Changes in the Fund Portfolio

In August, portfolio duration was shorter (2.82 yrs) versus benchmark(3.75 yrs on 31 August 2008). The fund received a large inflow (approx. 15 %)at the turn of July and August. The part of the cash was invested during August.Given the good condition of the Czech economy (GDP for the 2nd quarter of2008 at 4.5% y/y), the healthy financials of the vast majority of Czech bluechips as well as attractive valuations (measured by P/E ratio), equitiesremained overweighed (4.8% of the total fund net assets against 4.0% in thebenchmark) on 31 August 2008.

Fund Performance

Last month, NAV per share of the WIOF Conservative CZK Fund increased by0.14% (to CZK 101.2227), less than the benchmark (0.34% m/m). Local medium-termbonds (measured by EFFAS CZK Liquid 3–5 Yrs total return index) increased by0.30% m/m, Czech equities (measured by PX index) increased 0,43% in the sameperiod.

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 lastquarter). The Czech CPI index was 6.5 % y/y in August. Our basic scenariocalculates with no change in the key CNB interest rate in the coming months. Weexpect at least the long-term segment of the Czech yield curve to perform well.To sum up, we stick close to neutral duration for the time being. RegardingCzech equities, our generally bullish outlook still remains intact.

Jiri Pospisil, Fund Manager