23.01.2008

Changes in the Fund Portfolio During 4Q 2007, WIOF Conservative CZK fundtotal net assets grew from CZK 46.1 million (i.e. EUR 1.677 million) to CZK48.0 million (i.e. 1.802 million). For the whole period, portfolio durationwas kept more or less neutral against the benchmark (on 31 Dec 2007, both theportfolio as well as the benchmark duration was at 3.8 yrs, following 3.2 yrsand 3.3 yrs respectively on 28 Sep 2007). Given the attractive valuations ofkey stock indices and the still healthy financials of the majority of Czech bluechips, equities remained overweighed within the WIOF Conservative CZK(representation of this asset class remained flat at 7.3% on a q-on-q basis,versus cca. 5.5% against the benchmark).

Outlook and Expected Strategy In the beginning of 2008, the Czech bond marketwill be pulled down by fears of further acceleration in CPI. Fueled by increasesin VAT, tobacco excise tax, ongoing deregulation in rents and a rise in energyprices, it is almost certain now that the year-on-year CPI growth for Januarywill begin with figure “6”. However, during the year, inflation shoulddecelerate notably (the Czech National Bank has such expectations as well). Inthe nearest future, the positive impact on CZK bond prices might come fromdeveloped bond markets, where at present the increasing signs of a globaleconomy slowdown overshadow mounting inflation risks. In the last few months,equity markets were hit by a severe price correction. Moreover, after a set ofbad U.S. macroeconomic data released in the first week of January, theprobability of a recession in the world’s biggest economy increased further(but this still has not became our basic scenario). With regard to theattractive valuations of key stock indices and the healthy condition of topCzech companies, we will stick to our overweighed position in equities for thetime being.

Martin Zezula
Fund Manager