2021

Dear Shareholders,

The largest stock positions in the Vltava Fund portfolio at the beginning of 2022 were Berkshire Hathaway, Magna Corporation, Sberbank, Alimentation Couche-Tard and JP Morgan. Our portfolio is concentrated into investments we believe offer the best combination of expected return and risk. Sufficiently attractive investment opportunities are relatively rare, and therefore we strive to use them to our maximum advantage. The portfolio has undergone relatively minor changes over the past year. We sold shares of Union Pacific and Teekay LNG Partners. On the other hand, we added to the portfolio shares of Willis Towers Watson and Williams-Sonoma. We currently hold 20 stock positions. The ten largest of these comprise approximately 73% of our portfolio.

At the beginning of 2022, the market was valuing the Fund’s portfolio at just over ten times the trailing 12 months’ earnings. This means that the net earnings of our companies over the past year have been approximately 9.5% of their market capitalisation (that is the earnings yield, which is the inverse of the P/E). In our view, this is a very attractive valuation given the quality and prospects of these companies, and especially in comparison to the low interest rates. Measured by the current profitability of the companies, and despite the significant increase in NAV over the past year, our portfolio is cheaper today than it was at the start of 2021.

Our estimate as to the current fundamental value of Vltava Fund’s portfolio at the end of 2021 is approximately 30% greater than the Fund’s present NAV. During this year, the fundamental value of the Fund’s portfolio should continue to grow, especially due to the expected ongoing increase in profitability of the individual companies compared to 2021.

There are basically three things that affect development of the portfolio’s fundamental value: First, our estimate as to the fundamental values of the individual companies. Second, the passage of time itself, because the fundamental value of a company evolves over time and tends to grow strongly as more and more capital is reinvested. Third, our stock selection and our transactions, whereby we swap companies in the portfolio with lower potential for companies with higher potential. We cannot influence the prices of individual stocks, but we can determine their selection, and that is our focus. Long-term growth in the fundamental value of well-selected stocks will gradually pull their prices upwards. This is one of the few things upon which we can rely.

Over the past 13 years, which means since the Great Financial Crisis and the change of our investment strategy for the one we still follow today, Vltava Fund’s NAV has increased by 403.4%. World stock markets have grown by 263.1% over the same period.

In the next section of the annual report, you will find, as you do every year, the quarterly letters to shareholders from the past year (together these present a picture of our investments and views over the past year) and more detailed data, including full historical results and audited accounts.

We thank you for your support and patronage through the past years, and we look forward to co-operating with you in the years to come.

Daniel Gladiš, February 2022

For more information

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