Roundtable on Sustainable Palm Oil Annual Surveillance Audit Report Report no.: ASA3_18502207

Surveillance assessment against the RSPO Principles & Criteria NI Malaysia year 2010 Sime Darby Plantation Sdn. Bhd. SOU 11 Kerdau Palm Oil Mill

Level 3A, Main Block, Plantation Tower, No 2, Jalan PJU 1A/7, Ara Damansara, 47301 Petaling Jaya, Selangor Darul Ehsan,Malaysia.

Date of Assessment: 08 – 12 April 2014 Report prepared by: Fadli (RSPO Lead Auditor)

Certification Body: PT TUV Rheinland Indonesia Menara Karya, 10th Floor Jl. H.R. Rasuna Said Block X-5 Kav.1-2 Jakarta 12950,Indonesia Tel: +62 21 57944579 Fax: +62 21 57944575 www.tuv.com/id

TABLE OF CONTENTS

1.0 SCOPE OF ANNUAL SURVEILLANCE AUDIT ...... 3

1.1 National Interpretation Used 3 1.2 Type of Assessment 3 1.3 Certification Details 3 1.4 Location and Maps 4 1.5 Organisational Information / Contact Person 9 1.6 Description of Supply Base 10 1.7 Actual production volumes, tonnages and projected outputs. 10 1.8 Dates of Plantings and Replanting Cycles 11 1.9 Area of Plantation (Total, Planted and Mature) 11 1.10 Progress Against Time Bound Plan 13 1.11 Compliance to Rules for Partial Certification 14 1.12 Progress of associated smallholders or outgrowers towards RSPO compliance 15 1.13 Approximate Tonnages Certified 15

2.0 ASSESSMENT PROCESS ...... 16

2.1 Certification Body 16 2.2 Qualifications of Lead Assessor and Assessment Team 16 2.3 Assessment Methodology & Agenda 17

3.0 ASSESSMENT FINDINGS ...... 19

3.1 Summary of Findings 19 3.2 Status of Previously Identified Non-conformities 36 3.3 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions 42 3.4 Noteworthy Positive Components 48 3.5 Issues Raised by Stakeholders and Findings Pertaining to Issues 48

4.0 CERTIFIED ORGANISATION’S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY ...... 49

4.1 Date of Next Surveillance Visit 49 4.2 Acknowledgements of Internal Responsibility and Formal Sign-Off by Client 49

APPENDICES ...... 50

Appendix 1: List of Abbreviations 50 Appendix 2: List of Stakeholders Interviewed and Contacted 51 Appendix 3: Observations and Opportunities for Improvement 52

RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 3 of 52

1.0 SCOPE OF ANNUAL SURVEILLANCE AUDIT 1.1 National Interpretation Used The operations of the palm oil mill(s) and its supply base of FFB were assessed against the Malaysia National Intepretation year 2010 of the RSPO Principles & Criteria.

1.2 Type of Assessment This 3rd annual surveillance certification assessment was carried out on 1 mill and 5 estates under Kerdau Palm Oil Mill owned by Sime Darby Plantation Sdn. Bhd. The date of certification of this unit was May 11 to 18, 2009 .

1.3 Certification Details The details of RSPO certification of Sime Darby Plantation Sdn Bhd, SOU 11 Kerdau Palm Oil Mill are as per the table below

Table 1: RSPO Certification details of Kerdau Palm Oil Mill

RSPO Membership no.: 1-0008-04-000-00

RSPO Certificate no.: 824 502 14019 (Previously 18502207 001 and C819155CU-RSPO- 01.2011)

Date of first RSPO certificate & validity: 07/07/2011 valid until 06/07/2016

Date of certification audit: May 11 to 18, 2009

Date of previous surveillance audit: May 14 to 18, 2013

Date of revised RSPO certificate & - validity (if applicable):

CPO tonnages claimed: 48,075 MT PK tonnages claimed: 11,368 MT

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 4 of 52

1.4 Location and Maps

Figure 1: Location of SOU Kerdau estates and mill in Pahang, Malaysia

Kerdau POM & Estates

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 5 of 52

Figure 2: Kerdau Estate GPS Surveyed Map

Kerdau POM

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 6 of 52

Figure 3: Sg. Mai Estate GPS Surveyed Map

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 7 of 52

Figure 4: Location map of Mentakab Pahang

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 8 of 52

Figure 5: Jentar Estate estate map

Figure 7: Chenor Estate estate map

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 9 of 52 Table 2: GPS locations for all estates and mills included in annual surveillance assessment

Name of mill / GPS locations Location estate Latitude Longtitude Kerdau Palm Oil Mill Kilang Kelapa Sawit Kerdau, 3º34’07” 102º18’28” Wakil Pos Kerdau, 28010 Temerloh Pahang Ladang Kerdau, Wakil Pos Kerdau 28010 3º34’07” 102º18’28” Kerdau Estate Temerloh, Pahang Ladang Jentar, Wakil Pos Kerdau, 28010 3º34’07” 102º18’28” Jentar Estate Temerloh , Pahang Ladang Mentakab/ Lanchang/ Edensor, c/o 3º28’67” 102º10’95” Mentakab Estate Lanchang Division, 28500 Lanchang, Pahang Darul Makmur. Sg Mai Estate Ladang Sungai Mai, 27000 Jerantut, Pahang 3º48’50” 102º21’40” Ladang Chenor (KT), Sungai Jerik, 26400 Bandar 3º34’07” 102º18’28” Chenor Estate* Pusat Jengka, Pahang Note * : During the 1st certification audit, Chenor estate was part of SOU 12 Jabour, since 2010 Sime Darby management decided to include Chenor estate in the SOU 11 Kerdau and all FFB from Chenor estate is now supplied to Kerdau Palm Oil Mill

1.5 Organisational Information / Contact Person SOU 11 Kerdau estates are owned and operated by Sime Darby Plantation Sdn. Bhd, among the largest player in oil palm industry in Malaysia. The company has 65 individual “Strategic Operating Units” units (SOU’s) and each SOU comprises a number of individual estates In Malaysia there are 39 SOU’s with 140 individual estates, extending to 229,470 ha. In Indonesia there are 26 SOU’s, (Known as companies) with 90 individual estates, extending to 295,156 ha. It is noted that 21 SOU’s (In Malaysia) have either been certified or are currently in the process of being certified. Sime Darby Plantation Sdn. Bhd is merger of Sime Darby Berhad, Golden Hope Plantations berhad and Kumpulan Guthrie Berhad which was done on November 2007. The company represents one of the five core Divisions of Sime Darby group and is involved in the following: Oil Palm cultivation, Agribusiness & Food, Research and Development. The Plantation division has location in several Malaysia locations such as peninsular Malaysia, Sabah and Serawak and Indonesia location such as Kalimatan, Sumatera and Sulawesi. Company has total 524,624 hectares of planted oil palm. All products from Sime Darby Plantation Sdn. Bhd is supplied to their division’s downstream operations which has location in 15 countries around the world. Its business activites include the following; Edible oil refining, production of oils and fats products, Oleochemical and Biodisel. Alongside oil palm, the division is also involved in agri business activities and cultivationof rubber. In keeping with the aspiration of making sustainable future real for everyone, Sime Darby Plantation Sdn.Bhd claims to make a conscious and concerted effort towarda conservation and protection of the environment, the rehabilitation of forests, protection of wildlife and promotion of the well being of the communities in which it operates. Contacts details of the company are as follows:

Company Name: Sime Darby Plantation Sdn. Bhd. Kerdau Palm Oil Mill Address: Head Office : PSQM, Level 3A, Main Block, Plantation Tower, No. 2, Jalan PJU 1A/7, Ara Damansara, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia. Mill Location: Kilang Kelapa Sawit Kerdau, Wakil Pos Kerdau, 28010 Temerloh Pahang Contact Person: Pn. Sabarinah Marzuky

Telephone: 03-7848 4388

Email: [email protected]

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 10 of 52 1.6 Description of Supply Base The Kerdau palm oil mill sourced FFB from below mentioned group estate and smallholders under Sri Kerdau Sdn. Bhd., a FFB collector from smallholder.

Table 3 : FFB Supply Information for Kerdau Palm Oil Mill for July 2012 to June 2013 and July 2013 to March 2014

FFB received FFB received FFB Contributors July 2012 to June 2013 July 2013 – March 2014 Tonnes % Tonnes % Company owned estates:

Chenor estate 42,530.40 16.58 30,703.21 15.71

Jentar estate 28,281.80 11.03 20,081.90 10.27

Kerdau estate 49,471.15 19.29 40,622.34 20.78

Mentakab estate 61,835.32 24.11 45,288.72 23.17

Sungai Mai estate 64,323.62 25.08 50,949.07 26.06 Sub-total 246,442.29 96.08 187,645.24 96.00 Outgrower :

Sri Kerdau Commodities 10,057.50 3.92 7,825.98 4.00 TOTAL 256,499.79 100.00 195,471.22 100.00

1.7 Actual production volumes, tonnages and projected outputs. Table 4: Certified tonnages claimed, certified tonnages purchased or sold, total and projected CPO and PK production from Kerdau Palm Oil Mill

Amount (MT) Description CPO PK Certified tonnages claimed 48,075.00 11,368.00

Certified tonnages sold* - -

Certified tonnages purchased** - -

Actual Production for certified product** 38,185.81 10,057.78

Actual Total production** 39,692.67 10,254.02

Projected certified output for next 12 months*** 51,654.04 12,850.52

Projected total output for next 12 months*** 51,654.04 12,850.52

Actual Conversion factor (%)** OER : 20.35 KER : 5.36

Projected Conversion factor (%)*** OER : 19.79 KER : 4.92

* Data from period of July 2013 to March 2014, during which the product not sold as CSPO claimed but ISCC claimed only ** Data from period of July 2013 to March 2014 *** Projected data for period of July 2014 to June 2015

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 11 of 52

1.8 Dates of Plantings and Replanting Cycles

Information on the dates of plantings is as per the table below.

