The TSL is situated west of the community of Meadow Lake, and is held solely by MLOSB.

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1 Tolko Meadow Lake OSB Limited Partnership 2016 SFI Re-certification Audit From October 12th to 14th, 2016, an audit team from KPMG Performance Registrar Inc. (KPMG PRI) carried out an SFI recertification audit of Tolko Industries Ltd., Meadow Lake OSB operations, against the requirements of the edition of the Sustainable Forestry Initiative (SFI) forest management and fibre sourcing standards. This Certification Summary Report provides an overview of the process and KPMG s findings. Description of Meadow Lake OSB s Woodlands Operations Meadow Lake OSB s woodlands operations are located in the vicinity of Prince Albert and Meadow Lake Saskatchewan, and encompass an area of two million hectares on the Prince Albert Forest Management Agreement (FMA) area as well as the Meadow Lake Term Supply Licence (TSL) area. On The Prince Albert FMA, MLOSB's activities encompass management and harvesting of its own allocation as well as those of L&M Wood Products Ltd., Meadow Lake Mechanical Pulp Inc., AC Forestry Ltd. and NorSask Forest Products Inc., which together are shareholders in Sakaw Askiy Management Inc., the FMA licence holder. The TSL is situated west of the community of Meadow Lake, and is held solely by MLOSB. Meadow Lake OSB s woodlands have a total AAC (allowable annual cut) of 1.6 million cubic metres per year, and the 2016 audit found that the Company s forest harvesting continues to conform to the AAC applicable to these operations. The woodlands operations that are included within the scope of the Company s SFI certification are covered by government-approved harvest plans that address both timber and non-timber values. These are developed to be consistent with higher level plans such as the Detailed Forest Management Plan which provide direction to forest management within the areas managed by the organization. The areas covered by the company s SFI certification fall within the following WWF ecoregions: (1) Mid-continental Canadian, (2) Canadian Aspen Forests and Parklands, and (3) Mid-western Canadian Shield forests. These are mixed deciduous and coniferous forests, with the main commercial species being trembling aspen, balsam poplar, white spruce, and jack pine. The forest management approach employed by the company is based on even-aged management, ground-based harvesting systems, clearcut harvesting with the retention of reserves of standing trees, post-harvest regeneration of deciduous species through natural suckering, and in the case of conifer species regeneration through planting with a mix of ecologically suited tree species. Description of Meadow Lake OSB s Manufacturing Facilities and Fibre Sourcing Program The company operates an Oriented Strand Board (OSB) mill near the community of Meadow Lake, Saskatchewan. Most of the logs for the mill are sourced from the

2 Findings: Tolko Meadow Lake OSB, 2016 SFI Re-certification Audit Page 2 company s SFI-certified timberlands, with the remainder being purchased from other crown-land operators (most of which are also SFI-certified) as well as a small amount from privately held land. The Company participates in the Western Canada SFI Implementation Committee (WCSIC) Purchase Wood Monitoring Program and completes risk assessments for all wood purchases and purchase wood inspections as necessary. The inspection results are then collated by WCSIC in order to identify trends in performance and opportunities for improvement. Audit Scope The audit was conducted against the requirements of the edition of the SFI forest management and fibre sourcing standards, and incorporated an assessment against all applicable SFI program objectives shown in the table on the following pages. The scope of the 2016 SFI re-certification audit included all of Meadow Lake OSB s Saskatchewan woodlands operations, as well as fibre procurement activities for the company OSB plant at Meadow Lake SK. The Audit Audit Team The audit was conducted by Yurgen Menninga, RPF, EP(EMSLA), and Branden Beatty, RPBio, both of who are employees of KPMG PRI and have collectively conducted numerous forest management audits under a variety of standards including SFI, ISO 14001, CSA Z809 and FSC SFI Re-certification Audit The audit involved an on-site assessment of all elements of the company s SFI program, and included visits to several field sites (five roads, four cutblocks, two silviculture sites, and two wood procurement sites) to evaluate conformance with the requirements of the SFI forest management and fibre sourcing standards. The audit took a total of ten auditor days to complete, six days of which were spent on-site at the operations included in the audit sample. The balance of audit time was spent preparing the audit plan, completing an audit checklist, and preparing the main and public summary audit reports. Meadow Lake OSB s SFI Program Representative Michelle Young, RPF, served as Meadow Lake OSB s SFI program representative during the audit. Use of Substitute Indicators The audit involved an assessment of conformance against the applicable objectives, performance measures and indicators included SFI standard. None of the indicators included in the SFI standards were modified or substituted for the purpose of this audit. Audit Objectives The objectives of the audit were to evaluate the sustainable forest management system at Meadow Lake OSB to: Meadow Lake OSB 2016 SFI Audit Findings Open non-conformities from previous audits New major nonconformities New minor nonconformities New opportunities for improvement Types of audit findings Major non-conformities: Are pervasive or critical to the achievement of the SFM Objectives. Minor non-conformities: Are isolated incidents that are noncritical to the achievement of SFM Objectives. All non-conformities: 0 All non-conformities require the development of a corrective action plan within 30 days of the audit. Corrective action plans to address major nonconformities must be fully implemented by the operation within 3 months or certification cannot be achieved / maintained. Corrective action plans to address minor non-conformities must be fully implemented within 12 months. Opportunities for Improvement: Are not non-conformities but are comments on specific areas of the SFM System where improvements can be made

