GLOBAL FORESTRY SERVICES. Sarawak Audit Checklist / Report STLVS Principles 1-4

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1 Sarawak Audit Checklist / Report STLVS Principles 1-4 Licensee Raplex Sdn. Bhd. (3618-V) Reference # GFSS b Contact Person Office Address Site Address Mr. Nicholas Ting (Ta Ann Holdings Bhd. - Senior General Manager) Mr. Lau Yew Yiung (Raplex Sdn. Bhd. General Manager) Ta Ann Building Level 4B, No. 6, Jalan Rawang, Sibu, Sarawak, Malaysia. Sg. Pila Camp nicholas.ting@taann.com.my tiingtchin.ling@taann.com.my yewyiung.lau@taann.com.my Report Date Date of close out Telephone Fax Telephone Fax Approved By 31 October Dr. Kevin T. Grace Statements GFS Statement of Compliance # GFS 03 LVS Issuance Date 01 November 017 Expiration Date 31 October 018 Assessment Details Assessment dates 16 th - 0 th October 017 Scope of Assessment Forest Timber License No. T/0560 Shorea spp. (Meranti), Shorea spp. (Selangan batu), Mangifera spp. (Asam), Dyera spp. (Jelutong), Dryobalanops spp. (Kapur), Shorea spp. / Lithocarpus spp. (Empenit), Lauraceae (Medang), Cratoxylum spp. (Geroggang), Gluta spp. (Rengas hutan), Octomeles sumatrana (Binuang), Cephalomappa spp. Species (Arau), Sapotaceae spp. (Nyatoh), Dipterocarpus spp. (Keruing), Anisoptera spp. (Mersawa), Cotylelobium spp. and Vatica spp. (Resak), Syzygium polyanthum (Ubah), Tristaniopsis spp. (Selunsor), Hopea spp. (Luis), Dialium spp. (Keranji), Copaifera palustris and Sindora spp. (Tampar Hantu) and MLH (Mixed Light Hardwood) GFS Lead Assessor Paramjit S. Gill GFS Assessor(s) Others NA OBJECTIVES: The objective of this checklist is to verify compliance to the Criteria listed in the Sarawak Legality Standard as defined by STLVS Principles 1-4 (Draft 07) for Sarawak dated 1 April 017. Compliance is defined when all applicable criteria are observed to be compliant. A Minor Gap to any indicator does not constitute non-compliance to a criterion. A Major Gap to any applicable indicator does reflect non-compliance to a criterion. Compliance for a criterion where multiple minor gaps are identified in indicators under the criterion may reflect non-compliance to the criterion. Raplex Sdn. Bhd. - FTL No. T/0560 Page 1

2 All issues identified under this standard shall be considered appropriate to the scale and degree of forestry operations undertaken by the parties under the agreement. Overview of Licensee Summary Information Organization Information: Ta Ann Holdings Berhad (Ta Ann) is a timber resource-based company based in Sibu, Sarawak, Malaysia. It was founded in the mid 1980 s as a small trading company by the main founders Datuk Amar Abdul Hamed Bin Haji Sepawi, Datuk Wahab Bin Haji Dolah and Dato Wong Kuo Hea, starting as a forest concession licensee which included timber harvesting operations, shipping operations and downstream wood-based industries. Ta Ann Holdings Berhad was incorporated as a public limited company in February 1997 and listed on the main board of Bursa Malaysia (Kuala Lumpur Stock Exchange) on 3 rd November The principal activities of Ta Ann Holdings Berhad are centred around sustainable harvesting of timber resources and value adding downstream activities such as the manufacturing of veneer, plywood, coated plywood, eco plywood, laminated veneer lumber and pachinko plywood, sawn timber and laminated moulding products. Ta Ann is one of the pioneers in reforestation in Sarawak and actively operates its reforestation programmes on which the Group places a strong emphasis. Due the commitment to ensure sustainability of its forest resources, Ta Ann has embarked on research and development programmes to produce improved tree planting material of Acacia mangium, Superbulk and Acacia hybrid, which return higher quality and yield for veneer production. Currently Ta Ann s plan to gradually shift to plantation-based resources is based on using local timber species such as Kelampayan (Neolamarckia cadamba) planted in system termed ZEBRA Planting which involves planting operations conducted at about 50 m intervals following the terrain contour alignment. Ta Ann emphasises on environmentally friendly forestry practices to meet the needs of its customers who are becoming increasingly environmentally conscious. Due diligence surveys are carried out by independent consultants prior to commencement of ground operations to ensure that areas known as High Conservation Value are protected. Ta Ann through its subsidiary companies operates five natural forest concession areas with the following Forest Timber License (FTL) and area sizes, comprising a total of 415,36 ha: 1. FTL No. T/ ,69 ha operated under Pasin Sdn. Bhd. (revised on nd May 01). FTL No. T/ ,856 ha operated under Woodley Sdn. Bhd. (revised on nd May 01) 3. FTL No. T/ ,909 ha operated under Raplex Sdn. Bhd. (revised on 3 rd May 017) 4. FTL No. T/ ,756 ha operated under Tanjong Manis Holdings Sdn. Bhd. (revised on 9 th May 017) 5. FTL No. T/034 3,03 ha operated under Borlin Sdn. Bhd. Raplex Sdn. Bhd. - FTL No. T/0560 Page

3 In addition, three Licenses for Planted Forests (LPF) comprising a total of 308,935* ha were issued to Ta Ann by the Sarawak State Government. Note*: FTL No. T/3135 and FTL No. T/3346 concessions will be progressively revised to resolve the overlapping issue with the converted areas under LPF No LPF No ,703 ha was issued in November 1997 and operated under Zumida Sdn. Bhd.. LPF No ,316 ha operated under Ta Ann Plywood Sdn. Bhd. (revised on 9 May 017) 3. LPF No ,747 ha was issued in October 005 (revised on 8 th July 015) operated under Ta Ann Plywood Sdn. Bhd and further revised down to 10,799 ha in May 017. Raplex Sdn. Bhd., a 100 % subsidiary of Ta Ann Holdings Berhad is the licensed holder for FTL No. T/0560 and had engaged Ironwall Sdn. Bhd as the logging contractor to fell, extract, harvest and transport all merchantable timber from the FTL No. T/0560 licensed area. Key regulations: The legal framework is provided in the following laws (ordinances), rules and regulations: - Statement of Forest Policy (1954) - Forest Ordinance (015) - Forest Rules (1954) - National Parks Ordinance (1956) - National Parks and Nature Reserves Ordinance (1998) - Wildlife Protection Ordinance (1958) - Sarawak Timber Industry Development Corporation Ordinance (1973) - Sarawak Timber Industry (Registration) Regulations (008) - Sarawak Forestry Cooperation Ordinance (1995) - State of Sarawak Forest Timber License (FTL) - Inter-agency Standard Operating Procedures (SOPs) for Performance of Forestry Functions in Sarawak (Ministry of Resource Planning and Environment, 01) - Minimum Wages (Amendment) (No.3) Order Sarawak Labour Ordinance (Cap.76) - Employment Act 1955 Description & Licenses: The FTL No. T/0560 area is located to the Northeast of Kapit town, in the Kapit and Belaga Districts of the 7 th Division of Sarawak. It is bordering the Rajang River along its north-western boundary, extending from the river junctions with Sungai Mamong in the North and Sungai Pila in the south. The management unit is known as the Rajang Pila Management Unit, comprising a gross area of 71,650 ha. Raplex Sdn. Bhd. holds the Forest Timber License No. T/0560 granted by the Forest Department Sarawak (FDS) for timber harvesting operations within a licensed area of 71,650 ha of natural forest. The revised General Harvesting Plan (GP) was approved by FDS on 7 th April 003 [Ref.#: WPO.68.31(VI) 53] that covers 71,650 ha of the licensed concession with a net operable area of 55,600 ha. The area for FTL No. T/0560 operated by Raplex Sdn. Bhd was recent revised General Harvesting Plan (GP) was approved by the FDS on 3 rd May 017 [Ref.#: WPO.68.31(IX) 50] that covers 63,909 ha of the licensed concession Raplex Sdn. Bhd. - FTL No. T/0560 Page 3

