1.  What  is  the  reason for terminating the operations of Strenči and

Jērcēni  woodworking  facilities  in  2003,  thus  incurring LVL 99,087

losses  to  "Strenču  MRS",  though  it is a general understanding that

processed wood generates more value added than selling of round timber?



The  decision to close down the two woodworking facilities was taken by

AGM  of  shareholders  of  March  31,  2003 (100% votes) - to authorise

Management  Board  to close down the facilities from July 1, 2003. This

business line was already bringing losses. Closing down has allowed the

Company to improve its financial performance.



Though  indeed  it  is  a  general  understanding  that wood processing

generates  more  value  added  than  sale of round timber, here are the

arguments supporting the decision:



a)  woodworking business was generating losses instead of profit to the

company;



b)  upgrading  the  business  line  to  make it profitable would mean a

complete  change  of  infrastructure  and technologies that meet the EU

standards - this would require substantial financial resources;



c) company further plans are associated with focusing on development of

woodcutting  services.  Company  management  does  not  believe  that a

simultaneous  development of wood processing branch is feasible because

of  the  large  investments  it  requires,  as well as due to the tough

competition both on the input and output side.



2.  2003  financial  statements  show  that  "Pata  AB"  is a debtor to

"Strenču  MRS"  LVL  250,936.  What are these receivables and when will

they be paid off? 



"Pata  AB"  is  paying  the invoices according to the provisions of the

agreement,  and  the term is 14 days. As of the beginning of 2004 "Pata

AB"  had  fully  paid for the round timber bought from "Strenču MRS" at

the  end  of 2003; moreover, "Pata" has made an advance payment towards

purchase  of  wood,  and  as of March 31, 2004 it is "Strenču MRS" that

owes "Pata AB".



3.  Please  explain  why cash balance has been significantly reduced if

compared to the end of 2002. 



Company finance and cash management policies do not provide for keeping

large  physical  cash amounts in the company premises.  If the question

refers  to  decrease  in  the  item Cash, we are offering the following

explanation:



a)  during  2003  debt to credit institutions and leasing companies has

reduced by LVL 122 thousand;



b)  the  accounts  receivable  at the end of 2003 were LVL 424 thousand

less than at the end of 2002.



4. What is the reason for the difference in the item provisions for bad

losses  (from  LVL  80,828 in 2002 to LVL 6,494 at the end of 2003), at

the time when accounts receivable have increased? 



During  2003  there has been no change in the policies as to provisions

for  bad  debts.  In  2003 some of the bad debts were written off, and,

together  with them, the respective provisions. The accounts receivable

as  of  December  31,  2003 were owed by customers that are paying on a

regular basis and do not require provisions. All in all, the quality of

debtors has increased over 2003.



5. What were the considerations of the shareholders when they on AGM on

May 20, 2004 resolved to change the company auditors and to discontinue

buying the services of an international audit firm? 



The  Law  on  Annual  Reports requires an audit by a certified auditor.

Both  the  previous  and  the new auditor meet the criteria. One of the

main  reasons  was  a  significant increase of audit costs, at the same

time retaining the high quality of the audit.



6.  Please comment on the status of litigation between "Strenču MRS"and

"Latvijas valsts meži". 



The  litigation  was  closed  on  October  22, 2003, as reported in the

Annual  Report.  The  court  verdict  is  evaluated  to be in favour of

"Strenču MRS".