PT. Tiar Bungin Elok In Southeast Sulawesi, INDONESIA

Verified by:Verification of Legal OriginSmartWood Program Headquarters65 Millet St. Suite 201Richmond, VT 05477 USATel: 802-434-5491Fax: 802-434-3116www.smartwood.orgAssessmentReport for:PT. Tiar Bungin ElokInSoutheast Sulawesi, INDONESIAAudit Managed by:Asia-Pacific Regional OfficeJl. Ciung Wanara No. 1x, RenonLingkungan Kertasari, Kelurahan Panjer,Denpasar Selatan, Bali - INDONESIATel: +62 361 224356Fax: +62 361 235875Contact Person: Irwan GunawanEmail: igunawan@ra.orgReport Version: Public SummaryReport Finalized: 30 March 2010Audit Dates: 9-13 December 2009Audit Team: Iwan Kurniawan PermadiVerification Code: SW-VLO-004794Verification Date: 31 March 2010Report based on Standard(s):SmartWood Standard for verification of Legal Origin for IndonesiaVersion: 21 February 2008

TABLE OF CONTENTS1 INTRODUCTION ..................................................................................................................... 32 VERIFICATION CONCLUSIONS ............................................................................................. 42.1 Auditor Recommendation ...................................................................................................... 42.2 Corrective Action Requests (CARs)....................................................................................... 42.3 Observations ......................................................................................................................... 52.4 Actions Taken by Company Prior to Report Finalization ........................................................ 62.5 Notes for Next Audit .............................................................................................................. 63 AUDIT PROCESS.................................................................................................................... 73.1 Description of Audit Process .................................................................................................. 73.2 Audit Team ............................................................................................................................ 73.3 Evaluation Schedule .............................................................................................................. 73.4 Persons Interviewed .............................................................................................................. 84 COMPANY INFORMATION ..................................................................................................... 94.1 Primary Contact for Company Seeking Verification ............................................................... 94.2 Billing Contact ....................................................................................................................... 94.3 Location Where Relevant Records will be Kept ..................................................................... 95 VERIFICATION SCOPE ........................................................................................................ 105.1 Scope Description ............................................................................................................... 105.2 Company Facilities and other Entities Included in the Scope of Verification......................... 115.3 Details of Entities NOT Included in the Current Scope of Verification .................................. 11SmartWood Program Page 2VER-08 01May09

1 INTRODUCTIONThe purpose of this report is to document conformance with the requirements of the SmartWoodVerification of Legal Origin (VLO) Standard by PT. Tiar Bungin Elok, hereafter referred to as “FME”.The report presents the findings of SmartWood auditors who have evaluated Company systems andperformance against the applicable standard(s). Section II below provides the audit conclusions andany necessary follow-up actions by the Company through corrective action requests. Section IIIdescribes the audit process and Section IV defines the scope of the assessment (including companyand non-company suppliers of raw or processed material).The Rainforest Alliance’s SmartWood program was founded in 1989 to verify responsible forestrypractices and now focuses on providing a variety of certification and verification auditing services.Verification of Legal Origin audits verify on-site that the forest source has obtained the license toharvest, acquired planning approvals and permits, paid the required taxes, royalties and/or harvestingfees, and maintained a chain of custody system.Verified Legal Compliance Audits verify that the forest source is in compliance with the totality of lawsrelating to environmental protection, wildlife, water and soil conservation, harvesting rules andpractices, worker health and safety, and fairness to communities. VLC thus review compliance to alllegal regulation pertaining to forestry in the region in question.In addition to verifying legal origin or legal compliance the VLO and VLC verification standards includeverification that a chain of custody system is maintained from the forest source through alldownstream entities in a defined supply chain.Dispute resolution: If SmartWood clients encounter organizations or individuals having concerns orcomments about Rainforest Alliance/SmartWood and our services, these parties are stronglyencouraged to contact SmartWood Headquarters directly. Formal complaints or concerns should besent in writing.Additional comments about the audit: The FME is sister company of PT. MIJA RAYA SEMBADA,overall these two FME are managed by the same organization. PT. MIJA RAYA SEMBADA is alsoongoing process for obtaining their own verification from SW. The assessment process wasconducted in sequence with this assessment since the FME offices was actually located at the samebase camp (Camp Tolala KM. 5, Tolala, North Kolaka District, Southeast Sulawesi, Indonesia.There also another FME, PT. Rante Mario (FME) located in Mamuju, West Sulawesi. This FME wasexcluded from either PT. TIAR BUNGIN ELOK or PT. MIJARAYA SEMBADA. Detail explanation ofthis exclusion can be found in Appendix 1.SmartWood Program Page 3VER-08 01May09

2 VERIFICATION CONCLUSIONSThe following section contains the conclusions of the audit as well as a list of applicable CorrectiveAction Requests issued during the audit.The CARs are issued to each individual Company Facility and Participating Entity included in thescope of the verification. In the below the relevant CARs are listed for each facility/entity included inthe scope.2.1 Auditor RecommendationAdditional comments:Based on Company’s conformance with the Rainforest Alliance/SmartWoodlegality verification requirements, the auditor makes the followingrecommendation:Verification approved:Upon acceptance of CAR(s) issued belowVerification not approved:Conformance with Major CAR(s) requiredNote: CARs describe required actions or improvements that addressCOMPANY non-conformances identified during audits. CARs include definedtimelines for completion. Major CARs issued during assessments/reassessments shall be closed prior to issuance of verification statement.Major CARs issued during audits shall be closed within timeline or resultin suspension.2.2 Corrective Action Requests (CARs)CAR issued for:PT. Tiar Bungin ElokCAR 01/09 Reference Standard & Requirement: C.6Non-conformance: Description of non-conformance:Major Minor X The audit could not find any evidences or documentation which clearlyinclude VLO and claim category of the FME. From interview with the FME'sstaff, it was acknowledged that the FME has just finished opening coridoraccess road to the FME, therefore during year 2009, FME only sold oneshipment of logs. However, the requirement of this criterion was clearlyasked the FME to define and document VLO as a claim categoryCorrective Action Request:FME shall define and document VLO as claim category.Timeline for conformance: Prior to 6 month after the issuance of the verification agreementEvidence to close CAR:CAR Status:PENDINGOPENFollow-up Actions (if any):SmartWood Program Page 4VER-08 01May09

CAR issued for:PT. Tiar Bungin ElokCAR 02/09 Reference Standard & Requirement: C.21Non-conformance: Description of non-conformance:Major Minor X FME has not included claim information on sales invoices and shippingdocuments.Corrective Action Request:FME shall develop procedure to include claim information on sales invoices and shippingdocuments, including the following:A description of the product as VLO;The quantity/volume for each product; andThe verification code, if applicable.Prior to starting VLO sales and/or shipping, the FME shall notify SW for approval of the logoTimeline forPrior Starting VLO sales or prior 6 month audit, whichever comes firstconformance:Evidence to close CAR: PENDINGCAR Status:OPENFollow-up Actions (ifany):2.3 ObservationsNote: Observations are issued for the early stages of a problem which doesnot of itself constitute a non-conformance, but which the auditor considers maylead to a future non-conformance if not addressed by the organization;observations may lead to direct non-conformances if not addressed.OBS issued for: PT. Tiar Bungin ElokOBS 01/09 Reference Standard & Requirement: 2.2.1Description of findings leading to observation:FME is currently still working on RKT 2009. This was caused by the limited accessibility. The RKT2009 was approved by Provincial Forestry Office of Southeast Sulawesi Province, on 22 December2008.The Annual work plan for 2010 is ongoing process for approval, it was acknowledged by staff ofdistrict forestry office during the consultation with stakeholders. The process for verification of theFME designated area for RKT 2010 was postponed due to limited staff of the district forestry officeto conduct ground verification.Observation:FME should submit the approval letter of the 2010 work plan.SmartWood Program Page 5VER-08 01May09

