2016

Dear Shareholders,

The Fund’s NAV grew by 7.2% in 2016. Our largest equity positions at the start of 2017 were Berkshire Hathaway, Total Produce, BMW, WH Smith, and Teva Pharmaceutical. The regional distribution of the Fund’s net exposure is approximately as follows: 41% Europe, 34% US, 13% Asia, and 7% Canada. Our portfolio is concentrated into investments we consider to provide the best combination of returns and risk. Sufficiently attractive investment opportunities are rather rare, and therefore we endeavour to utilise these to their best advantage. Our 10 largest positions make up approximately 69% of our portfolio.

In the current market, the Fund’s portfolio is priced at less than 11 times the earnings of the past 12 months. This means that for the past year the net profits of our companies amounted to approximately 9% of their market capitalisation (that is their earnings yield, which is the inverse of P/E). In our opinion, that is an attractive yield considering the quality and prospects of these companies. This number stands out particularly in comparison to interest rates that linger close to zero. By our estimates, the fundamental value of our shares stands about one quarter higher than their current prices. A fundamental valuation is not something static, however. Rather, it develops through time. In the case of our portfolio, it is quite solidly growing. At the end of this year, it should be on the order of one ‑third higher than today’s prices. This ought to create sufficiently strong pressure to push the prices of our stocks upwards.

Over the past eight years, which means from the Great Financial Crisis and at the same time from the change in our investment strategy, Vltava Fund’s NAV has grown by 4.8 times. More precisely, it has risen by 387%. While it is true that the past eight years were very good for equity investments, our result is very good even by a global measure.

To achieve such returns, it is necessary also to have a little luck, and it is obvious that they are not sustainable over the long term. Be that as it may, we believe that we will remain among the better funds for a long time to come and that our returns will be good. Your expectations, though, should be realistic and should not be based upon returns from the past eight years.

In the next part of the Annual Report, as in the past, you will find quarterly letters to stockholders from the past year (taken together, these present a picture of our investments and opinions from last year) as well as more detailed data, including comprehensive historical results and audited financial statements. We thank you for your support and goodwill through the years gone by and we look forward to our co ‑operation in the years to come.

Daniel Gladiš, February 2017