4 Management / Land Tenure: The license tenure based on the Forest Timber Licence No. T/0560, which covers an area of 7,50 ha was issued and approved to Raplex Sdn. Bhd. on nd February 1977 for a period of 5 years; which expired on 1 st February 00. The FTL No. T/0560 was renewed and extended for another 15 years with the expiry date of 1 st February 017 (Ref.#: WPO.68.31(V) 47). After 1 st February 017, the FTL No. T/0560 was renewed on a yearly basis and Raplex Sdn. Bhd. renewed the license and expires on 1 st February 018 (Ref.#: WPO.68.31(IX) 44. Management Planning (FMP / GP): Forest Timber License No. T/0560 is under the Rejang-Pila Forest Management Plan area and the license was issued by the Director of the Forest Department Sarawak. Management Plan period and expiry date is identical with the Forest Timber License No. T/0560, i.e. from nd February 1977 and extended to 1 st February 017. The most recent revised General Harvesting Plan (GP) was approved by the FDS on 3 rd May 017 [Ref.#: WPO.68.31(IX) 50] that covers 63,909 ha of the licensed concession with a net operable area of 38,15 ha. Operational activities: Ironwall Sdn. Bhd. is a registered logging contractor for FTL No. T/0560. Ironwall Sdn. Bhd. is engaged by the licensee as the contractor to fell, extract, harvest and sell all merchantable timber from the FTL No. T/0560 area. Currently, active Coupe with valid Permit to Enter Coupe (PEC) is Coupe 1AR (I) (14 th September 017). The current code of practice of harvesting for Coupe 1AR (I) is based on conventional harvesting method with some RIL practice being implemented. The revised allowable cutting limits for FTL No. T/0560 are DBH 45 cm and above for Non-Dipterocarp species and DBH 50 cm and above for Dipterocarp species. RIL practice is not required in the FTL No. T/0560 as this FTL area is located outside the HOB areas of Sarawak. However, the licensee has decided to implement RIL on its own. The RIL method will be fully implemented in the year 018 after their proposed FMP has been approved. Land Use Classification General Harvesting Plan (ha) A. Total FTL No. T/0560 Area 63,909 B. Estimated net production area 38,15 C. Non-forest areas: social, community & shifting cultivation areas, titled land 15,760 D. Protected Forest / Terrain IV & Conservation Areas 8,4 E. Infrastructure, Roads, Buildings, etc. 1,755 Note: Area B = Area A (Area C + D + E) Raplex Sdn. Bhd. - FTL No. T/0560 Page 4

5 Environmental context Environmental Impact Assessments (EIA) have been conducted for the first three re-entry coupes (C01AR, C0AR, and C03AR) but were subsequently discontinued for FTL No. T/0560. Since the licensee had obtained approval to progressively convert FTL No. T/0560 into a planted forest (following completion of harvesting operations under Forest Timber License No. T/0560), no EIA monitoring was conducted for the remaining coupes of FTL No. T/0560. However, the Natural Resources and Environment Board (NREB) had requested the Company to develop an Environmental Management Plan (EMP) instead of an EIA, on individual Coupe basis. EMP for the licensed area titled Environmental Management Plan (EMP) For The Re-Entry Timber Harvesting Of Hill Forest Within Coupes 1AR(I) and 1AR(II) Of Forest Timber Licence No. T/0560, In The Sg. Pila (Sg. Ebon) Sg. Sepulau Area, Kapit Division, Sarawak was conducted by a registered environmental consultant firm; Ecosol Consultancy Sdn. Bhd and submitted to the Natural Resources and Environment Board (NREB) and was subsequently approved in 15 th June 016. The land use details of Coupe 1AR (I) and (II) are shown in the table below. Land Use Hectarage 9ha) Percentage Coupe 1AR Total (ha) Coupe 1AR (I) (%) (II) Gross Area 3,358,834 6, Shifting Agriculture, Pulaus, and secondary forest Riparian buffer zones/ wildlife corridor Operable area,637,775 5,41 87 Key EMP Findings: The current vegetation is predominantly logged-over remnant Mixed Dipterocarp Forest (MDF). In the operable forest, the previous harvesting was quite intensive in areas with gentle to moderately steep terrain. Scattered remnants of trees of Dipterocarpaceae and Koompassia spp., mainly K. excelsa made up the broken emergent. Below this was a denser canopy comprising trees between 5 m and 15 m tall, where species of dipterocarps were still common, e.g. Shorea parvifolia, Shorea laevis, Dryobalanops spp., Vatica spp., and Hopea spp. Non-dipterocarps were aplenty and well represented by many common families, in particular Euphorphiaceae, Myrtaceae, Burseraceae, and Myristicaceae. Other plant groups consisted of herbs, climbers, and grasses on the forest floor. Intact forest was found on steep slopes, along Sg. Pila, Sg. Lili, and Sg. Sepulau, and in pulaus within shifting agriculture sites. These forests were little affected by timber harvesting, and trees up to m were still common. Apart from dipterocarps, Koompassia malaccensis, K. excelsa, and tree families of Myrtaceae and Sapotaceae were also recorded. Tree density in the middle canopy on steep terrain was high, so that the forest floor was quite dark and humid with a thick layer of semi rotten litter. Raplex Sdn. Bhd. - FTL No. T/0560 Page 5

6 The main natural drainage channels draining the area within Coupe 1AR (I) and (II) are upper Sg. Pila and its tributaries such as Sg. Malut Besar, Sg. Lili, and Sg. Sepulau; and its tributaries of Sg. Besuar. Fauna is an integral component of the forest ecosystem, which depends on the forest for food and shelter. The major faunal groups affected by logging are mammals, birds, and fishes. The forests within the Coupe 1AR (I) and (II) are still rich in species including protected and threatened species. Among the protected species of mammals were Arctivtis binturong (binturong), Neofelis nebulosa (clouded leopard), Hylobates muelleri (Borneon gibbon), and Presbytis frontata (white-fronted langur). Numerous footprints of sus barbatus (bearded pig) and Cervus unicolor (sambar deer) were seen along main logging roads, riparian forest and alluvial forest. Bird fauna was equally diverse. Recorded protected species were Buceros rhinoceros (rhinoceros hornbill), Annorhinus galeritus (bushy-crested hornbill), Copyschus malabaricus (white-rumped shama), Blythipicus rubiginosus (maroon woodpecker). Sg. Pila is clear and fast flowing and is inhabited by many amphibians and fishes. Frogs belonging to the genera of Meristogenys and Ansonia are well adapted to such a habitat but tend to decrease with sedimentation as reported along some parts of Sg. Sepulau. Common fish along Sg. Pila, Sg. Sepulau, and Sg. Lili include Tor spp. (semah), Mystus spp. (baung), and Gastromyzon spp. (kulong). Fishing is an important activity for the local people. Social Context Social Assessment: An Assessment was conducted in early 017 to evaluate the livelihood of the people from the 5 identified settlements that were associated to LPF No and FTL No. T/0560. It is important to note that there were areas overlapping between FTL No. T/0560 and LPF No during the time the assessment was conducted and all of the longhouses that are currently associated with FTL No. T/0560 were located within the overlapping LPF No area. The FTL No. T/0560 was revised on the 3 rd May 017, which resulted in the concession area being reduced to 63,909 ha. After the revision was made, the number of longhouses associated to T/0560 remained as 5 (some were located adjacent and some within the revised concession). Yet the current areas claimed by the longhouses were not clearly documented or mapped. According to Ta Ann, certain areas within the licensed area are subjected to claims by the local people based on their shifting cultivation areas or native farmlands and forest areas associated with resource use such as hunting, fishing and gathering of Non-Timber Forest Products (NTFP). Current Records of FTL No. T/0560 Longhouse Communities and Agreements: Race Iban Village Name Rumah Empang Village Location Outside of FTL No. T/0560 Area Claimed/ Coupe(s) 1AR (I) Blocks 1-15 Area Claimed (Ha) 1165 ha Date of Valid Agreement 04/05/017 till current round of logging is completed Raplex Sdn. Bhd. - FTL No. T/0560 Page 6

