities;
outside activities by a spouse or other relative living in the same residence;
shareholdings in an issuer of greater than 10% of the issued shares on a fully diluted basis, whether voting or not;
family affiliation with the controlling management or ownership of an issuer;
lawsuits or other significant adversarial actions against an issuer, no matter who initiated them;
information about any undisclosed interests or business of KVC or an employee that a client would reasonably expect to be told to make an informed decision about a recommendation; or
any other situation where a conflict or perceived conflict has arisen.

When an existing or reasonably foreseeable material conflict of interest has been identified, the CCO must address the conflict of interest in the best interests of the client. There are two methods of managing such material conflicts of interest:

disclosure of the material conflict of interest to the client, implementation of controls, and, if applicable, supervision to ensure that the party with the conflict acts in the client’s best interests; or
refraining from conducting the business that results in the material conflict of interest.

The existing or reasonably foreseeable material conflict of interest will typically be managed by avoiding conducting the business that results in the conflict of interest. Where the existing or reasonably foreseeable material conflict of interest is addressed through disclosure, controls and supervision, the disclosure and delivery of such activities must be documented. For an individual client, the documentation can be maintained in the client file; where it involves several unrelated clients, it can be maintained in the dealing representative’s file or identified in the client relationship disclosure information.

If supervision is used in addressing the material conflict of interest, the related controls and procedures can be maintained in the client file where only a single client is affected. Where the material conflict of interest involves several unrelated clients, the related controls and procedures implemented to protect clients must be included in KVC’s Policies and Procedures Manual. The controls must be approved by the CCO. If KVC or an employee refrains from conducting the business, all parties must be notified and the decision must be approved and documented by the CCO.

Identifying and Addressing Conflicts of Interest

KVC must continually identify and address reasonably foreseeable material conflicts of interest. It is KVC’s policy to address all material conflicts of interest in the best interest of the client. Where a conflict cannot be appropriately mitigated, it is expected KVC will remove itself from the conflict. The CCO and ultimate designated person (“UDP”) are responsible for addressing identified material conflicts of interest. All employees are each individually responsible for identifying existing and reasonably foreseeable material conflicts of interest. Further, on an ongoing basis the CCO and CFO of KVC must meet and complete the Conflict of Interest checklist to determine if there are any new material conflicts of interest in KVC’s business activities.

Existing and reasonably foreseeable material conflicts of interest and responses to them currently include the following:

Existing and reasonably foreseeable material conflict of interest	Level of risk	Response and controls
KVC allocates mortgage investment opportunities among KVC, its principals and affiliates, its syndicated mortgage clients and its related entity, KVMF. KVMF either fully funds mortgage investments or participates as an investor in a syndicated mortgage offered by KVC. Pursuant to policy established by KVC, KVMF will be given priority with respect to investment opportunities. See Item 9.25 “Allocation” in KVMF’s May 1, 2024 Offering Memorandum. If not addressed, your investment in KVMF could be disadvantaged by certain mortgage investment opportunities being provided to KVC, its principals, or other entities prior to KVMF.	Low	KVC will present an investment opportunity to KVMF first and then to its syndicated investors, then to KVC itself and then last to KVC’s principals and affiliates. KVMF receives priority in viewing investment opportunities. As such KVC, its principals and affiliates and its syndicated mortgage clients may be disadvantaged under this approach. KVC was established to provide investment opportunities first and foremost to KVMF. The relationship between KVC and syndicated investors contemplates this allocation policy. As the KVPE Funds do not generally consider mortgage investment opportunities as potential investments, no conflict is reasonably foreseeable in relation to those entities; if such an investment opportunity does arise, it would only occur after it has been determined that such an opportunity is unsuitable for KVMF or syndicated mortgage investors.
KVREQ Funds may receive certain real estate investment opportunities which could also be opportunities for KVMF or syndicated mortgage clients. If not addressed, your investment(s) could be disadvantaged by KVREQ Funds taking priority in certain mortgage investment opportunities, however as further described in the “Response” column, KVREQ Funds’ business differs in making equity investments as opposed to debt investments.	Low	As noted above, KVMF receives priority in viewing and participating in all mortgage investment opportunities sourced by KVC. Further, KVREQ Funds’ real estate investment opportunities differ from the types of investments made by syndicated mortgage clients and KVMF. KVREQ Funds are generally in the business of making equity investments as compared to syndicated mortgage clients or KVMF which make debt investments. Where the person seeking capital is uncertain as to which type of capital (debt or equity) it is looking to obtain, KVC directors and officers and senior managers may screen such investment opportunities to determine which mode of financing, equity or debt, is the most appropriate type of financing for the person seeking capital, and then ensure that the resulting opportunity is allocated in accordance with its policies and so any reasonably foreseeable material conflicts of interest are addressed in the best interest of the client.
Certain differences in the features of the Class A Preferred Shares and Class B Preferred Shares of KVMF may create a conflict of interest, given that: (a) third-party registered dealers will receive higher compensation on the sale of Class B Preferred Shares than on Class A Preferred Shares, and (b) KVC will receive compensation from KVMF when shareholders redeem Class B Preferred Shares within 5 years of purchasing the shares. If not addressed, and if you are eligible for both Class A and Class B Preferred Shares, you may be disadvantaged by being recommended Class B Preferred Shares by KVC, which are subject to early redemption fees, as opposed to Class A Preferred Shares, which are not.	Low	To address this material conflict of interest, KVC pays, out of its own resources, the upfront commission paid to third-party registered dealers on the sale of Class B Preferred Shares of KVMF. In the event investor shareholder redeems their Class B Preferred Shares before the redemption period expires a portion of the sales commission will be repaid to KVC. Furthermore, KVC addresses this material conflict of interest by ensuring that its clients are aware of minimum subscription requirements for both classes of Preferred Shares and the differences between each classes, enabling its clients to decide which class of share is most appropriate.
Certain directors and officers of KVMF and KVPE Funds, as the case may be, may face actual or potential conflicts of interest due to their positions as directors or officers of KVC, and/or their direct or indirect ownership interest in KVC, and/or their direct or indirect participation in the operation and management of any KVPE Funds and such fund’s respective investments. These directors and officers may have a conflict of interest in allocating their time between the respective businesses and interest of KVC, KVMF, KVPE Fund entities, and other businesses and projects in which they may become involved. The services of KVC and their respective directors and officers are not exclusive to KVMF. KVC and their affiliates may, at any time, engage in promoting or managing any other corporation or its investments including those which may compete directly or indirectly with KVMF. If not addressed, certain directors and officers may not devote sufficient time to manage KVMF or any of the other investments managed by KVC, ultimately potentially disadvantaging investors of any one investment. KVC has entered into a management and advisory agreement (the “Management Agreement”) with KVMF and is entitled to earn fees for providing services to KVMF and is also entitled to earn fees from borrowers pursuant to the terms and conditions of mortgage loans. KVC is also entitled to earn fees and other compensation in respect of KVPE Funds, as set out and described in the materials related to those funds. KVMF may be subject to various conflicts of interest because of the fact that the directors and officers of KVC are engaged in a wide range of investing and other business activities which may include real property financing in direct competition with KVMF. KVC has also established other investment vehicles which may involve transactions which conflict with the interests of KVMF. See also Item 2.7.1, “The Management and Advisory Agreement”, and Item 9.16 “Conflicts of Interest” contained in KVMF’s May 1, 2024 Offering Memorandum.	