3 Findings: Tolko Meadow Lake OSB, 2016 SFI Re-certification Audit Page 3 Determine its conformance with the requirements of the SFI forest management and fibre sourcing standards; Evaluate the ability of the system to ensure the company s woodlands operations meet applicable regulatory requirements, and; Evaluate the effectiveness of the system in ensuring the company meets its specified SFM objectives. These objectives were met. Evidence of Conformity with the SFI Forest Management and Fibre Sourcing Standards Primary sources of evidence assessed to determine conformity with the SFI standard are presented in the following tables. SFI Forest Management Objective # 1. Forest Management Planning Forest management plan, geographic information system, forest inventory records, harvesting records, interviews with planning staff. 2. Forest Health and Productivity Site plans, silviculture reports, field inspections. 3. Protection and Maintenance of Water Resources Field inspections of riparian areas, review of site plans & harvest plans. 4. Conservation of Biological Diversity 5. Management of Visual Quality and Recreational Benefits Forest management plan, site plans, interviews with planning staff, field inspections. Forest management plan, harvest plans, field inspections. 6. Protection of Special Sites Forest management plan, site plans, special site inspections. 7. Efficient Use of Fibre Resources Forest management plan, waste reports, field inspections. 8. Recognize and Respect Indigenous Peoples Rights 9. Legal and Regulatory Compliance Company policy on Indigenous Peoples rights, records of consultation with local Indigenous Peoples, pre-audit questionnaire responses, interviews with Company staff. Forest management plan, environmental management plan (EMP), health & safety policy, field inspections. The top photo shows the launching of a drone, and below is the controller used to operate it. In this case the drone was used to inspect a road which was too wet and soft to drive. See the good practice related to the use of drones later in this report.

4 Findings: Tolko Meadow Lake OSB, 2016 SFI Re-certification Audit Page 4 SFI Forest Management Objective # 10. Forestry Research, Science & Technology Forest management plan, records of research projects and funding, staff interviews. 11. Training and Education Forest management plan, training records, SIC minutes & resources, interviews with staff and contractors. 12. Community Involvement and Landowner Outreach Forest management plan, SIC minutes & resources, community and landowner outreach records, staff interviews. 13. Public Land Management Responsibilities 14. Communications and Public Reporting 15. Management Review and Continual Improvement Records of cooperative public land planning processes, forest management plan, associated referral process, site plans, records of plan referrals to local stakeholders, staff interviews. Certification summary report, annual report to SFI Inc. Forest management plan, management review records, internal audit and related action plans. This photo shows a typical fall harvest area. While there is snow on the ground the ground has yet to freeze solid. Once freezing does occur, the harvesting contractor will complete construction of the winter road and hauling will commence. SFI Fibre Sourcing Objective # 1. Biodiversity in Fibre Sourcing Program to promote biodiversity in fibre sourcing, records of involvement in local or regional conservation efforts, interviews with procurement staff. 2. Adherence to Best Management Practices 3. Use of Qualified Resource and Logging Professionals 4. Legal and Regulatory Compliance Fibre sourcing policy and records of its distribution to wood producers, written fibre sourcing agreements, records of implementation of the BMP monitoring system, inspection of a sample of procurement sites. List of Qualified Resource and Logging Professionals, records of proportion of fibre delivered by QLPs, interviews with procurement staff. Company policies regarding regulatory compliance, procedures to ensure compliance with applicable regulatory requirements, inspection of a sample of procurement sites, interviews with regulatory agency personnel.