7 Social Monitoring: Ta Ann has not conducted a formal Social Monitoring Program under a scheduled system of communication with longhouses. However, regular communication and mutual consultation between Ta Ann and local communities has been demonstrated over the years since the commencement of the logging operations. Any community claims or issues are recorded, monitored and dealt with according to the Company s Standard Operating Procedures. Ta Ann compensates the local communities for any damages or losses to claimed forest resources through signing written agreements on the type and amount of compensation given. Meetings between the Company and the local communities are recorded and issues or questions raised in the meetings have been documented. Scope of Assessment The scope of the evaluation is to verify compliance of FTL No. T/0560, Raplex Sdn. Bhd. with the STLVS P1-4 Standard (Draft 07) 1 April 017. Site evaluation to verify and report the level of compliance by Ironwall Sdn. Bhd. to the standard in respect to each of the criteria within this report. Compliance is defined when the auditee demonstrates that the indicators consist of only minor gaps or no gaps against any applicable criteria of the standard. Non-compliance to the Sarawak Legality Standard occurs when the auditee does not demonstrate adequate compliance to a criterion. Itinerary of Assessment Date Activities GFS Staff Mandays 16 th October 017 Monday 17 th October 017 Tuesday Opening meeting followed by document review at Raplex Sdn. Bhd. office. Travel from Sibu to Sg. Pila base camp (FTL No. T/0560). Visited Rumah Empang for longhouse interview session. Overnight at Sg. Pila base camp. Site visit to verify: i) Common licensed boundary between FTL No. T/0560 and FTL No. T/0518. ii) Few stream/river buffer zones and protected areas (high conservation value forest). iii) Coupe boundary between Coupe 1AR (I) and Coupe 8AR, Coupe 1AR (I) and Coupe 13AR (II). Block boundary between Coupe 1AR (I) B13 and B14, Coupe 1AR (I) B14 and B15, and Coupe 1AR (I) B30 and B31. iv) Sampling of stumps in Block 13, 15, 7, and 30 of Coupe 1AR (I). v) Sampling of logs at the log landings of block 7 and 30 of Coupe 1AR (I) and Sg. Pila, Kapit stumping. vi). Site visit to Sg. Pila camp in FTL No. T/0560. Assessment of generator set storage area, workshop, lubricant storage, scheduled wastes Paramjit S. Gill Paramjit S. Gill Raplex Sdn. Bhd. - FTL No. T/0560 Page 7

8 18 th October 017 Wednesday storage area, waste disposal pit, fuel depot and workers quarters. Travel to Kapit and overnight in Kapit. Log inspection and document review at Ng. Bawai log pond. Travel to Sibu and overnight at Sibu. Paramjit S. Gill 19 th October 017 Document review at Raplex Sdn. Bhd. Office. Paramjit S. Gill Thursday Overnight at Sibu. 0th October 017 Document review and closing meeting at Raplex Paramjit S. Gill Friday Sdn. Bhd. office. Saturday Paramjit S. Gill 1 th October 017 Reporting: GFSS Dr. Kevin Grace Total 1 (Major Gap = 0 / Minor Gap = 1 / Observation = 1) Highlights of Assessment Raplex Sdn. Bhd. has complied with the Sarawak Legality Standard (Principles 1-4) as no noncompliance was identified during the assessment on 16 th 0 th October 017. Principle 1. Right to Harvest: Raplex Sdn. Bhd has demonstrated compliance to the license requirements, EIA requirements and management planning guidelines. Raplex Sdn. Bhd is currently only conducting harvesting operations in Coupe 1AR (I). Principle. Forest Operations: Raplex Sdn. Bhd has demonstrated compliance to forestry operation standards, specifically standards pertaining to demarcation of boundaries and areas for protection, tree enumeration, control of timber production, log transportation, worker safety and health. Boundaries and areas designated for protection such as buffer zones were marked with signs and respective colours as reflected on the map. Raplex Sdn. Bhd. does not have a manned guard post which is a part of the system for entry and access control to the FTL No. T/0560 concession. The Company