Low	KVC has mitigated this risk by requiring its directors and officers that are engaged in activities that could cause a reasonably foreseeable material conflict of interest with KVC or its clients to abstain from receiving or reviewing any information provided on potential real estate opportunities and the related investment decisions which may create the actual or potential conflict, recuse themselves if necessary from meetings may occur in a conflicted context, and ultimately resign from their position if necessary. Further, the terms of the Management Agreement provide that KVC is contractually obligated to devote sufficient time and attention to the business and affairs of KVMF. KVC is also party to a similar form of agreement with similar obligations in respect of any KVPE Fund. Pursuant to such contracts (including the Management Agreement), KVC must generally render its services honestly and in good faith and must use reasonable commercial efforts to perform its duties and responsibilities in a conscientious, reasonable and competent manner. Further, KVMF does not and will not lend to any related party and has not done so; nor have any of the related parties been borrowers under a mortgage syndicated by KVC, except where otherwise disclosed to participants of such syndicated mortgage investment. Where a borrower is a related party, material decisions in respect of such syndicated mortgage investment are generally made by the participants to such investment in accordance with the contracts related to such investment.
KVC in its capacity as a mortgage brokerage, could facilitate a mortgage loan to a commercial real estate project that is also an investment of KVREQ Funds. If not addressed, a material conflict of interest could arise where KVC’s interest as broker conflicts with KVC’s duties as manager of any such KVREQ Fund.	Low	Where KVC brokers a mortgage loan in respect of an entity that a KVREQ Fund has investment in, the fees payable to KVC in respect of such brokerage activities are capped.
KVC, its directors, officers, and other employees are (directly or indirectly) investors in KVMF and may be investors in a particular Syndicated Mortgage Investment and each KVPE Fund. As a result, a reasonably foreseeable material conflict of interest arises because such participation in investments may impact KVC’s decisions or recommendations, to the prejudice of its clients, including in connection with the allocation of limited opportunities to participate in a particular Syndicated Mortgage Investment or where redemptions of Preferred Shares may be temporarily suspended or otherwise gated.	Low	KVC has mitigated this reasonably foreseeable conflict of interest by adopting policies that determine how investment opportunities are to be allocated (see above) and undertaken, and generally prohibiting its directors and officers from redeeming Preferred Shares if, by virtue of their role at KVC, such persons have access to information that KVC’s clients do not.
Certain stakeholders, such as borrowers or investor-clients, delivering gifts or entertainment to KVC creates a reasonably foreseeable conflict of interest when KVC deals securities that are directly or indirectly connected to such stakeholders.	Low	KVC has mitigated this reasonably foreseeable conflict of interest by adopting a gift policy that ensures that the receipt of gifts that might create a material conflict of interest are managed in the best interests of its clients.
KVC may from time-to-time, in its sole discretion, enter into referral arrangements whereby it pays a fee for the referral of a client to KVC or to one of the funds it manages, or receives a fee for the referral of a client to a third party. Referral arrangements may be entered into both with other registrants and with non registrants. This can create a conflict between the person to whom the referral is made and the person making the referral, as the person making the referral is incented to do so by the promise of receiving compensation even where the investment is not necessarily in the best interest of the person making the investment.	Low	No such referral payments will be made or received unless the referred investors are first advised of the arrangement and all applicable securities laws in connection with the referral arrangements are complied with
KVC, in its capacity as a manager of the KV PE Entities, may find itself in a material conflict of interest where an investee entity of a KV PE Entity deals with: (i) a borrower of KVMF or a Syndicated Mortgage Investment, or (ii) an investee entity of a KVREQ Fund. If not addressed, such a material conflict of interest could result in an investor’s investment being prejudiced.	Medium	This material conflict of interest has been mitigated in two key ways: (1) investee entities of a KV PE Entity can only deal with other entities or investments that are managed by KVC, directly or indirectly, on arm’s length terms, and (2) KVC has developed policies and procedures that require it to disclose to appropriate conflict resolution bodies where investments it manages or deals are in conflict.
Shafin Kanji, Aleem Virani, and Curtis Power, and Jonathan Herman are directors and/or officers and/or direct or indirect shareholders of (i) KVMF and/or (ii) KVC. Nicholas Jeanes and Darin Rayburn are direct and/or indirect shareholders of KVC. KVC owns 100% of the shares of the general partner of each KVPE Fund, which general partner controls each such KVPE Fund. Shafin Kanji, Aleem Virani, Jonathan Herman, and Darin Rayburn are directors and/or officers of certain general partners of certain KVPE Funds. Nicholas Jeanes and Renee Kent are officers of each of KVMF and KVC. KVC has the ability to change the investment criteria and guidelines under which it manages KVMF. If not addressed, certain directors and shareholders of KVC and its related entities may be motivated to change investment criteria and guidelines, ultimately benefiting KVC and its directors, officers, and direct and indirect shareholders.	Medium	KVC has addressed this reasonably foreseeable material conflict of interest by having a majority of independent board of directors and lending review committee members of KVMF. Each KVPE Fund is established with investment committees that also participate in the investment decisions of each KVPE Fund. Any changes to the investment criteria and guidelines under which KVC manages KVMF would have to be approved by the directors of KVMF. In addition, pursuant to its operating policies, KVMF is not permitted to loan money to, borrow money from or invest in securities of KVC, affiliates of KVMF or any other non-arm’s length party, which, for greater certainty, excludes syndicated mortgages in which any such other person may also be an investor (including KVC, affiliates of KVMF or other non-arm’s length party), and it excludes debt obligations that may be owing to KVC from time to time under the Management Agreement between KVC and KVMF. Notwithstanding the foregoing, KVMF may loan money to or invest in securities of any single purpose entity which is an affiliate of KVMF or is otherwise non-arm’s length to KVMF and whose purpose is to hold title to or manage or develop properties obtained through foreclosure, or any other enforcement proceedings or actions (including any receivership or CCAA proceedings) in relation to KVMF’s investments.