Table 5: Age and year of plantings of company estate supplying to Kerdau Mill Estate Age & Year of Plantings Chenor Jentar Kerdau Mentakab Sungai Mai

0 – 5 yrs(2008 – 2012) 108 626.31 995.07 472.40 - 5-10 yrs(2003 – 2007) - - - - 163.42 10-15 yrs(1998 – 2002) 791 - 611.63 1149.80 914.25 15-20 yrs(1993 – 1997) 384 - 194.06 867.78 1403.43 20-25 yrs(1988 – 1992) 421 1356.70 - 186.88 166.66 25 - 30yrs(1982 - 1987) 176 - 1429.04 265.83 - TOTAL 1880 1983.01 3229.80 2942.69 2647.76

Table 6: Planned and actual oil palm replanting activities for SOU 11 Sime Darby Plantation Sdn. Bhd.

Total planned replanting area for each estate (ha) Actual total Year Total (Ha) area replanted Chenor Jentar Kerdau Mentakab Sungai Mai (ha) 2010/2011 - 203.00 227.00 200.61 - 630.61 630.61 2011/2012 108.00 135.04 79.28 271.79 - 594.11 594.11 2012/2013 - 162.42 160.38 265.83 - 588.63 588.63 2013/2014 176.00 201.15 57.39 119.10 - 553.64 507.14 2014/2015 151.00 298.73 417.45 147.44 - 1,014.62 2015/2016 83.00 344.00 - 94.98 - 521.98 2016/2017 - - - 72.62 93.05 165.67 2017/2018 - - - - 73.61 73.61 2018/2019 ------Total 518 1,344.34 941.5 1,172.37 166.66 4,142.87 Note : *) There are revisied of planned replanting in Mentakab and Sg Mai estate in 2014/2015 (67.78 ha be 147.44), in 2015/2016 (0 ha be 94.98 ha).

1.9 Area of Plantation (Total, Planted and Mature) Table 7: Oil Palm Planted Area Summary, FFB Production and Average yield/ha for Sime Darby Plantation Sdn. Bhd. SOU 11 Kerdau Palm Oil Mill

Oil Palm Mature Immature FFB Total area Average Estate Name Planted area (Production) (Non-production) Production (ha) yield/ ha (ha) area (ha) area (ha) (tonnes) Chenor 2001.27 1880 1772 108 42,406.59 22.98 Jentar 2,234.00 1983.01 1356.70 626.31 26,904.12 21.05 Kerdau 3,446.93 3229.80 2450.79 779.01 43,489.59 17.44 Mentakab 3,273.09 2942.69 2470.29 472.40 57,294.55 23.19 Sungai Mai 2,835.04 2,647.76 2,647.76 0 55,679.31 21.03 TOTAL 13,790.33 12 ,683.26 10 ,697.54 1985.72 225,774.16 21.11

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 12 of 52 Table 8: Land use data for SOU 11 Sime Darby Plantation Oil Palm HCV/ Land used for other purposes (ha) Estate Total area Planted Potential Cleared Other Name (ha) Area HCV areas* Nursery Mill (ha) (ha) Area Land Chenor 2,001.27 1880 11.22 4 - - 106.05 Jentar 2,234.0 1983.01 73 - - - 177.99 Kerdau 3,446.93 3229.80 7.45 16 65 20 108.68 Mentakab 3,273.09 2942.69 116 8.09 - - 206.31 Sungai Mai 2,835.04 2,647.76 3.78* - - - 187.28 TOTAL 13,790.33 12,683.26 207.67 28.09 65 20 786.31 *Include in productive area

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 13 of 52 1.10 Progress Against Time Bound Plan

Table 9: RSPO Certification Timebound Plan for Sime Darby Plantation (SDP)

Financial year (July – June) Targeted Achieved

June 2008 5 SOUs Sime Darby Plantation has had all 2008/2009 20 SOUs ( from Malaysia and Indonesia) its SOUs (Malaysian & Indonesian) 2009/2010 20 SOUs ( from Malaysia and Indonesia) completing the RSPO Main Assessment. 2010/2011 17 SOUs ( from Malaysia and Indonesia)

Table 10: Status RSPO certification for all Palm Oil Mill under Sime Darby Plantation Sdn Bhd

Status Malaysia Indonesia Total Remarks

*Effectively only 36 SOUs certified (starting July 2012): Jeleta Bumi POM and Mostyn POM have been closed down. Sepang POM has been Certified 39* 16 55** converted to third party oil mill and not included in the RSPO Certification timebound plan.

**Total SOUs certified 52 SOUs.

• Pending review by RSPO EB. RSPO EB 0 7*** 7*** *** Effectively only 6 SOUs as Tamiang Review POM had ceased operation & combined with Blang Simpo POM.

**** Revised number of SOUs for SDP is 58 Total SOUs 39* 23 62**** beginning FY 2012/2013.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 14 of 52 Table 11. Other RSPO Supply Chain Certified Facilities under Sime Darby Plantation (SDP)

RSPO SCCS Date of SCCS Certification Certification No Business Unit Certification Certification Body Date Trading Option Process Certified on 28 1 Unimills B.V. SG & MB Jan – March 2009 Control Union June 2011 Certified on 25 2 SD Biodiesel SG & MB Jan – March 2010 SIRIM March 2011 Certified on 10 3 SD Jomalina SG & MB Oct – Dec 2010 SIRIM March 2011 Certified on 19 4 SD Kempas MB Jul- Sept 2011 SIRIM Aug 2011. Certified on 13 5 SD Austral MB Jan – March 2012 SIRIM April 2012. Certified on 13 6 NURI – SD Jomalina MB Jan – March 2012 SIRIM April 2012. Kernel Crushing Plant Certified on 13 7 SG & MB Jan – March 2012 SIRIM – Carey Island (KCP) April 2012. Certified 10 Sept 8 Morakot MB July - August 2012 SGS 2012 BUREAU Certified 8 Oct 9 Emery Oleochemical SG & MB March - June 2012 VERITAS 2012 Certified Dec 10 Hudson & Knights MB March – June 2012 SIRIM 2012 11 SDEPL - FY 2012/2013 TBI 12 GH Nhabe - FY 2012/2013 TBI

1.11 Compliance to Rules for Partial Certification Compliance of the uncertified management units of Sime Darby Sdn. Bhd against the rules for partial certification according to RSPO Certification System clause 4.2.4 was assessed by Documentation review. A summary of findings is as stated below. Partial Certification Requirements Audit Findings (a) The parent organization or one of its Sime Darby Plantation Sdn. Bhd is RSPO member majority owned and / or managed with membership number is 1-0008-04-000-00. subsidiaries is a member of RSPO. (b-d) A challenging time-bound plan for The company has a timebound plan both for certifying all its relevant entities is submitted Malaysia site and Indonesia site as determined on to the Certification Body (CB) during the first the table 9 above. certification audit. The time-bound plan should contain a list of subsidiaries, estates and mills. Any revision to the time-bound plan or to the circumstances of the company shall cause the plan to be reviewed. for whether it is still appropriate, such that changes to the time- bound plan are permitted only where the organisation can demonstrate that they are justified (e) No replacement of primary forest or any According to the previous assessment report area identified as containing High which is carried by Control Union there are 10,317 Conservation Values (HCVs) or required to ha in 28 estate planting between November 2005 maintain or enhance HCVs in accordance to 2007 and 1,215 ha in 4 estates planted after

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 15 of 52

Partial Certification Requirements Audit Findings with RSPO criterion 7.3. Any new plantings November 2007. No information regarding HCV since January 1st 2010 must comply with the assessment. As no HCV assessments were RSPO New Plantings Procedure conducted, the company cannot demonstrate compliance with this rule. (f) Land conflicts, if any, are being resolved According to information from Sime Darby through a mutually agreed process, e.g. Management and interview with local communities RSPO Grievance procedure or Dispute surrounding company’s area, they have good Settlement Facility, in accordance with relationship and no conflict appear relating to land RSPO criteria 6.4, 7.5 and 7.6. dispute in all of Sime Darby’s SOUs.

(g) Labour disputes, if any, are being During this audit there is currently no case of resolved through a mutually agreed process, significant labour dispute among Sime Darby in accordance with RSPO criterion 6.3. Plantation’s SOUs which audited by the team. Another SOU’s compliance regarding this issue would have been assessed by other certification bodies. (h) Legal non-compliance, if any, are being Some legal compliance was identified, for SOU 11 resolved in accordance with the legal several non conformities have been identified. For requirements, with reference to RSPO other SOUs compliance regarding this issue would criteria 2.1 and 2.2. have been assessed by other certification bodies.

1.12 Progress of associated smallholders or outgrowers towards RSPO compliance There are no associated smallholders supplying to Kerdau POM, only independent outgrower supply to Kerdau POM through one FFB agent i.e. Sri Kerdau Commodities Sdn.Bhd, there are no specific planning by Kerdau POM for independent outgrowers towards to RSPO compliance.

1.13 Approximate Tonnages Certified

The approximate tonnages certified shall be the same as per the original certificate, which is as follows

Crude Palm Oil (CPO) : 48,075 mt Palm Kernel (PK) : 11,368 mt

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 16 of 52

2.0 ASSESSMENT PROCESS 2.1 Certification Body

PT TUV Rheinland Indonesia is member of Group TÜV Rheinland Group, a global leader in independent testing and assessment services. The TÜV Rheinland Group was established in 1872 with offices located in over 490 locations in 62 countries on all five continents. PT TUV Rheinland Indonesia offers certification for a wide range of management systems according to established international standards including ISO 9001, ISO 14001, OHSAS 18001, SA 8000, as well as CDM Validations and Verifications. PT TUV Rheinland Indonesia’s office is located in Jakarta, Indonesia.

