14.04.2008

Changes in the Fund Portfolio

During 1Q 2008, WIOF Conservative CZK fund total net assets grew from CZK48.0 million to CZK 50.8 million (i.e. EUR 2.004 million). For the wholeperiod, portfolio duration was kept neutral or slightly shorter in comparison tobenchmark duration (on 31 March 2008, both portfolio and benchmark durationwere 3.5 yrs, after the equal duration of 3.8 yrs on 31 Dec 2007). Given thegood condition of Czech economy (GDP for the 4th quarter of 2007 at 6.6% y/y),healthy financials of the vast majority of Czech blue chips as well asattractive valuations (measured by P/E ratio), equities remained overweighedwithin WIOF Conservative CZK (representation of this asset class was 6.1%against 4.3% in the benchmark on 31 March 2008, after 7.3% and 5.7%respectively on year-end 2007).

Fund Performance

In the 1Q 2008, NAV per share of the WIOF Conservative CZK Fund fell by 0.90%(to CZK 100.2006), whereas benchmark improved by +0.20%. Key reason for the Fundunderperformance lies in overweighed equities (PX erased –13.9% within thereported period) and positions in corporate bonds (accounting for 30.6% of theportfolio at the end of March vs. 0% within the benchmark), whose performancewas far behind that of government bonds in 1Q 2008 (i.e. significant widening ofcredit spreads).

Outlook and Expected Strategy

Czech CPI inflation probably passed its peak (7.5% y/y) in Jan/Feb 2008 andis set to decelerate further during the rest of the year (mainly in the secondhalf). Our basic scenario calculates with no change in key CNB’s interestrate in the coming months – however, with a risk clearly to the upside (fromcurrent 3.75% to 4.00%). After a huge sell-off on Czech bond market in the firstMarch decade, which manifested itself in considerable cheapening of Czech 10Ygovernment bonds against their German peers, we expect at least long-termsegment of the Czech yield curve to perform well (even in case of potentialdecrease in prices of bonds on developed markets). To sum up, we stick toneutral duration for the time being. Regarding the Czech equities, our generallybullish outlook still remains intact (reasons mentioned in section „Changes inthe Fund Portfolio“). Notwithstanding, coming weeks will probably remainvolatile on the stock exchanges (investors will closely monitor corporateearnings for 1Q), with a convictive return to a growth path in the middle ofthe year.

Martin Zezula Fund Manager