is in the process of building a manned guard post at the licensed boundary between FTL No. T/0560 and FTL No. T/0518 (GPS coordinates of the location are N 0 o E 113 o ). The building of the guard post is expected to be completed within the next month (November 017). Gates were not erected along the main logging road as it was a public road for the use of all the communities and leading to adjacent licensed areas. Ta Ann has a proposed monitoring procedure on license area security, boundary integrity, encroachment and illegal activity monitoring for FTL No. T/0560. Nevertheless, forest surveyor teams are responsible for on ground general checking or patrolling within the licensed area while conducting forest surveys. Reports were documented and maintained. The licensee strictly adhered to cutting limits as stipulated in the license conditions and monthly production limit as approved by FDS. The current code of practice of harvesting for Coupe 1AR (I) is based on conventional harvesting method. The revised allowable cutting limits for FTL No. T/0560 are DBH 45 cm and above for Non-Dipterocarp species and DBH 50 cm and above for Dipterocarp species. There is no upper diameter threshold on tree felling. Stumps measured in blocks 13, 15, 7, and 30 of Coupe 1 AR (I) were found in compliance with the permitted diameter cutting limits. There were no Raplex Sdn. Bhd. - FTL No. T/0560 Page 8

9 Highlights of Assessment stumps sampled that were cut below the cutting limits. Logs randomly sampled in field, stumping and log pond were royalty assessed. Related documents on production, royalty payment and transportation were adequately maintained for cross checking and inspection. Field workers sampled had valid documents and were covered by SOCSO and insurance. All field workers were equipped with PPE. Various types of training were provided to workers and the workers were fully aware of the safety and health procedures. Trainings conducted were documented and maintained. Observation 001 Checklist.1.4: Ta Ann does not have a manned guard post which is a part of the system for entry and access control to the FTL No. T/0560 concession. The Company is in the process of building a manned guard post at the licensed boundary between FTL No. T/0560 and FTL No. T/0518 (GPS coordinates of the location are N 0 o E 113 o ). The building of the guard post is planned to be completed within the next month (November 017). Principle 3. Statutory Charges: Raplex Sdn. Bhd. demonstrated compliance to payment of Royalty Fees and other charges as required. Principle 4. Other User Rights: An Assessment was conducted in early 017 to evaluate the livelihood of the people from the 5 identified settlements that were associated to LPF No and FTL No. T/0560. It is important to note that there were areas overlapping between FTL No. T/0560 and LPF No during the time the assessment was conducted and all of the longhouses that are currently associated with FTL No. T/0560 were located within the overlapping LPF No area. The FTL No. T/0560 was revised on the 3 rd May 017, which resulted in the concession area being reduced to 63,909 ha. After the revision was made, the number of longhouses associated to T/0560 remained as 5 (some were located adjacent and some within the revised concession). Gap 001/017 (Minor) Checklist 4.1.: Apart from Rumah Empang, Ta Ann has not clearly defined nor mapped the areas claimed by each longhouse community in relation to planned coupe areas within FTL No. T/0560 to ensure that no forestry operations are conducted in claimed areas without a signed agreement. According to Ta Ann, certain areas within the licensed area are subjected to claims by the local people based on their shifting cultivation areas or native farmlands and forest areas associated with resource use such as hunting, fishing and gathering of Non-Timber Forest Products (NTFP). Ta Ann has a system to establish formal agreements with each longhouse community for compensation for resource