2.2 Qualifications of Lead Assessor and Assessment Team

The assessment team members of this surveillance audit are:

Name Position Qualifications / Experience

Education: Bachelor of Anthropology, Department of Anthropology - University of Indonesia, Jakarta. Trainings attended : Sustainable Natural Production Forest Management (Pengelolaan Hutan Alam Produksi Lestari - PHAPL) assessor training (May 2003); Forest Plantation Management (August 2003) training - Indonesian Ecolabel Institute (LEI), Forest Management and Agriculture Auditor Training; Lead Fadli ISO 9001:2008, ISO 14000:2004, OHSAS 18001:2007 trainings - Auditor Smartwood/Rainforest Alliance; SA8000 training - SA International; RSPO Lead Auditor Training -Indonesian Palm Oil Commissions. Working experience: Experienced as lecturer for D3 Tourism program, University of Indonesia. Social Aspect Auditor of PT. TUV International Indonesia for Sustainable Forest Management and RSPO Principles & Criteria. Researcher of Stakeholder Mapping With CSR Indonesia. Education: Higher National Diploma in Electrical and Electronic Engineering – Nottingham Trent University ISHM (Institute of Safety & Health Management) Accredited OSH Professional Certificate – OSHA Train Academy, USA. FMM Certificate in Safety and Health Officer – Federation of Malaysian Manufacturers. Suniljit Trainings attended: Auditor Singh Various trainings in social accountability standards including on SA8000, SMETA (SEDEX Members Ethical Trade Audit), EICC (Electronic Code of Conduct) Auditor trainings. RSPO P&C training. Various trainings in quality, health, safety and environmental. Trainings in IRCA 9001, 14001 and 18001 management systems for auditors. Working experience: 9 years of experience in conducting quality, health, safety, environmental and social accountability audits in various industries. Education: Bachelors Degree in Forestry - Bogor Agriculture Institute. Indonesia, (1995 to 2000). Trainings attended : ISO 9001 : 2008 lead auditor course - Neville Clark (2011), ISO 14001 : 2004 lead auditor course - TUV Rheinland Indonesia (2011), SMK3 Hendra auditor course – Department of manpower and transmigration of the Republic of Fachrur Auditor Indonesia (2009), Sustainable Forest Management (SFM) – Forestry Education ozy and Training Centre (2010), Timber Legality of Verification - Forestry Education and Training Centre (2010), RSPO Lead Auditor Course – Pro Forest & Wild Asia (2011), RSPO SCCS Lead Auidtor Course – David Ogg and Partners (2012), ISPO Lead Auditor Course – Indonesian Sustainable Palm Oil Co mmision (2012), RSPO RED Lead Auditor Course – RSPO & Brinkman

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 17 of 52

Name Position Qualifications / Experience

Consultant (2013). Working experience: Experienced as Junior Consultant at PT Surveyor Indonesia (2002 s/d 2010), assesor for SFM –mandatory (PHPL & PHTL), assessor for industry performance assessment (IPHHK)-mandatory, auditor for Timber Legality of Verfication, auditor for SMK3, auditor for QMS and EMS and auditor for RSPO & ISPO at TUV Rheinland Indonesia. Education : Diploma in Public Administration- MARA Institute of Technology, Malaysia (1991). Certificate of Safety and Health Officer-Malaysian Insurance Institute (2003). Bachelor of Corporate Administration (Hons)-MARA University of Technology, Malaysia (2003), Master of Science in Occupational Safety and Health Management-Northern University of Malaysia (2011), Candidate for Phd in Occupational Safety and Health Management-Northern University of Malaysia. Trainings attended: ISO 9001:2000 IRCA/IATCA Lead Auditor Training- International Management & Technology Limited (Kuala Lumpur), ISO 14001:2004 IEMA Approved EMS Advanced Lead Auditor Training Course- Aspects Moody Certification Ltd (United Kingdom). OH&SMS IRCA Certified Lead Auditor Training Course-Moody International (Kuala Lumpur). MS 1722 Yusof Lead Auditor Training-Niosh Certification (Kuala Lumpur) Auditor Nizar Working experience: Experience in managing, consulting, training and auditing quality, environmental, occupational safety and health management systems such as ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007, MS1722:Part 1:2005 from 1996-Current. Contract Trainer of OSH & Environmental Legal & Other Requirements Lead Auditors course for SIRIM Training Services Sdn Bhd & NIOSH Certification Sdn Bhd. Contract Auditor for Environmental Management System for Sirim QAS International (2006). Department of Occupational Safety and Health Malaysia (DOSH) Registered Safety and Health Officer (2003-2006). Approved Human Resources Development Fund (HRDF) Trainer (2011). Assessor for Prime Minister’s Hibiscus Award and involving assessment for oil and gas companies, plantations industries, manufacturings, utilities, cleaning and transportations services (2003-2011). OSH and Environmental Auditor for TUV Rheinland Malaysia RSPO Principles & Criteria.

2.3 Assessment Methodology & Agenda

The surveillance assessment was conducted from 08-12 April, 2014 as per the assessment program below. The assessment was carried out in accordance with TUV Rheinland Indonesia’s RSPO audit procedure as well as the RSPO Certification Systems document. During assessment, the qualified TUV Rheinland assessors used the RSPO standard as endorsed for the country in which the assessment took place and recorded their findings. Due to the location and proximity of the estates, combined with common management systems, it was possible to carry out both field and document assessments of all estates and the mill within the time frame without compromising the integrity of the assessment in anyway. A sample of 4 estates and 1 mill were visited and the assessment team carried out field and document assessments of compliance to all the RSPO principles and criteria. Common systems were identified and specific evidence was recorded for individual estates. Interviews were conducted at all estates and the mill. The company proposed the correction and corrective action for all identified non conformities raised to the certification body 30 days after the closing meeting. Verification of closure of major non-conformances was conducted through document checked 1 month after the closing meeting of the surveillance audit and implementation of corrective actions for minor non-conformities will be verified during the next suriveillance audit. The surveillance audit agenda is as explained below.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 18 of 52 Surveillance Audit Agenda. Location/ Date Main activities Main sites 08 April Kerdau Opening meeting and Introduction Clubhouse, Document Review: verification of NCR of the last audit, OSH Manual, OSH Kerdau Mill Policy SOP, legal compliance records, minutes of meeting for safety and health committee, HIRARC formats, accident records and statistics, noise monitoring report, Medical Surveillance report, CHRA report, training records, permits, Emergency Procedures and Records of OSH implementation; Records of EMS implementation; Document Review: Hazardous waste inventories & manifest, fertilizer application records, chemical application records, chemical stock inventory, etc. On-site visit: Mill, receiving bay, weight bridge area, Operation area, Engine room, scheduled waste store. Budget plan Checking for Incoming FFB Data Mill tour; Visiting POME ; Visiting Composting project Interview with local Workers and Migrant worker; Interview with FFB supplier Sri Kerdau Commodity; Interviews: Assistant Mill Manager, Wireman, Charman, Engine Driver, Workers at mill and receiving bay and Pahang Zone representatives.

09 April Kerdau Mill Document Review : Supply Chain Certification Standard and and Kerdau Relevant P&C Criteria, OSH Manual, OSH Policy, legal compliance records, Estate chemical stock card, MSDS, medical surveillance report, HIRARC formats, CHRA report, training records and SOP including Social Impact Assessment, CSR program records, workers pay slips, insurance records. On-site visit: chemical store/temporary store, chemical mixing area, diesel tank area, scheduled waste store, clinic, plantation, fertilizer store, Workshop Checking boundery stone Visit Housing area Visit water Cathment area, Visit Green Lung. Interviews: Estate Manager, Manurers, harvesters, Store Clerk, Hospital Assistant, Mandores and Pahang Zone representatives Interview with worker, Sprayer 10 April Chenor, Sg Document Review: OSH Manual, OSH Policy, HIRARC formats, May Estate legal compliance records, chemical stock card, MSDS, medical surveillance report, CHRA report. Minutes of meeting for safety and health committee, foreign workers compensation scheme, training records, On-site visit: Chemical Store, chemical mixing area, Diesel Tank Area, scheduled waste store, fertilizer store, plantation, workshop Visiting Replanting location; Visiting boundary stones with Forest reserve Jengka; Beneficial plan location block 97A; Riparian watercourses block 90A; Land slope area; Warehouse/Chemica store Interviews : Estate Manager, cutters, sprayers, harvesters, Store Clerk, Hospital Assistant, Mandores and Pahang Zone representatives Interview with villager in Pekan Sungai Jerik ; Interview with Sprayer ; Interview with Harvester

11 April Jentar, Document Review : OSH Manual, Chemical Stock Card, HIRARC formats, Mentakab MSDS, Medical Surveillance report, CHRA report. accident report and statistics, Estate training records. On-site visit: chemical store, chemical mixing area, Diesel Tank Area, scheduled waste store, clinic, fertilizer store, workshop, plantation and workers cleaning room. Interviews: Estate Manager, cutters, harvesters, Store Clerk, Hospital Assistant, Mandores and Pahang Zone representatives 12 April Kerdau Closing Meeting and Presentation of Audit Findings Estate

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 19 of 52

3.0 ASSESSMENT FINDINGS 3.1 Summary of Findings

The following is a summary of findings during this surveillance audit for the criteria listed in the RSPO Principles & Criteria Malaysia National Interpretation year 2008 and RSPO SCCS, November 2011 • RSPO P&C

Principle 1: Commitment to transparency

Criteria assessed: CR1.1, CR1.2 Criteria not assessed:

Findings: Quite the same with the last surveillance audit, there is no change on company’s procedure regarding request of information management. The procedure was available for all relevant stakeholders that wish to request for information including workers, government agencies such as Malaysian Palm Oil Board (MPOB), and so on. As explained on the procedure, that all incoming information through phone calls, walk in, mail or email will be received by company’s staff, and it will be reported to estate assistants before it is reported to the higher level management who will decide whether the information will be issued or not. All incoming information is recorded on a form. It was sighted on the log book in the past one year that most incoming information to each estate management more about request of donation, and mechanism to approve request of donation is clearly stated on the procedure. Some of request of donation has been fulfiled where some still waiting for the response from estate management for approval. Mill: There is record of request letter from stakeholder i.e: 1. Letter no. PIBG/04/01/010/Jld.2 (222), on 14 March 2014 from PIBG Sekolah Kebangsaan Kerdau 28010 Temerloh, Pahang Darul Makmur, pertaining to donation request for great meeting of PIBG SK Kerdau 2014. There is record of respons from company by letter on 20 March 2014, signed by Bendahari PIBG Sk Kerdau 28010 Temerloh for 6 Hampers as RM200. 2. Letter no. CBA,7020.600-3/1/10 ( ), on 17 July 2013 from Sekolah Kebangsaan Kerdau 28010 Temerloh pertaining to mohon sumbangan uang tunai untuk program Ihya' Ramadhan. There was no evidence of response from the mill (KKS Kerdau ) regarding to this letter 3. Letter from Jabatan Alam Sekitar Negeri Pahang Darul Makmur no. AS.C31/152/000/772 Jld 1 (10) on 17 July 2013, regarding to request to the company for changing medium komunikasi data dari modem dial up kepada internet selambat-lambatnya 31 Desember 2013. There was record of company’s reponse on 23 December 2013 stated that the cpmpany already conducted the request.

