This report will read eerily similar to that of the last quarter, since many of last quarter's trends continued into the first quarter of 2010. For the first quarter ended March 31st, 2010, KVF earned 33 cents per share, bringing the value of each share to $11.73. The markets had another strong quarter, with most indexes up in the low to mid single digits. As such, most funds will have made money in this period. However, the true test of whether this (or any other) fund is adding value will take place over a period of several years and through both bull and bear markets.
Once again, weakness in the US dollar (relative to the Canadian dollar, the fund's reporting currency) hurt results. Had the exchange rate ended the quarter at the same position at which it started the quarter, earnings this quarter would have been almost 20 cents per share higher. Currency volatility is likely to continue to have a significant bearing on quarterly results, but over the long-term it is not expected to be a material factor. With the currency rates where they are presently, however, owners of Canadian dollars who have a long-term perspective are offered opportunities to buy securities around the world at what appears to be a favourable rate.
As the market rose over the quarter, some stocks were divested following their exceptional price run-ups. These stocks include Key Tronic, Chromcraft Revington, Hardinge, and LCA Vision (further details are available where linked). Despite these divestments, KVF continues to own a great many stocks that are deemed to be undervalued.
At the same time, as downside risks in the market have risen (thanks to the market's continued rise), KVF is also capitalized to seize any opportunities the market may offer through both temporary or prolonged pullbacks.
KVF's income statement and balance sheet are included below. Note that securities are marked to market value, and amounts are in $CAD: