E-Delivery

Annual report 2013 KPMG LLP Chartered Accountants 10125 – 102 Street Edmonton AB T5J 3V8 Canada Telephone(780) 429-7300 Fax (780) 429-7379 Internetwww.kpmg.ca Independent Auditors' Report To the Shareholders of KV Mortgage Fund Inc. We have audited the accompanying financial statements of KV Mortgage Fund Inc., which comprise the statements of net assets as at February 28, 2013 and February 29, 2012, the statement of investment portfolio as at February 28, 2013, the statements of operations, changes in net assets, and cash flows for the years ended February 28, 2013 and February 29, 2012, and notes, comprising a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of KV Mortgage Fund Inc. as at February 28, 2013 and February 29, 2012, its investment portfolio as at February 28, 2013 and its results of operations and its cash flows for the years then ended February 28, 2013 and February 29, 2012 in accordance with Canadian generally accepted accounting principles. Chartered Accountants May 15, 2013 Edmonton, Canada KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG Canada provides services to KPMG LLP. 28

• Cover