Jentar Estate : 1. There is request letter from malaysian Palm Oil Board no. SSCC/MSPO/2014-001 dated on 5 February 2014 regarding to request for two representatives from company to attend a roadshow for Malaysian Sustainable Palm oil on 4 March 2014. 2. There is request letter from RHB Bank on 10 March 2014 regarding to scheduled explanation session of product of RHB for company's employees, will be held on 13 march 2014 at Jentar Plantation meeting room. There is evidence of response from the company by phone call that the RHB is allowed to conduct the session at bilik meusyarat of Jentar Estate.

Kerdau Estate : There is a letter from MPOB no. SSCC/MSPO/2014-001 on 5 February 2014 regarding to request for 2 persons to attend Roadshow for MSPO which would be held on 4 March 2014. There is evidence that the program was attended by the manager and assistant manager of Jabor zone on behalf of Sime Darby.

Chenor estate :

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 20 of 52

1. There is request letter from National Type School on 1st April 2014 on 1st April 2014 regarding an approval request for cross country activity of students through estate's road. As evidance of response, there is letter no. MI/isb/K-2 on 3 April 2014 from Chenor Esatet to Guru Besar Sekolah Jenis Kebangsaan (C) Jerik 26400 Bandar Jengka, Pahang Darul Makmur, stating the company’s approval for the cross country activity by the students. 2. There is request letter from a religious school, i.e. ‘Sekolah Agama Rakyat’ (KAFA) of Chenor Estate on 22 April 2013 regarding approval for Kelab Ladang Chenor Buliding using in order to conduct AJK Persatuan Guru Kafa Daerah Jengka. There is response from Ladang Chenor on 24 Aprl 2013 that stated that the company agree with this request. As stated on the management notifcation there are some documents made available to the public based on stakeholder requests, and these documents include land titles, safety and health plan, plans and impact assessments relating to environmental and social impacts, pollution prevention plans, details of complaints and grievances, negotiation procedures, and continuous improvement plans. As seen at Kerdau Palm Oil Mill found publicly available document is Safety and Health Manual Version 1:2008 covering 17 chapters. Concerned area under the Annexure A Summary of Penalty Under OSHA 1994. The OSH Policy Annexure A also that authorised by the Executive Vice President on April 2008 is available.

Compliance status : Non Compliance NCR 01 of 8, 2014 There was no evidence of response from the mill (KKS Kerdau ) regarding to letter no. CBA,7020.600-3/1/10 ( ), on 17 July 2013 from Sekolah Kebangsaan Kerdau 28010 Temerloh pertaining to request for donation for Ihya' Ramadhan program

Principle 2: Compliance with applicable laws and regulations

Criteria assessed: CR2.1, CR2.2, CR2.3 Criteria not assessed:

Findings: PSQM (Plantation Sustainability and Quality Management) department located in KL HQ is responsible on updating and tracking the changes on the legal and/or other requirements. Email communication from (PSQM) dated 4 th Sept, 2013 details the update on the LORR (Legal and Other Requirement Register) which supersede the 2008 version. In addition it was made known that Group Compliance is developing a new on-line Legal Register namely ERGC – Electronic Rules Group Compliance which is in progress to be rolled out to all units. The latest updated reviewed LORR was on 12 th & 15 th Fe, 2014 respectively.

Mechanism for tracking changes any changes in the law was detailed in Level 2; Standard Operation Manual (SOM); Appendix 5.2.4a Procedure For Legal and Other Requirements; Issue No: 1; Issue Date: 1 st Nov, 2008. The changes later were to be documented in the Legal and Other Requirement Register (LORR). However this was insufficiently tracked and updated as the reviewed LORR does not detail for e.g. and not limited to Employment Act (Amendment) Act 2012, Children and Young Persons (Employment) Act 1966 and Holiday Act 1951 (Act 369).

Reviewed Evaluation of Compliance Score-Card approved by respective Mill and Estate Managers indicate 100% compliance in all legal and other requirement was found not reflecting actual compliance status as noted in the sampled evidences as follows:- Kerdau Mill:- 1) 5 selected employees time attendance i.e. punch cards and time slip records for the month of June, Aug and Oct 2013 including Jan 2014 details they were working 1 to 5 rest days in a month (consecutively ranging from 7 to 30 days). For e.g. • Employee A , B & D was working on 2, 9, 16, 23 & 30th June 2013 • Employee C was working on 5,12, 19 and 26th Jan 2014 • Employee E was working on 4, 11, 18 and 25th August 2013

2) 2 selected employees time attendance i.e. punch cards and pay slip records for the month of Jan 2014 details they were working more than 12 hours per day (normal 8 hours + 4 hours overtime). For e.g.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 21 of 52

• Employee A was working 14 hours per day on 7, 8, 20, 22, 23 & 24th Jan 2014 and was working 13 hours per day on Jan 9th Jan 2014 Employee B was working 13 ½ hours per day on 26th Jan, 2014

Sg Mai Estate:- 1) Review of the time attendance and pay slip records for the month of Feb 2014 indicates the harvesters and sprayers were working 1 to 3 rest days (consecutively ranging from 7 to 21 days) in a month. For e.g. • Employee A was working on 9 and 16th Feb, 2014 • Employee B was working on 2, 9 and 16th Feb, 2014 Further probe indicates other employees in the same categories were working 1 to 4 rest days (consecutively 7 to 30 days) in a month as detailed in the Estate Daily Attendance Record and Checkroll Report.

Jentar, Kerdau and Mentakab:- 1) CPL 1987 still evaluated in the LORR at page 3 of 5, where it was supposed to be replaced by Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013. 2) For Fire Services (Fire Certificate) Regulations 2001 required to have fire certificate, while actually no fire certificate being awarded by BOMBA yet. 3) Sect. 49A of EQA 1974 revised 2012 was still not included in LORR and no competent person available for management of scheduled waste as required. A discussion was made at HQ level with DOE Putrajaya on this matter but action plan to comply was not yet established. 4) Environmental Quality (Scheduled Waste) Regulations) 2005 requirement for disposal of SW410x category of scheduled waste not fully complied as evidence found rags, cotton glove or paper contaminated with scheduled waste except filters were not collected, included and disposed accordingly to prescribed premise.

Kerdau Mill and Sg Mai Estate: Mechanism for ensuring compliance is enforced was detailed as follows in “Level 2; Standard Operation Manual (SOM); Appendix 5.2.4a Procedure For Legal and Other Requirements; Issue No: 1; Issue Date: 1 st Nov, 2008; 6.4 All requirements shall be evaluated at least once a year. Should there be any non-compliance or potential non-compliance to the regulation or other requirements, necessary corrective and preventive action shall be taken“.

However as per finding reported in point 1 (C2.1.1) above there were no evidence sighted that necessary corrective and preventive action were taken.

Mill and All Estates: Mechanism for tracking changes any changes in the law was detailed in Level 2; Standard Operation Manual (SOM); Appendix 5.2.4a Procedure For Legal and Other Requirements; Issue No: 1; Issue Date: 1 st Nov, 2008. The changes later was to be documented in the Legal and Other Requirement Register (LOR).

However this was insufficiently tracked and updated as the reviewed LOR does not detail for e.g. and not limited to Employment Act (Amendment) Act 2012, Holiday Act 1951 (Act 369), Immigration Act 1959/63 and Passport Act 1966 was reviewed.

New legal such as Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was not updated in the Legal and Requirement Register (LORR) reviewed in 2014 at Jentar, Kerdau, Mentakab Estates.The Environmental Quality Act 1974 revised 2012 particularly on Section 49A still not yet included in the LORR.

The right to use land can be demonstrated, and there are no disputes on land use with local communities. Kerdau Palm Oil mill located in Kerdau estate which has land titles from the Land and Surveying Department of Pahang state bandar pekan Mukim Kerdau Lot No. PT 575 with total area 4856.22 ha registered in September 9, 1987 valid for 99 years with land use right No. 060803HSD00005401. There are 22 land title for Mentakab estate with total area 3273.09 ha SOU 11 can show that they comply with the terms of the land title as seen on payment evidence dated Feburary 22, 2012 to Pahang Darul Makmur state.

During 3 rd surveillance audit, there is no changed information about the right to use land. Kerdau Palm Oil mill located in Kerdau estate which has land titles from the Land and Surveying Department of Pahang state Bandar Pekan Mukim Kerdau Lot No. PT 575 with total area 4,856.22 ha registered in September 9, 1987 valid for 99 years with land use right No. 060803HSD00005401. There are 22 land titles for Mentakab estate with

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 22 of 52 total 3,273.09 ha. Whereas in Sg Mai, there are 8 land titles such as 3 land titles are Licencehold ((no.509 and experied date of 31 Dec 2057), (no.796 and experied date of 20 April 2071), (no.797 and experied date of 20 April 20171)) and 5 land titles are frehold where total areas in Sg Mai amount of 2,835.04 Ha. In Mentakab’s land title, there are total hectare taken by the government amount of 18.66 Ha but not reduced in land title i.e school, road and clinic.

