Ralfs  Drēska,  Chairman of Management Board, Baltic Asset Management ,

offers  the  increasing  confidence of investors in the Baltic markets,

together  with  the  development  prospects  of individual companies in

anticipation  of  the  EU  accession,  as  an explanation for the rapid

development  of  the  Baltic capital markets in the first half of 2003.

During  the  past  six months the prices of many stocks have climbed to

their all-times-high. The good financial performance of the largest and

most  liquid  companies and their dividend policies has left a positive

effect  as  well.  The trend of declining yields in global debt markets

led to an increased interest in Latvian bonds.



Further   development   in  2003  in  the  Baltic  equity  market  and,

consequently,  Baltic  Index  fonds  and  Valsts  obligāciju fonds will

depend on two key factors:



·         the  outcome  of referendum on the EU accession in Latvia and

Estonia;



·        trends in global money markets and financial markets.



An  affirmative  outcome of the referendum could bring new investors to

the  Baltic  markets,  previously  refraining  from investing in Baltic

company  stocks. The performance of Baltic Index fonds depends directly

from this element.



In the second half of 2003 the prospects of Valsts Obligāciju fonds may

be affected by still further lowering of EUR and USD base rates, likely

to  boost  fixed  income  market,  thus  bringing down the yields. In a

foreseeable  future,  when  global  economy  recovers,  the  rates  are

expected  to  go up, resulting in dwindling optimism in debt market. In

such  cases  it is critical to chose the correct investment policy, and

to  assess  the fixed income portfolio from the bond maturity structure

aspect.