Changes in the Fund Portfolio

In May, portfolio duration was decreased slightly (from 3.53 to 3.48 yrs)and put on neutral versus benchmark (3.48 yrs on 31 May 2008). Given the goodcondition of Czech economy (GDP for the 1st quarter of 2008 at 5.2% y/y),healthy financials of the vast majority of Czech blue chips as well asattractive valuations (measured by P/E ratio), equities remained overweighed(6.2% of the total fund net assets against 4.4% in the benchmark on 31 May2008, both unchanged on month-on-month basis).

Fund Performance

Last month, NAV per share of the WIOF Conservative CZK Fund increased by0.04% (to CZK 100.3575), more than the benchmark (-0.42% m/m). Local medium-termbonds (measured by EFFAS CZK Liquid 3–5 Yrs total return index) decreased by0.74% m/m, Czech equities (measured by PX index) advanced 4,7% 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 secondhalf). Czech CPI index was 6.8 % y/y in April and 6.8% y/y in May. Our basicscenario calculates with no change in the key CNB’s interest rate in thecoming months – however, with a risk clearly to the upside (from current3.75% to 4.00%). We expect at least the long-term segment of the Czech yieldcurve to perform well. To sum up, we stick to the neutral duration for the timebeing. Regarding Czech equities, our generally bullish outlook still remainsintact (reasons mentioned in section „Changes in the Fund Portfolio“).

Jiri Pospisil, Fund Manager