SOU 11 can show that they comply with the terms of the land title (Cukai Tanah) as seen on payment evidence to Pahang Darul Makmur state on behalf of Austral Enterprise Berhard.

Boundary stones were sighted and well maintained at the border between company’s estate and other land owners, as seen on the border of Mentakab estate with Forest reserve area and Sg Mai with Orang Asli reserves area, Program to monitor and maintenance of Boundary stone and Markers has been established, as seen on boundary stone maintenance records in Mentakab, and Sg. Mai estate. The maintenance of boundary in form of fencing, trenching and re-marking.

There is dispute between nationally school at Bakti village with estate about overlapping areas amount of 1 ha where has involved local government as mediator. The result of re-measurement that the company has planted oil palm in each land no.6418 (nationally school’s land) amount of 1 ha. The record of the result of re-measurement has been gived by nationally school too. The next stage, the resolution of dispute is waiting final diseasion from Sime Darby management. Both of parties have agreed with step by step the resolution of dispute has taked.

As confirmed to local communities’ surronding SOU 11 estates, there is no land owned by this company identified as encumbered with customary rights in all estates.

Compliance status: Non Compliance

NCR 2014-02 of 08 Reviewed Evaluation of Compliance Score-Card approved by respective Mill and Estate Managers indicate 100% compliance in all legal and other requirement was found not reflecting actual compliance status as noted in the sampled evidences as follows :

Kerdau Mill : 5 selected employees time attendance i.e. punch cards and time slip records for the month of June, Aug and Oct 2013 including Jan 2014 details they were working 1 to 5 rest days in a month (consecutively ranging from 7 to 30 days).

Sg Mai Estate : Review of the time attendance and pay slip records for the month of Feb 2014 indicates the harvesters and sprayers were working 1 to 3 rest days (consecutively ranging from 7 to 21 days) in a month.

Jentar, Kerdau and Mentakab : CPL 1987 still evaluated in the LORR at page 3 of 5, where it was supposed to be replaced by Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013. For Fire Services (Fire Certificate) Regulations 2001 required to have fire certificate, while actually no fire certificate being awarded by BOMBA yet. Sect. 49A of EQA 1974 revised 2012 was still not included in LORR and no competent person available for management of scheduled waste as required. A discussion was made at HQ level with DOE Putrajaya on this matter but action plan to comply was not yet established. Environmental Quality (Scheduled Waste) Regulations) 2005 reguirement for disposal of SW410 category of scheduled waste not fully complied as evidence found rags, cotton glove or paper contaminated with scheduled waste except filters were not collected, included and disposed accordingly to prescribed premise.

NCR 2014-03 of 08 Kerdau Mill and Sg Mai Estate : Mechanism for ensuring compliance is enforced was detailed as follows in “Level 2; Standard Operation Manual (SOM); Appendix 5.2.4a Procedure For Legal and Other Requirements; Issue No: 1; Issue Date: 1st Nov, 2008; 6.4 All requirements shall be evaluated at least once a year. Should there be any non-compliance

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 23 of 52 or potential non-compliance to the regulation or other requirements, necessary corrective and preventive action shall be taken“. However as per finding reported in point 1 (C2.1.1) above there were no evidence sighted that necessary corrective and preventive action were taken.

NCR 2014-04 of 08 Mill and All Estates : Mechanism for tracking changes any changes in the law was detailed in Level 2; Standard Operation Manual (SOM); Appendix 5.2.4a Procedure For Legal and Other Requirements; Issue No: 1; Issue Date: 1st Nov, 2008. The changes later was to be documented in the Legal and Other Requirement Register (LOR). a. However this was insufficiently tracked and updated as the reviewed LOR does not detail for e.g. and not limited to Employment Act (Amendment) Act 2012, Holiday Act 1951 (Act 369), Immigration Act 1959/63 and Passport Act 1966 was reviewed. b. New legal such as Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was not updated in the Legal and Requirement Register (LORR) reviewed in 2014 at Jentar, Kerdau, Mentakab Estates.The Environmental Quality Act 1974 revised 2012 particularly on Section 49A still not yet included in the LORR.

Principle 3: Commitment to long-term economic and financial viability

Criteria assessed: CR3.1 Criteria not assessed: -

Findings: The annual budget for fiscal year July 2013 to June 2014 was available on Kerdau POM. The information stated in the annual budget is Operational expenditure (Opex) Capex and other operation cost, FFB processing, CPO & PK production and extraction rate (OER & KER). There is also planning for Kerdau mill from year 2011 to 2016 that will be revised every year following current condition where in budget of year 2013/2014, production data was as follows: FFB received : 262,832.25 tonnes, CPO & PK production: 55,104.77 tonnes & 14,433.27 tonnes and extraction rate for oil & kernel : 20.97% (OER) & 5.49% (KER). The budget for year 2014/2015 stated production data as follows: FFB received: 260,970.94 tonnes, CPO & PK production : 51,654.04 tonnes & 12,850.52 tonnes and extraction rate for oil & kernel : 19.79 % (OER) & 4.92% (KER). Budget of year 2015/2016 states production data as follows: FFB received : 260,281.25 tonnes, CPO & PK production : 51,638.30 tonnes & 13,066.63 tonnes and extraction rate for oil & kernel : 19.84% (OER) & 5.02% (KER). The production data for year 2014/2015 and year 2015/2016 is lower than year 2013/2014 because there are replanting activity in more estate. Each estate has their own annual budget such as annual budget for Mentakab estate and Sg. Mai estate for management plan period of year 2013/2014, 2014/2015 and 2015/2016. Contain of information in management plan such as FFB production, FFB yield (tonnes/ha), oil palm total direct cost, oil palm replant total cost, estate administration, estate road and bridge, estate labour overhead, etc. Budget crop production in Mentakab estate are 58,763.69 tonnes (year 2013/2014), 64,931.77 tonnes (year 2014/2015) and 75,647.05 tonnes (year 2015/2016).

The Sime Darby plantation head issued revised letter for replanting program in SOU 11, according to that letter and as determined on SD Agricultural reference Manual, the planning for next 5 years as seen on the table 6 section 1.8 above. Replanting program in Mentakab estate has revised in year 2014/2015 from 67.78 ha be 147.44 ha and new plan i.e year 2015/2016 : 94.98 ha and year 2016/2017 : 72.62 ha. Whereas in Sg Mai estate, there are replanting program in year 2016/2017: 93.05 ha and year 2017/2018: 73.61 ha.

Compliance status: Full Compliance

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 24 of 52

Principle 4: Use of appropriate best practices by growers and millers

Criteria assessed : CR 4.2, CR 4.3, CR 4.4, CR 4.5, CR 4.6, CR 4.7, CR 4.8 Criteria not assessed: CR 4.1

Findings: Recommendation for fertilizer was issued annually (internal letter dated of 27 December 2013 for year 2013/2014) by the Sime Darby Research & Development Department which includes agronomic & fertilizer recommendations. The 2013/2014 manuring programme involves the requierement of fertiliser quantities in Mentakab estate i.e AC : 138 tonnes (March 2014), MOP : 131 tonnes (April 2014), GML & Kieserite : 122.50 tonnes & 6 tonnes (May 2014), Borate : 0.70 tonnes (June 2014), RP : 141.75 tonnes (July 2014), As : 134 tonnes (August 2014) and MOP : 119.25 tonnes (September 2014). Whereas in Sg Mai estate are As : 781.26 tonnes (July 2013), MOP : 811.44 tonnes (August 2013), GML : 665.24 tonnes (September 2013), Borate : 3.71 tonnes (October 2013), CIRP : 660.34 tonnes (January 2014), As : 636.96 tonnes (February 2014) and MOP : 556.64 tonnes (March 2014). Actual fertilizer applications are recorded monthly and available in each estate such as records of fertilizer activities in Sg. Mai and Mentakab estate. The application of fertilizer was mostly on schedule as recommended. Program vs application fertilizing in Mentakab estate year 2012/2013 has completed except AC where there are gap amount of 184 tonnes. Leaf analysis is consistently conducted annually (April 2013) and results for each estate are available in each estate, analysis is conducted by Sime Darby Research Sdn. Bhd. Soil analysis still not conducted again because company will conduct every 5 years, the last soil analysis was conducted on March 02, 2012. The company has monitored EFB application each estate except Sg Mai estate because EFB application not available. Volume of EFB application in Lanchang division – Mertakab estate amount of 2,794.29 tonnes. The results of field verification in P11C and P95B (Lanchang division – Mentakab Estate) that zero burn for replanting activity. Sg Mai estate has map of potensial erosion or slope > 25 0 and evidence of practices minimizing soil erosion example in Jerantut division-Sg Mai estate such as terraces, planting mocuna (cover crop), maintaining good non-competitive ground covers in mature areas, advocating proper frond heap stacking such as countur shaped stacking. The road maintenance has available in estate such as Mentakab and Sg Mai estate in form road grading (total road maintenance program period of 2012/2013 in Sg Mai estate is 3,718.42 ha with three maintenance rotation as seen on Machinary rental book year 2012) so all transport activity clearly and there is not peat soil in all company areas. The company has constructed drains/bunds between each 4 trees in lower land (usually float). Guidance to protect watercourses stated on Sustainable Plantation Management System (SPMS) Appendix 14, version 1, 1 January 2010 as the best practice to include protection of water courses and wetlands, including maintaining and restoring appropriate riparian buffer zone or before replanting along the natural waterways within the estate. In the Slope and River Protection Policy also highlighted the issue dated April 2011. In Jerantut division, there are some hilly area which has slope > 25˚ and map of topography and map of potensial erosion has available so that the company has program to prevent soil erosion and degradation and there are evidence that the company has conducted minimise of soil erosion. In replanting areas (Mentakab estate), there are riparian zone not planting oil palm and there are not bunds/weirs/dams across the main river or waterways passing through an estate. The company has measurement of water and pesticide analysis in river regulary example on Sg Cheramang upstream, midstream and downstream (Lanchang divisiion - Mentakab estate) that not detected pesticide (test report no. PL0249/13 dated of 06 August 2013), on Sg Semantan and Sg Chermang Kanan upstream, midstream and downstream (Endensor division & Lanchang division- Mentakab estate) that not detected pesticide too (test report no. PL0424/13 dated of 22 November 2013). The records of rainfall in Sg Mai and Mentakab estate period of 2013 and 2014 (until March) are available. Rainfall year 2013 in Sg Mai estate amount of 4,878 mm (277 days) and year 2014 (until March) amount of 324.5 mm (17 days). The company has a water management program in which the company established a contingency plan during water shortage for 2012/2013 dated 5 July 2012 i.e 1).to purchase water from the Pahang Water