use within areas claimed / used by each longhouse. Agreements are reached through negotiations and discussions as operations progresses, coupe by coupe basis. Once a deal has been reached, provisions are then laid out in a formal written agreement. The agreement is then read and interpreted to all parties involved to declare that they have fully understood and agreed to the agreement provisions before signing. As Ta Ann s timber harvesting operations progresses, the Company has come up with a plan to identify any potential land claims within the next working coupe to approach the land claiming party or parties for Raplex Sdn. Bhd. - FTL No. T/0560 Page 9

10 Highlights of Assessment new negotiations and signed agreements. Once the potential lands claims are solved and agreements are signed, only then will Ta Ann starts their harvesting operations. Current payments / compensations are based on volume basis of extracted timber on the claimed areas after local communities has finalized and resolved any conflicting land claims which are dynamic and did not arise previously during the previous rotation of timber harvesting operations. Ta Ann is currently only operating in Coupe 1AR (I). Although not located within the FTL No. T/0560 concession, the longhouse Rumah Empang have claims over areas within the Coupe 1AR (I). Ta Ann has established a formal agreement with Rumah Empang prior to starting the harvesting operations in Coupe 1AR (I). Summary results: (Major Gap = 0 / Minor Gap = 1 / Observations = 1) GAPs: Assessment Date GAP # Type Checklist Description 001/017 Minor 4.1. Apart from Rumah Empang, Ta Ann has not clearly defined nor mapped the areas claimed by each longhouse community in relation to planned coupe areas within FTL No. T/0560 to ensure that no forestry operations are conducted in claimed areas without a signed agreement. *Note: Major Gap = Non-Compliance / Minor Gap = Minor Gap raised can be upgraded to a Major Gap if not adequately addressed by the date of the next surveillance visit. Status of Outstanding GAPs GAP # Type Checklist Status Description Observations Obs # Checklist Description Ta Ann does not have a manned guard post which is a part of the system for entry and access control to the FTL No. T/0560 concession. The Company is in the process of building a manned guard post at the licensed boundary between FTL No. T/0560 and FTL No. T/0518 (GPS coordinates of the location are N 0 o E 113 o ). The building of the guard post is expected to be completed within the next month (November 017). *Note: Observation raised can be upgraded to a Minor Gap if not adequately addressed by the date of the next surveillance visit. Highlights of Close out visit (if applicable) Not Applicable Dates Raplex Sdn. Bhd. - FTL No. T/0560 Page 10

11 Recommendations Raplex Sdn. Bhd. has demonstrated compliance with the Sarawak Legality Standard (Principles 1-4) for Forest Timber License No. T/0560 and is recommended to receive a GFS Statement of Compliance and STLVS Certificate of Compliance from Forestry Department of Sarawak. Gaps and observations identified in this assessment must be addressed by the next surveillance visit scheduled in October 018. Action required to close the gaps and observations include: Gap 001/017 (Minor) Checklist 4.1.: identify forest areas associated with longhouses within the current licensed area for FTL No. T/0560 as a basis to negotiate an agreement prior to commencing harvesting operations. Longhouse communities and associated areas should be clearly mapped and defined in relation to planned coupe areas. Agreements with the FTL No. T/0560 associated settlements need to be established prior to harvesting operations that define agreed claimed areas and compensation for harvesting. Observation 001 Checklist.1.4: Ensure the building of security guard post is completed and operational as planned. The next surveillance will be scheduled in October 018. End of Summary Report Raplex Sdn. Bhd. - FTL No. T/0560 Page 11