OBS issued for: PT. Tiar Bungin ElokOBS 02/09 Reference Standard & Requirement: C.2Description of findings leading to observation:The auditor reviewed the documented control system entitle Standard Operational Procedure,which is a compilation of FME procedures for each activitiy. The DCS initially developed on April2009. Updating and revision to the documented procedure is conducted for each procedure, andrecorded on revision record matrix which provided on the first page of each procedure.The auditor found some revision was made to the procedure for Lacak Balak (Chain of Custody),however the revision number of the procedure was not updated.Observation:FME should implement consistent revision to the documented procedures.OBS issued for: PT. Tiar Bungin ElokOBS 03/09 Reference Standard & Requirement: C.4Description of findings leading to observation:The FME has developed internal audit procedure (See Exhibit 12). However, it was clearly statedwithin the procedure that the internal audit will be conducted once annually. It is the auditor'sopinion that the internal audit intensity was considered not adequate.Observation:The FME should revise the procedure for internal audit within the documented control system.OBS issued for: PT. Tiar Bungin ElokOBS 04/09 Reference Standard & Requirement: C.7Description of findings leading to observation:All record of harvested and transported logs is kept in Log pond Tanjung Bakke. Copy of therecords and sales record is kept in Camp office. Records of log sales were evaluated in this audit.This record includes volume and quantity of logs sales and buyers ID.The interviewed staff acknowledged that all logs from the FME will be transported to PT. RanteMario, primary manufacturing in Makassar, which is a sister company of the FME. Until November2009, FME has only produce 30,807.01 m3 of logs. All these logs were transported on November15, 2009.The auditor found that FME only recorded local name for each species, eventough the FME staffswas aware that different local names can be used for refering to the same tree species.Observation:The FME should update the volume records. List of species should include scientific name.2.4 Actions Taken by Company Prior to Report FinalizationNone2.5 Notes for Next AuditNoneSmartWood Program Page 6VER-08 01May09

3 AUDIT PROCESS3.1 Description of Audit ProcessOn December 8, The auditor driving 12 hours from Makassar to Camp Tolala. The openingmeeting was held on December 9, and attended by all the key staffs of the FME, and staffs ofTTAP. After FME presented background information of the FME, the audit continued withdocument review and staffs interview. The auditor discussed the sites to be visited for this audit.On December 10, the auditor conducted field observation of designated harvesting block for2010 annual workplan. The auditor also conducted observation on FME's tracking system from2009 harvesting blocks, through to the logpond.Stakeholder consultation was conducted on December 12, in Lasusua, capital of North KolakaDistrict, Southeast Sulawesi.Closing meeting was conducted at FME office, after the stakeholder consultation. The auditorpresented the preliminary findings and discussed with the FME's staff.3.2 Audit TeamAuditor(s)Iwan Kurniawan PermadiQualifications, AffiliationsIwan holds a bachelor degree in forest management from theBogor Agricultural University (IPB) and has 5 years experience asa forester that covers forest management, forest policy andregulation, forest concessions, forest plantation, andenvironmental protection experiences.He also ran a forestry consultant company from 2004 to 2007,and has been employed by SmartWood on 2008 as a forestmanagement specialist for the Rainforest Alliance SmartWoodProgram Asia Pacific Regional Office.Iwan has participated in 8 FM audits, 5 VLO assessments, 4 VLOaudits, 2 CoC Assessments and 2 CoC audit for SmartWoodsince he attended Rainforest Alliance’s auditor training in June2008.3.3 Evaluation ScheduleDate(s) Site(s) Main ActivitiesDec 9, 2009 Camp Tolala KM.5 Opening Meeting,Document review,staffs interviewDec 10, 2009 Camp Tolala Document ReviewPetak 07/2009Site Observation,Dec 11, 2009 TPK 1 KM 58 Observation on CoC control system- TPK 2 KM 48 Observation on CoC control system- TPK 3 KM 22 Observation on CoC control system- Logpond Tanjung Bake Observation on CoC control systemDec 12 District Forestry Office Stakeholder Consultation- Camp Tolala Closing MeetingSmartWood Program Page 7VER-08 01May09

3.4 Persons InterviewedNamePosition and OrganisationOs RosyadiCamp ManagerHadiamin KadirKoordinator SertifikasiAep SaepudinAdministrasi UmumDeni KusdiniPerencanaan & ProduksiDadan HidayatLingkungan dan BinhutRahma SummaPerencanaan & ProduksiDiana KoswaraLingkungan dan BinhutAgus SuryadiOperation Coordinator, Green World GroupBiki Baju WendaniForestry Coordinator, Green Worl GroupFirdausTUKThesis BudiartoTTAPGunung WijanarkoTTAPDrs. Mukrim, MM.Head of District Forestry OfficeDrs. NurjayaSecretary of District Forestry OfficeDrs. M. Mansyur, MM.Kasubdin Perlindungan Hutan (District Forestry Office)M. Alamsyah P2SKSKB Officer (District Forestry Office)Martin LeppoLocal sawntimber EnterpreneurSmartWood Program Page 8VER-08 01May09

4 COMPANY INFORMATION4.1 Primary Contact for Company Seeking VerificationPrimary Contact, Position:Ms. Biki Baju WendaniAddress:Gd. Manggala Wanabakti Blok IV Lt.6 Suite 612BJl. Gatot Subroto, Senayan - Jakarta 10270Tel/Fax/Email: Tel. : +62 (021) 5703246/65 Ext. 5270-5273Fax. : +62 (021) 5721325Email(s) : mija@green-world.co.id; tiarmija_jkt@yahoo.com4.2 Billing ContactSame as shown for primary contactContact, Position:Address:Tel/Fax/Email:4.3 Location Where Relevant Records will be KeptSame as shown for primary contactContact, Position:Address:Tel/Fax/Email:SmartWood Program Page 9VER-08 01May09

5 VERIFICATION SCOPE5.1 Scope DescriptionScope Item Check all that apply to the Verification Scope Change inScope(N/A forAssessments)Verification Type: Single Multi-sitePrimary Activity:Company Legal Unit:Jurisdiction:Number of CompanyFacilities:Number of FMEs:Number of ParticipatingEntities:Species (trade andscientific names):LoggingLimited Liability Company (PT/ Perseroan Terbatas)IndonesiaN/A1 FMEN/AKELOMPOK JENIS MERANTI (Dipterocarpaceae SpeciesGroup)Agathis (Agathis spp.)Dama dama (Vatica flavoriens)Damar (Agathis phillippinensis)Matoa (Palaquium spp.)Meranti (Shorea spp.)Nyatoh (Palaquium spp.)Palapi (Tariettia sp.)Pulai (Alstonia spatulata)KELOMPOK JENIS RIMBA CAMPURAN (Mixed tropicalHardwood Species Group)Bawang bawang (Melia excelsa)Bayur (Pterospermum celebincum)Bintangur (Callophyllum soulatri)Binuang (Octomeles sumatrana)Binuang laki (Duabanga moluccana)Bongin (Irvingin malayana oliv)Cempedak (Artocarpus champeden)Dara dara (Myristica spp.)Jambu jambu (Eugenia spp.)Kenanga (Cananga spp.)Kolaka (Maranthes corymbosa)Medang (Litsea spp.)Pollo (Cinnamommum spp.)Ponto (Dehaasia spp.)Rambutan hutan (Arythera litholaris)Samama (Anthocephalus spp.)Suri (Koordersiodendron pinnatum)Terap (Artocarpus teysmanii)Kumea (Manilkara merilliana)AndoliaAnyurungBajoBakataSmartWood Program Page 10VER-08 01May09

BanceBangkanaseBilulangDangoHonomareKalapiKalojuKondonio/SaponiLada ladaLantiLeasaPala HutanPangiPolonangkaPutut GajahSinangkalaTapi tapiKELOMPOK JENIS KAYU INDAH (Fancy Wood Group)Dao (Dracontomelon mangiforum)Kayu Cina (Dacrydium spp.)Cempaka (Michelia spp.)Products groups (logs,lumber, moldings,veneer, etc.):Comments:Round Logs5.2 Company Facilities and other Entities Included in the Scope of VerificationList of all Company-owned facilitiesN/A: Only the main facility above is included in the scope.Forest Management Units (FMUs)N/A: No FMUs are included in the scopeSee above.Other Participating Entities (not managed or owned by Company)N/A: No other entities are included in the scope.5.3 Details of Entities NOT Included in the Current Scope of VerificationOther verified suppliers that are not included under the current scope of evaluationN/A: there are no other verified suppliers.SmartWood Program Page 11VER-08 01May09