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 25 of 52

Department, 2). to train staff or educate to conserve water, 3). Collect rainwater for recycling. Use water year 2012/2013 in mill is 381,748 litter (1.5 litter/ton FFB) and year 2013/2014 (until march) is 305,869 litter (1.19 litter/ton FFB) where standard of consumption water in mill is 1.4 litter/ton FFB. Source of water is water chachment and it is water used for processing, cleaning and housing. At Kerdau Estate, found a Costing Book for immature fields 2012/2013 recording the application of pesticides and the field area where they were applied. For example lalang spraying recorded at field 2010B (82.26 HA) on 08/03/14, 09/03/14 and 10/03/14. In Chenor Estate, the monitoring was done on pesticides usage unit per hectre and per ton FFB production 2013/2014. Chemical name: Ally (metsulforon methyl), Touch up (glyphosate), Hextar Cyper, Basta, Kenlon, Amine. As at march 2014, G. Total pestocides=139.45, Quantity of a/l/ha=0.074, Quantity of a.l/ton ffb= 0.053, Quantity planted ha= 1880 and Total FFB production (ton)= 2613.38 At Kerdau Estate, found newly built chemical store not safe and hazardous in term of design and arrangement as the store was built higher than the ground that will create problem for loading and unloading activity and potential fall of chemicals to ground. The staircase was built without handrail and can potentially lead fall if unbalance as auditor himself felt down when he use it during audit. The 2 exhaust fans were wrongly fixed with poor circulation of air as both blowing in the air from outside. Suppose it should blow out the air from inside the chemical store. No railing of guarding fixed to the exhaust fan too that can cause potential injury to hand. The fire extinguisher was not available in the chemical store. Another door that lead to the fertilizer store not having any staircase built and if you open the door and walk forward, you will fall down 1.5 meter down. At Kerdau Estate, all informations related to chemicals were clearly posted in the Standard Operation Procedure (SOP) and MSDS/CSDS with language in English and Bahasa Malaysia. Signage and warning were posted at chemical store, mixing area and workers bathing room.

In Jentar Estate, the medical surveillance was conducted by a DOSH registered doctor from Sulaiman Temerloh Clinic between 26/04/13-04/05/13. 22 workers were sent and medically fit and medical result is normal. In Kerdau Estate, medical surveillance was conducted on 24/09/13 for 9 workers. All medically fit and 4 have issue of high cholesterol while 2 of them have additional High Uric Acid. At Mentakab Estate, sampled Medical Surveillance report 2013 for Lanchang Estate Temerloh done by another doctor. For 10/10/13, 12 workers sent. All Medically fit but medical result shows only 8 are normals, High uric acid 1 and 3 high cholesterol. On 11/10/13, 10 workers sent and all medically fit, Medical result shows 8 workers are normal and 2 high cholesterol. On 09/10/13, 10 workers were sent and all medically fit and only 1 worker have high uric acid and cholesterol. Sampled at Block 00, 3 sprayers and the mandore underwent medical check but one sprayer was not yet sent as he was just recently assigned to be a sprayer even though he had already worked for the company for the past 1.5 years. According to auditee, he will be sent soon. In Jentar Estate, found in Meeting room's Human Resources Development board listing, therefore no ladies workers involve with pesticides as sampled in the field and checked.

HIRARC in Kerdau Mill was not done properly according to requirement of OSH Manual Version 1, 2008, where in Chapter 6, Annexure Verification: Based from Risk Level Table (Annexure C) for score 4-8 (Medium). Decision on Risk Control Measure: Current Risk Control measure shall need to be improved. Actions required to control hazard. Evidence found in HIRARC revised 08/02/14 score 4 and above still not having any recommendation for Risk control (Example Breaking up press cake at press discharge (score=6), Workshop Mechanical, Set welding ration correctly (score=6), Cut off electric supply for machinery involve (score=6). In Jentar Estate also found (HIRARC) verified by the Jentar Estate Manager, and reviewed on 01/04/13. Remarks mentioned "HIRARC already done review in April 2014". Found at Section welding (workshop) the risk assessment score 4, 6 and 8 also not having any recommended risk control.

At Kerdau Mill, the first aid box was kept inside Chargeman Room and locked, Mandore should keep first aid box at field and in proper condition and order to be ready for use during emergency or when needed. As per Level 2; Standard Operation Manual (SOM); Appendix 5.4.1a Hazard Identification, Risk Assessment & Determining Controls (HIRADC) Procedure; Version 1, 2008; Issue No: 1; Issue Date: 1st Nov, 2008; Annexure C Risk Assessment Criteria Table details for Risk Level Score 4 to 10 (Rank:

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 26 of 52

Medium), decision on risk control action – Current risk control measures shall need to be improved. Actions required to control hazards. As per Level 2; Standard Operation Manual (SOM); Appendix 5.4.1a Hazard Identification, Risk Assessment & Determining Controls (HIRADC) Procedure; Version 1, 2008; Issue No: 1; Issue Date: 1st Nov, 2008; 8.0 Review; HIRADC should be reviewed and updated at least once yearly by the OSH Committee for its effectiveness and also under the following circumstances : a. Immediately whenever there is an incident, near miss, dangerous occurrence and etc. at the workplace. b. Occupational Safety and Health Meeting was conducted on 19 th March, 2014, 10 th May, 2013, 19 th July, 2013 and 8 th Nov, 2013 was with its minute recorded were reviewed. The following were the common agenda discussed during the meetings : 1.0 Review of previous meeting minutes 2.0 Accident Reporting 3.0 Near-Miss Reporting 4.0 Workplace Inspection 5.0 Occupational Safety and Health Training 6.0 Health Reporting 7.0 Scheduled Wastes Management Reporting 8.0 Environmental Issues 9.0 Other matters The following detailed in the Kerdau Estate 2013 / 2014 Training Requirement For Operating Units (Estates) • Spraying Training • Clinometer • Tractor Operator Training • T-Baton Training For AP • On-Site Training Tractor Driver • Tractor Driver Competency at Sua Betong • HIRARC, Accident Report and SIME Card Training • Schedule Waste & E-Consignment Training • 3R Awareness Training • Open Burning Awareness Training • 5S Implementation Training • Safety Training to Replanting Contractor • Fire Drill Training • RSPO Refresh Training • Biodiversity Awareness Training • SOP Training – Workshop • SOP Training – Manuring • First Aid Refresh Training • Emergency Response & Preparedness Training At Chenor Estate, training related to scheduled waste was conducted on 27/02/14 at Kerdau Club House ant attended by representatives from Kerdau Mill, Kerdau, Jentar, Mentakab, Chenor & Sungai Mai estates. Harvesting training was conducted on 06/01/14 on 06/01/14 attended 51+26 workers including Manager, Asisstant Managers, staffs, mandore, Quality Control staffs and harvesters.

Compliance Status: Non Compliance

NCR 05 of 08, 2014 At Kerdau Estate, found new chemical store not safe and hazardous in term of design and arrangement as the store was built higher than the ground that will create problem for loading and unloading activity and potential fall of chemicals to ground. The staircase was built without handrail and can potentially lead fall if imbalance as

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 27 of 52 auditor himself was falled down when he use it during audit. The 2 exhaust fans were wrongly fixed with poor circulation of air as both blowing in the air from outside. Suppose it should blow out the air from inside the chemical store. No railing of guarding fixed to the exhaust fan too that can cause potential injury to hand. The fire extinguisher was not available in the chemical store. Another door that lead to the fertilizer store not having any staircase built and if you open the door and walk forward, you will fall down 1.5 meter down.

NCR 06 of 08, 2014 Kerdau Estate Office : 1) A chemical and fertilizer store at Kerdau Estate Office was completed in early March 2014. However, the activities which observed may possibly create new hazards) specifically related to chemical store were not asssesed since the last HIRARC assessment was last conducted on 15th July, 2010. 2) Documented evidence to indicate the HIRARC was revisited since an accident has occured on 17th March, 2014 was not sighted.

Kerdau Mill : The Hazard Identification, Risk Assessment and Risk Control (HIRARC) in Kerdau Mill was not done properly according to requirement of OSH Manual Version 1, 2008, under Chapter 6, Annexure Verification. According to Risk Level Table (Annexure C) for activities found with risk score of score 4-8 (Medium), the Risk Control measure shall need to be improved. Evidence found in HIRARC revised 08/02/14, activities found with risk score 4 and above still not having any recommendation for Risk control (Example Breaking up press cake at press discharge (score=6), Workshop Mechanical, Set welding ration correctly (score=6), Cut off electric supply for machinery involve (score=6). In the HIRARC for Jentar Estate which was last reviewed on 01/04/13, it was found at section welding (workshop), the risk assessment score 4, 6 and 8 also did not have any recommended risk control.