5 Findings: Tolko Meadow Lake OSB, 2016 SFI Re-certification Audit Page 5 SFI Fibre Sourcing Objective # 5. Forestry Research, Science & Technology Records of research projects and funding, staff interviews. 6. Training and education Training records, SIC minutes & resources, interviews with staff and contractors. 7. Community Involvement and Landowner Outreach 8. Public Land Management Responsibilities 9. Communications and Public Reporting 10. Management Review and Continual Improvement 11. Promote Conservation of Biological Diversity, Biodiversity Hotspots and High-Biodiversity Wilderness Areas 12. Avoidance of Controversial Sources including Illegal Logging 13. Avoidance of Controversial Sources including Sources without Effective Social Laws SIC minutes & resources, community and landowner outreach records, staff interviews. Records of cooperative public land planning processes, records of plan referrals to local stakeholders, procurement staff interviews. Certification summary report, annual report to SFI Inc. Management review records, internal audit and related action plans. n/a applies to sourcing outside Canada/ USA n/a applies to sourcing outside Canada/ USA n/a applies to sourcing outside Canada/ USA Good Practices The following good practices were identified during the course of the audit. SFI Objective 10 (research and technology) The company is progressive in its use of remote controlled aerial drones. These are used as a management tool to assess EMS conformance by active operations as well as post-harvest conditions. They are efficient in collecting information and getting provide a clear video record for due diligence purposes. SFI Objective 10 (research and technology) The operation is noted to be advanced in the use or tablets for mapping, preworks and field inspections, and tracking of field action items. As well the tablets update & sync automatically upon connection to the office wireless, updating the central records.

6 Findings: Tolko Meadow Lake OSB, 2016 SFI Re-certification Audit Page 6 SFI Objective 3 (water quality) On a recent bridge replacement project, the audit found that streambank protection measures utilized were effective in reducing the environmental impact of the crossing. Follow-up on Findings from Previous Audits At the time of this assessment there was one open non-conformity from previous external SFI audits. The audit team reviewed the status of the action plans that were developed by the company to address the previous audit finding and concluded that they: (1) had been implemented as required, and (2) were effective in addressing the root causes of the non-conformity. As a result, all of the previously identified nonconformities have now been closed. Areas of Nonconformance One minor non-conformity was identified during the SFI re-certification audit of the company s operations: SFI Fibre Sourcing Objective 6 (training & education) The audit found that while qualified logging professionals are used to harvest purchase wood provided to MLOSB, the written agreements in place do not have wording regarding the use of qualified logging professionals. Opportunities for Improvement Two opportunities for improvement were also identified during the audit: SFI Forest Management Objective 1 (forest management planning) There is an opportunity to incorporate voluntary commitments under the Canadian Boreal Forest Agreement into the long-term forest management plan for the Meadow Lake TSL. SFI Forest Management Objective 9 (regulatory compliance) the audit noted a few specific cases where the amount of relevant detail could be increased in the company s incident tracking system. Corrective Action Plans Corrective action plans designed to address the root cause of the non-conformity identified during the audit have been developed by Meadow Lake OSB and reviewed and approved by KPMG PRI. The next audit will include a follow-up assessment to confirm that the corrective action plans have been implemented as required. Audit Conclusions The audit found that Meadow Lake OSB s sustainable forest management system: Was in full conformance with the requirements of the SFI forest management and fibre sourcing standards included in the scope of the audit, except where noted otherwise in this report; Has been effectively implemented, and;

7 Findings: Tolko Meadow Lake OSB, 2016 SFI Re-certification Audit Page 7 Is sufficient to systematically meet the commitments included within the organization s environmental and SFM policies, provided that the system continues to be implemented and maintained as required. As a result, a decision has been reached by the lead auditor to recommend that Meadow Lake OSB be re-certified to the SFI forest management and fibre sourcing standards. Focus Areas for the Next Audit Visit The following items have been identified as focus areas for the next audit visit: Silviculture survey program on the FMA surveys are due beginning in Forest Management Plan finalization & approval. Progress in completing predictive mapping for migratory bird habitat. Contacts: Chris Ridley-Thomas, RPBio, EP(EMSLA) (604) David Bebb, RPF, EP(EMSLA) (604) This report may only be reproduced by the intended client, Meadow Lake OSB LP, with the express consent of KPMG. Information in this issue is of a general nature with respect to audit findings and is not intended to be acted upon without appropriate professional advice KPMG. All rights reserved. Through KPMG PRI, KPMG s Vancouver based forestry group is accredited to register forest companies to ISO 14001, CSA-SFM, SFI and PEFC certification standards.