Certain directors and officers of KVMF and KVC, as the case may be, may face actual or reasonably foreseeable material conflicts of interest due to their positions as directors, officers and direct or indirect shareholders of, KVC and KVMF. These directors, officers and shareholders may have a commercial interest in KVMF funding opportunities sourced by KVC in its capacity as a commercial mortgage brokerage and potentially in its capacity as a residential mortgage brokerage. See Item 9.16 “Conflicts of Interest” contained in KVMF’s May 1, 2024 Offering Memorandum. If not addressed, certain directors and shareholders of KVC and its related entities may be motivated to have KVMF fund unsuitable mortgage investment opportunities sourced by KVC’s mortgage brokerage, ultimately benefiting KVC and its directors, officers, and direct and indirect shareholders.	Medium	KVC has addressed this reasonably foreseeable material conflict of interest by having a majority of independent board of directors and lending review committee members of KVMF. Any changes to the investment criteria and guidelines under which KVC manages KVMF would have to be approved by the directors of KVMF. Further, KVC has addressed this reasonably foreseeable material conflict of interest by ensuring that its mortgage investment underwriting guidelines and criteria are applied in the same manner to all deals whether such deals are sourced by KVC, a third-party mortgage broker or otherwise. KVC mortgage brokerage resources will not be used by KVC to underwrite any lending opportunities or investments. Further, pursuant to the Management Agreement, KVC must render its services as manager of KVMF honestly and in good faith and must use reasonable commercial efforts to perform its duties and responsibilities in a conscientious, reasonable and competent manner. Further, this reasonably foreseeable material conflict of interest is mitigated by the fact that KVC as a mortgage brokerage is bound by the certain rules and codes of conduct established by the Real Estate Council of Alberta (and equivalent regulatory bodies in Ontario and British Columbia, and any provincial regulatory bodies where KVC may become licensed, if applicable), including an obligation to act ethically and with a view to the best interests of its clients. KVC is only one lender of many that its mortgage brokers may approach in sourcing mortgage financing for its borrower clients. KVC as mortgage brokerage is obligated to act in the best interests of its mortgage brokerage client when providing its services. Lastly, as noted in Section 9 “Fees and Charges” above, KVC, as manager of KVMF, has an obligation to reimburse KVMF in the event all of the real estate security of an investment by KVMF has been monetized and the nominal aggregate cash flows of such investment to KVMF are negative.
The Preferred Shares and Syndicated Mortgage Interests, and other securities dealt by KVC, are proprietary products of KVC, which creates a reasonably foreseeable material conflict of interest because there is the potential for KVC to put its interests, or the interest of KVMF or the borrower, above a client’s interest. If this foreseeable material conflict of interest is not mitigated, an investment in the products dealt by KVC may be prejudiced.	Medium	KVC addresses this potential material conflict of interest by taking a number of steps, including: ensuring robust oversight of know your client, know your product and suitability determination processes, as well as a robust know your product process, including subsequent performance and other monitoring, and an ongoing evaluation of the suitability of the securities; andobtaining independent advice on, or an independent evaluation of, the effectiveness of the firm’s policies, procedures, and controls to address this conflict.
KVC, as an exempt market dealer, intends to only deal proprietary products that KVC, directly or indirectly, generally manages. As a result, a potential conflict arises because KVC is only providing its clients with access to proprietary products, from which KVC or an affiliate receives management and/or advisory fees and/or other compensation, and is not providing its clients with access to a wider universe of investment funds and other collective investment vehicles managed by third-party fund managers. Further, the suitability determination conducted by KVC for any client, where required by law. will not consider the larger market of non-proprietary products or whether those non-proprietary products would be better, worse or equal in meeting the client’s investment needs and objectives	Medium	To manage this conflict, KVC will only permit a client to be invested in a security that it deals where, unless the client waives KVC’s obligation to conduct a suitability assessment, it considers such securities to be suitable for such client and/or that investing in such securities puts the client’s interest first. Because KVC’s suitability review, where conducted, does not include a broader universe of potential products, investors may wish to consider engaging a third-party dealer or adviser before acquiring securities of a product dealt by KVC.
Firms have an inherent conflict of interest when they create incentives through their compensation practices for their representatives to sell or recommend certain products or services. For example, in some cases, KVC employees are paid a commission when clients acquire interests in its products. If this conflict is left unaddressed, a representative of KVC could be incentivized to sell a product because of the commission (or other compensation) it receives and not because the trade puts the client’s interests first.	Medium	KVC seeks to mitigate these conflicts by designing compensation programs that are product agnostic. Our registered representatives are not compensated differently based on which products or services they sell, nor is the variable portion of their compensation determined by such factors. It should also be noted that KVC only offers its client’s proprietary products as described previously.

13. Client assets

From time-to-time KVC holds and has access to client assets. In the case of investments into KVMF or KVPE Funds, the subscribing investor will deliver investment proceeds to trust accounts of the applicable issuer which accounts are managed by employees of KV Capital or its affiliates. These funds are held in these segregated trust accounts on behalf of the investor until accepted by the issuer for investment into such issuer. These funds are not co-mingled with assets of KV Capital.

In the case of investments into syndicated mortgage offerings provided by KVC, KVC will receive subscription proceeds from the investor-lender which are then held in segregated trust accounts of KVC on behalf of such investor-lender until the loan is funded and the investment closes. Loan distributions and proceeds are similarly collected from the applicable borrower and held in such segregated trust accounts on behalf of the investor-lender until distributed. Any funds received by, on behalf of, or for the benefit of an investor-lender of KVC are not co-mingled with assets of KVC. KVC will then hold title to the investor-lenders syndicated loan interest in trust for such lender and pursuant to the terms and conditions of any applicable mortgage servicing agreement and trust declaration.

Any client assets held by KVC or which KVC has access to are at risk of misappropriation or theft by employees of KVC. To mitigate this risk KVC has several financial controls and procedures in place including dual signatory requirements, banking reconciliations, annual external third party audits and insurance policies.

14. Performance reporting

KVC provides quarterly accountant statements in accordance with the obligations set forth under securities law, including but not limited to those obligations set out in NI 31-103. On an annual basis, where required by law, a “Report on Charges and Other Compensation” and an “Investment Performance Report” will be delivered to investors.

KVC allows its investors to access their accounts at any time via an online portal accessible through the KVC website located at: www.kvcapital.ca. Monthly account statements are available to investors upon request. The monthly account statements include the portfolio balance and any interest earned that month along with any contributions or redemptions.

The content of the quarterly reports (and, if requested by an investor, monthly reports) is prescribed by NI 31-103 and include:

the name and quantity of each security in the account;
the market value of each security in the account;
total market value of each security position in the account;
any cash balance in the account;
the total market value of all cash and securities in the account;
that the account is not eligible for coverage under an investor protection fund; and
which securities in the account might be subject to a deferred sales charge if they are sold.

In addition to the foregoing, if an investor has invested in an issuer during the preceding 3 month period then the statements will include:

the date of the transaction;
whether the transaction was a purchase, sale or transfer;
the name of the security;
the number of securities purchased, sold or transferred;
the price per security if the transaction was a purchase or sale; and
the total value of the transaction if it was a purchase or sale.

KVC does not employ the use of performance benchmarks as it does not believe there are relevant and reliable performance benchmarks available.

15. Investor responsibilities

It is important that you actively participate in our relationship with you as your exempt market dealer. In particular, you are responsible for the following:

Keeping us fully and accurately informed regarding your personal circumstances, and promptly advising us of any change to information that could reasonably result in a change to the types of investments appropriate for you, such as a change to your (i) personal circumstances; (ii) financial circumstances, such as income and net worth; (iii) investment needs and objectives; (iv) risk profile, including risk tolerance; and (v) time horizon.

Reviewing the documentation and other information we provide to you regarding your account, transactions conducted in your account and the holdings in your portfolio.

Asking questions of and requesting information from us to address any questions you have about your account, transactions conducted in your account or the holdings in your portfolio, or your relationship with us or anyone acting on our behalf.

Providing us with this information is important as when we are acting as your dealer, we have an obligation to assess whether a purchase or sale of a security is suitable for you prior to executing the transaction or at any other time.

16. Privacy policy

Preserving trust is a core value. We recognize our responsibility to adopt reasonable policies and procedures designed to protect the information of our clients and investors. We fully accept, and are committed to fulfilling the trust that is the foundation of our ongoing business relationships. In addition to our client focused corporate culture, we have also formally adopted and adhere to the following policy regarding the privacy of our client’s and investor’s nonpublic personal information and personally identifiable information (collectively “Nonpublic Personal Information”).