Principle 5: Environmental responsibility and conservation of natural resources and biodiversity

Criteria assessed : CR5.1, CR 5.2, CR 5.3, CR 5.4, CR 5.5, CR 5.6 Criteria not assessed:-

Findings: The Environmental Aspect and Impact Identification was not update and reviewed properly as found in Kerdau Mill, review was done on 16/03/14 by Mill Manager with remarks "no changes". For Operation of Steam Boiler and found legal reference was wrongly identified as EQMO 1974-Section 22 instead of EQA 1974. Similarly in the Operation of Softener. For Mill Compound process (compound upkeep), spillage of Lubricant oil, diesel and petrol identified as having impact of land contamination (5) and unpleasant working environment (6). Impact related to potential water pollution (4) not identified. When refer further to Environmental Impact Evaluation for activity Compound upkeep, Operating condition shown under Abnormal Condition. Spillage of lubricant oil, diesoline and petrol suppose under Emergency condition. Again legal referred to EQA 1974, Section 24. In Jentar Estate, Environmental Aspect and Impact Identification Form (EAI) verified by Jentar Estate Manager on 27/02/14. Remarks stated "EAI already done review in February 2014. The move of chemical store to new temporary site was not evaluated in the potential aspect to environment. At Kerdau mill, Jentar, Kerdau, Mentakab, Chenor Estates found there was no evidence of waste management implementation. There were found rubbish scattered at backyard of the worker housing, rubbish in the tray mixed between plastic, leaf and domestic waste. And at Mentakab estate found hazardous waste (black oil) in open container scattered at backyard of worker housing. Environmental Improvement Plan or Environmental Management Plan (EMP) was not established and available upon request after environmental aspect and impact evaluation done at Kerdau Mill and Mentakab Estate. According to Mill Quality Management System, Standard Operation Manual (SOM) Environmental Aspect/Impacts Evaluation Procedure. Sampled a Ranking of Environmental Impact, 3.4(c), mentioned If the environmental aspect has a high potential of non-compliance to regulatory requirements, then it automatically has to be address under the EMP. Sampled found that all Environmental Evaluation Form dated 01/03/12, mostly not have any high potential non-compliance to environmental regulations except aspect of effluent discharge from use of wash room (sewage, contaminated water, soap detergent). Another one is related to aspect of Inlet water from monsoon drain

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 28 of 52

(contaminated water). There were no EMPs established and available upon request from Mentakab and Chenor Estate too for example potential land contamination (spillage) from Aspect of diesel and lubricant. There was evidence of burning waste at worker quaters, for example: House no.8 at mill (KKS Kerdau), house no. 4B 2004 at Jentar estate, and house no. 27, 28, 29 at Mentakab division The company has revised biodiversity assessment for all SOU 11 area in year 2012. According to the company’s revised Biodiversity baseline assessment so HCV areas in each estate i.e : • In Jentar estate, there are 6 potensial HCV areas are Water Catchment location at blocks OP 86KA, OP 89KG and OP 86KH, Workshop area location on Linesite compound, Bukit Kitab location on OP 88JN, Jentar estate has set aside 13 ha of Bukit Kitab as Biodiversity area for its demographic pattern and with has slope more than 25 o, including abandoned area location in waste land. Jentar estate has also set aside 175 ha as biodiversity area for its demographic pattern, including boundary to forest reserves located at blocks OP 88JA, 87JB, & JC, 87JD,87JE &JF,87JG,87JH,87JI,87JK,88JK,88JL,88JM of Jentar estate located beside Kuala Krau Forest Reserve separated road. • In Sg Mai estate, there are 5 protected areas are boundary area with Forest reserves i.e. block 03S; 00SA; 00SB; 00SC;00SD; Riparian along Sg. Mai river with total area 7.3. Worship area i.e. Mosque and Hindu's temple; water catchment area; and used effluent pond. Biodiversity action plan year 2013/2014 consist of activities to educate sprayers to not spray at buffer zone, to program grass cutting program along the river (buffer zone), frequent check of the buffer zone including signages of buffer zone, no hunting, no fishing, no swimming and no spraying and marking of the buffer zone, to put signages of no entry and no hunting, no fishing, no swimming and no spraying, to arrange the grass cut program for water catchment area instead of using herbicide spraying, frequent check the water catchment area to ensure no workers or outsiders enter the area, to monitor the cleanliness of worship area by follow the rubbish collection schedule and grass cutschedule, and to ensure and maintain all the records of tree forest planting. • In Mentakab estate, there are 5 potential HCV areas area buffer zone along Sg Semantan (115 ha), boundary to reserve forest (Kemasul reserve forest), worship area (mosque in field OP87B and temple in field OP98A & OP87B where total areas are 0.5 ha), tree forest planting (0.5 ha) and interface with animal (wild elephant) in field 11A, 11B & 11C (200 ha). Biodiversity action plan year 2013/2014 same as year 2012/2013 consist of to educate sprayers to not spray at buffer zone, frequent check of the buffer zone including signages of buffer zone, no hunting, no fishing, no swimming and spraying and marking of the buffer zone, to ensure there is no encroachmen (trenching), availability of warning sign, to monitor the cleanliness of worship area by follow the rubbish collection schedule and grass cut schedule, to ensure and maintain all the records of tree forest planting and electrical fencing at boundary. All action to be taken in biodiversity action plan Sg Mai estate and Mentakab estate has been conducted as seen from monitoring records. SW410 was not clearly identified where in the scheduled waste inventory record, only filter only listed, rags, plastic, gloves, paper comtaminated with scheduled waste not included. Storekeeper was not attended on scheduled waste. At Kerdau Estate, SW305, SW409, SW410, SW102 among the scheduled waste generated. Contaminated rags and paper or plastic was not also identified as scheduled waste as generated from workshop. Only filters considered. Waste management Action Plan for Kerdau Estate 2013/2014 approved by Kerdau Estate Manager need to be improved where type of waste generated from office and field activities not included. Mentakab Estate Waste Management Action Plan 2013/2014 consist of type of waste, location generated and action to be taken. Record of fibre used year 2012/2013 amount of 30,584.76 tonnes (0.12 tonnes per tonnes FFB or 0.59 tonnes per tonnes CPO) and shell used amount of 15,064.36 tonnes (0.06 tonnes per tonnes FFB or 0.29 tonnes per tonnes CPO). Whereas record of fibre used year 2013/2014 amount of 23,651.28 tonnes (0.12 tonnes FFB or 0.59 tonnes per tonnes CPO) and shell used amount of 11,578.36 tonnes (0.06 tonnes per tonnes FFB or 0.29 tonnes per tonnes CPO). Consumption fosil fuel in mill amount of 2.80 litter per tonnes CPO (year 2012/2013) and 1.54 litter per tonnes CPO (year 2013/2014). Kerdau mill has establish pollutions preventive management plan 2013/2014 with mitigation acion to control pollution sources such as worshop, linesite/housing, chemical store, effluent and emission with means of mitigation to control the pollution. Also included monitoring and action plan for each mitigation. Realization of action has taked that air quality test, effluent analysis test, pesticide analysis test, maintenance of vehicle, etc. In Sg Mai, has establish pollutions preventive management plan 2013/2014 too with mitigation action control pollution sources such as vehicle and machinery exhaust, road condition, pesticide spraying and disposal, water retaining rubbish and garbage disposal and included action to be taken for each mitigation. Realization of action has taked that road and vehcles/tractor maintenance, monitoring of spraying activity, maintain buffer zone area,etc. Kerdau mill and Sg Mai estate has reviewed action plan last year and results of review was used prepare of pollution preventive management plan this year.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 29 of 52

Sime Darby Plantation has statement of purposed carbon emission reduction are 25% by 2016 and at least 40% by 2020 with strategic action plan in estate such as reduction of N-based fertilizer usage, IPM, use of generic herbicides, 10% ground cover, reduction of petroleum based fuel usage, 3R (reduce, replace, reuse). Whereas in mill such as implement methane capture and biogas power at 34 mills in Malaysia (one of them Kedau mill on 2015/2016 in form methane capture anda flare) and at 23 mills in Indonesia, composting plants (30% of POME and 70% of EFB from mill), other 2 nd generation biomass technologies i.e bio-ethanol, bio-char, etc and water savings from 1.4 m 3/FFB processed to 1.3 m 3/FFB processed. In Sg Mai and Kerdau estate no peat areas so there are not activities relate reduce peat subsidence rate and monitor water table management.

Compliance Status : Non-Compliance NCR 07 of 07, 2014 There was no evidence of waste management implementation since: 1. There were found rubbish scattered at backyard of the worker housing 2. Found rubbish in the tray mixed between plastic, leaf and domestic waste. (mill, Jentar, Kerdau, Mentakab, Chenor. 3. Found hazardous waste (minyak hitam / black oil) in open container scattered at backyard of worker housing at Mentakab division.

NCR 08 of 08, 2014 There was evidence of burning waste at worker quaters, for example: 1. House no.8 at mill (Kerdau Palm Oil Mill) 2. House no. 4B 2004 at Jentar estate 3. House no. 27, 28, 29 at Mentakab division

Principle 6: Responsible consideration of employees and of individuals and communities affected by growers and mills

Criteria assessed: CR6.1, CR6.2, CR6.3, CR6.4, CR6.5, CR6.6, CR6.7, CR6.8, CR6.9, CR6.10 Criteria not assessed: 6.4, CR6.11

Findings: At Mentakab Estate, there is report of SIA covering the natives (“Orang Asli”) of Leleh Village and local people as Kg Gajah mati, Kg Sg Buloh, Kg Batu Ampar. Assessment made on 18 June 2013. Complaint from Kg Leleh is: for estate management to rebulid the footbridge connection Orang Asli area to estate field. site visit and observation prove that the footbridge already established.

For Sg Mai Estate, there is report of SIA covering Orang Asli of the Jah Hut tribe on 17 June 2013. Some orang asli complaint about the road condition to their community area. The road is not in good condition, making the the trip to go outside a little bit unpleasant They requested the road to be paved. There is no estate budget to do paving since the road is not main road, but field road, estate will resurfacing and maintaining the condition, repair uneven road and do patching in a regular basis. Resurfacing road and grading is already done on 18 June 2013.

