Kiln status

• Deposits remain paused on Aave V3 vaults via Kiln DeFi as a precaution in light of the current situation (which hasn't changed much).

• We will continue to monitor and post the next update as soon as things evolve.

Overall

No change to the bad-debt picture since our April 20th update. The L2-isolated scenario is consolidating, ~$70M ETH has been recovered via the Arbitrum Security Council freeze, and a proposal to use the Aave DAO treasury to make WETH lenders whole (net of Umbrella) is now on the governance forum. Kiln vault contracts remain unaffected throughout.

Operational issue on Aave v3 Ethereum Core stablecoin markets:

• USDC, USDT, and USDe on Core have been pinned at ~100% utilization for four days. This is not a solvency issue - every dollar supplied is still currently fully backed.

• Kiln stablecoin vaults on Aave v3 Ethereum Core are subject to the same constraint as any other supplier: end-user withdrawals may fail or partial-fill until utilization drops below 100%. Vault share price is unaffected.

Expected resolution.

Circle filed an emergency governance proposal on April 22 to steepen the USDC interest rate model on Core, which should pull new supply in and force borrower repayment. If the risk steward acts on the interim parameters, we expect withdrawals to begin clearing within 24-48 hours, with full normalization over 5-7 days. The same adjustment may follow on Arbitrum, Base, Polygon, Avalanche, Optimism, and Linea.

Please get in touch with your Kiln representative for further information or any questions.