Information that we collect

In the conduct of operations, we may collect Nonpublic Personal Information from clients and investors including but not limited to:

names, address, email, telephone numbers and other contact information as appropriate;
information about personal financial situations and business dealings;
employment or occupation, salary, assets, insurance and previous transactions; and
banking information, and other financial and tax information.

We only collect Nonpublic Personal Information that is relevant to the conduct of our operations.

How we collect Information

We collect Nonpublic Personal Information through a variety of sources including but not limited to;

clients/investors directly on new account forms, fact finding questionnaires, product and service applications, and other forms;
clients/investors directly through written, electronic or verbal correspondence when contacted about our products and services;
consumer reporting agencies; and
other individuals or entities that you authorize us to obtain information from, such as an attorney or accountant.

We only collect Nonpublic Personal Information after having received your consent.

Information that we disclose

As permitted by law and as outlined in this policy, we disclose Nonpublic Personal Information to unaffiliated third parties that provide services to us or with whom we have a contractual relationship or where we have a legislated requirement in order that we may effectively and efficiently carry out your directions and service your account.

Examples of third parties with whom we may share your Nonpublic Personal information include:

Product sponsors in order to generate proposals, reflect available services, execute transactions and otherwise service an account;
Companies providing account performance and/or reporting services on an account;
Third party asset managers with whom we have a relationship;
Banks and other financial institutions;
Provincial, Federal and other regulatory or self-regulatory authorities, or under a subpoena for release of information, as required by law or regulation;
Other companies, associations, agencies, third parties and institutions that provide services to us; and
Those companies, associations, agencies, third parties and institutions with which we or our representatives are licensees, registrants or members.

Where we share Nonpublic Personal Information with third parties for the purposes noted above, we ensure that contractual agreements with the third party prohibiting their use and disclosure of that information are in force or that such third party is prohibited by law from further sharing for any purpose other than to carry out the purposes for which the information was disclosed.

Except under the circumstances outlined above, we will not share Nonpublic Personal Information to parties external to KVC.

Steps we take to protect your information

We have developed security policies and procedures, and adopted technology reasonably designed to prevent unauthorized use or access to your Nonpublic Personal Information. Within KVC, Nonpublic Personal Information is available to employees for various business purposes such as servicing transactions, fulfilling compliance, legal and audit functions.

Amendments to our privacy policy

From time to time, and in accordance with our internal review of corporate policies, amendments to our privacy policy may be made, in our sole discretion and without notice to you. As material amendments to this policy are adopted we will post appropriate notice on our website.

17. Complaint handling

If you have a complaint, we encourage you to let us know and give us an opportunity to address your concerns. We do all we can to ensure that your business is managed in an effective, timely, accurate, and courteous manner.

If you have a complaint, please contact us at:

1-780-433-1222 or Nicholas.jeanes@kvcapital.ca; or

KV Capital Inc. Attention: Nicholas Jeanes, Chief Compliance Officer

#101, 1290 – 91 Street SW, Edmonton, Alberta T6X 0P2

We will acknowledge your complaint in writing and we may ask you to provide clarification or more information to help us resolve your complaint.

We will review, analyze and assess your complaint. Upon completion of our review, we will provide you with a full response to your complaint.

If you are not satisfied with our response, you may be eligible for a free and independent dispute resolution service offered by the Ombudsman for Banking Services and Investments (OBSI). KVC is required to maintain membership in OBSI. You can contact OBSI by email at ombudsman@obsi.ca. or by telephone 1-888-451-4519.

In order to take advantage of OBSI’s free services, your complaint must fulfill the certain requirements, including:

the complaint must relate to trading services of KVC or one of its dealing representatives,
the complaint must be brought to KVC’s attention within six years from the time that you first knew, or ought to have known, about the event that caused the complaint, and
your claim against KVC must be under $350,000.

OBSI will conduct its own independent investigation and provide its recommendations to you and to KVC. Please note that OBSI’s recommendations are not binding on you or KVC. You can find more information at www.obsi.ca.

You do not have to use OBSI as your dispute resolution provider. At your own expense you may choose another dispute resolution provider such as an arbitrator, or you may pursue legal action to resolve your complaint. You may do this if your complaint does not fit within OBSI’s criteria.

If you have any questions regarding this complaint procedure, please contact the Chief Compliance Officer of KVC at nicholas.jeanes@kvcapital.ca or 780-433-1222.