At Chenor Estate, there is management plan on SIA updated 2012/2013 as follow: 1. There is dusty road in estate. This complant come from workers. this compalint already close. the solcrete road already done in workers housing, and tar road already constructed from government main road to estate's gate. 2. JBA water required in order to add or elaborate water resources for workers as first cathed in the stakeholder meeting in 2009. The company already followed this issue with the PAIP (Perbadanan Air Pahang) and still waiting for approval from PAIP for joint the valve.In December 2013 the PAIP alrady joint the valve and the company already establish pump house for water from jabatan Pembekalan air, but the power suppply is insufficient.. There is evidence of water bill payment on 28 Feb 2014 as RM12.20 and on 28 March 2014 as RM15.00. There is evidence that the company already request to Kasyaf Letrik (power authority) to upgarde electric power supply, which is purchase order payment on

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 30 of 52

19 March 2014 as RM27,500 and now the company is waiting for progress from Kasyaf Lektrik.

At Jentar Estate, there is evidence of SIA management plan implementation, such as 1. Transportaion problem in case of emergency: estate already provide transportation (van WBB 1306 for all staff and workers need to go to the hospital. 2. Propose to conduct sport activities and health check up with klinik keehatan Kerdau: estate liase with KK Kerdau on those activities. 3. Request to send personal information of Jentar Estate Resident to Balai Polis Kerdau: On going.

There is management plan on social impact assessment FY 2012/2013 consisting of Area of Concerns/Key findings, including action plan, person-in-charge. expected completion date, remarks. There is a report on implementation of the management plan for: leak of water supply, leak at the local prayer house, fire drill, housing repair, gender committee establishment, occupational safety and health, night patrol, stakeholder meeting. water supply done by engineeering dept., roal quality done by kerdau estate, suaru condition already improve (clean and comfortable) and there is structure of the prayer room management consisting of the manager, vice manager, secretary, malay priest (imam), muezzin, Committee Member 2013. Fire drill: already done on 23 July 2013, housing repair: terdapat record dalam internal/external complaint book that work has been done to fix the damage to facilities several workers as pipe damage, damage to the door lock, clogged gutters. The gender committee already established on 1 November 2013. Related to that, there are minutes of meetings of the women from four separate mills on 24 August 2013 was attended by 9 participants from Kerdau. There is a Health and Safety Committee meeting of 18th March 2014 was attended by 19 participants. There is a safety and health committee members meeting date 19 Dec 2013, attended by 18 participants. Night patrols are done by auxiliary police (example: night patrol on 15-27 August 2013).

The mill has an appointed official for communication and consultation based on appointment letter dated 3 January 2013. While at Chenor estate, there is a similar appointed communications and consultation office as seen from appointment letter dated 1 January 2014. There is list of stakeholder and records of actions taken in response to input from stakeholders. from example: input for management plan of SIA, record of request from the Department of Occupational Safety and Health of Pahang regrding to using of internet than "dial up modem" on 23/12/2013. And permohonan kebenaran untuk menjalankan kerja-kerja desludging dan membina kolam baru on 17 Feb 2014.

Jentar estate: There are reports of meetings with community community Jentar 2011/2012 on 13 June 2012 was attended by the farm manager, assistant manager I, II assistant manager, assistant manager III, chief clerk, medical assistant, supervisor (supervisor) farm, police assistance, factory representatives Kerdau, representative of Kerdau police station, representatives of Kerdau health clinics, indigenous representatives. The issue presented in this meeting: 1 Lack of transport for the sick 2 Suggested that there should be joint activities such as sports and health screening for employees and families. 3 Police ask residents to fill out a form field data collection. 4 Indigenous people agreed to do joint activities like futsalThere is list of stakeholders 2013-2014 including contractors, suppliers, local community, government agencies, School, hospitals, etc.

There is list of stakeholder and records of actions taken in respnse to input from stakeholders. from example: input for management plan of SIA, record of request from the Pahang Department of Occupational Safety and Health requesting for usage of internet rather than "dial up modem" on 23/12/2013. There is also a request for approval to carry out deslugding and pond construction works on 17 February 2014.

Chenor estate has an updated stakeholder list FY 2013/2014 consist of contractors, vendor/suppliers, government. There are records of communication with stakeholder as stated in management plan on SIA i.e. 1. There are dusty roads in the estate. This complant come from workers. This complaint already close as the solcrete road already done in field 96. 2. JBA water required in order to add or elaborate water resources for workers as first requested in the stakeholder meeting in 2009. The company already followed this issue with the PAIP (Perbadanan Air Pahang) and still waiting for approval from PAIP for joint the valve.In December 2013 the PAIP alrady

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 31 of 52 joint the valve and the company already establish pump house for water from jabatan Pembekalan air, but the power suppply is insuficient. There is evidence that the company already request to Kasyaf Letrik (power authority) to upgarde electric power supply, which is purchase order payment on 19 March 2014 as RM27,500 and now the company is waiting for progress from Kasyaf Lektrik.

It was inform that there are no complaints from external parties, no change from last year. There is no dispute. But there is a complaints records book regarding housing facilities such as for broken pipes, broken faucets, etc. For Jentar estate, there is no complaint from external parties but there is vandalism from the children of indigenous people who damage sign boards and oil palm plantings.

Chenor estate: Terdapat laporan kerusakan fasilitas rumah dri workers as follow: 1. Complaint on February 12, 2014 from worker regarding broken LED light, already fixed on February 12, 2014. 2. Complaint on February 10, 2014, from two workers regarding kitchen water pipe breaks, water pipe behind the house was damaged. Damage has been repaired on the date of February 13, 2014. 3. Complaint regarding home of contractor regarding broken toilet, clogged pipes, overflow of septic tank on 24 December 2013. The problem was fixed on 10 March 2014.

For the mill, there is no land dispute found. At Jentar estate, there is evidence as minutes of meetings with the Tok Batin (representative of Beredut village) Sept 27, 2013 stating that the estate manager requested the cooperation of the parties so as not to damage the inner Tok signs placed by the farm manager. Manager requested that their children not harm the palm tree saplings being grown in the plantations. The manager also contributed in the form of rice and oil as a sign of gratitude.

The documented collective agreement dated 1 st March, 2011 and the provisions of the Agreement shall continue to apply until superseded by a new Collective Agreement or an award of the Industrial Court as detailed in Article 3(d) of the agreement. The collective agreement covers the following and not limited to statutory, terms and conditions of employment provisions relating to field and other general employees and provisions relating to fringe benefits.

There were a total of 114 employees (68 check-roll, 4 contract, 6 executives, 30 staff, 6 auxiliary police) employed in this mill. Normal working hours for staff is 8 am to 5 pm (Monday to Friday), for checkroll (8 am to 4 pm – Shift A, 4 pm to 12 pm – Shift B, Workshop – 7 am to 3 pm, 3 pm to 11 pm (Monday to Saturday), Contract (8 am to 4 pm – Monday to Saturday) for auxiliary police working hours follow their working schedule. Working time was manually recorded using the time punch cards applied. Reviewed selected personal files indicate copies of appointment letters, application forms and disciplinary letters available. Pay-slips indicates Basic Pay, Attendance Incentive, Phone Allowance, Deduction-Normal Advances, Harvesting Incentive and Statutory Withholdings in form of Deduction for e.g. Employers Provident Fund (EPF) and Social Security Organization (SOSCO). Salary bank-in every 1 st week of the month which was followed as per appointment Letter in File.

The last meeting between the employee representatives of the National Union of Plantation Workers (NUPW) Pahang branch on 17 March 2014, the proposed increase in employee wages. No decision on this motion. Record of meeting and minutes of meeting is hold by NUPW.

At the mill, there is a master list of employee February 10, 2014 indicating that the youngest age of employees is 18 years. Kerdau estate, there is master list of employees period of 29.07.2013 consist of Malaysian 92, Indian 39, Indonesian 100, Nepal 4, total 235 persons. The youngest when joined the company is 20 years. No evidence of underaged workers was found.

The mill has a master list of employees dated 10 Feb 2014, which shows that indicating that the youngest age of employees is 18 years old and come from a variety of nationalities (Malaysian and Indonesian) and religions. At Kerdau estate, there is master list of employees period of 29.07.2013 consist of Malaysian 92, Indian 39, Indonesian 100, Nepal 4, total 235 persons. The youngest when joined the company is 20 years. At Chenor estate, there is checkroll employee listing indicates that workers come from any kind of nation as Indonesia, Malaysia, India, Bangladesh and different religions. No evidence of discrimination was found.

The Social Policy details the organization commitment against prevention of sexual harassment and

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 32 of 52 other forms of violence as follows “To develop and apply policy to prevent sexual harassment and other forms of violence against women and to protect their reproductive rights”. The organization has developed manual on implementation of the Gender Policy which includes the following:- • Statement Policy – Statement on the prevention of sexual harassment and all other forms of gender-based violence • Sexual Harassment Grievance Procedure • Guidance for Policy and Grievance Procedure In addition Gender Policy Statement was sighted which also elaborates further on the intent of the women rights. The last gender committee was conducted on 27 th Mac, 2014, attended by the 9 persons both from employer and employee representative. The matter discussed were on:- • Opening, Correction on Minutes of Meeting, Confirmation of Previous Minutes of Meeting, Safety Issues, Report and Suggestion on Committee Activities and Closing. There were no reported sexual harassment and violence cases noted since last year audit (June 2013 to March 2014). There were participation of two Gender Committee Members in the ESH Committee Structure 2013/2014.

FFB pricing is done in MPOB meeting each month. The FFB prices set during the MPOB meeting every month and can be checked online. There is a FFB Purchase Agreement, agrement no: P/AGC/0413/FFB001029L between Sime Darby holdings Berhad and Sri Kerdau Commodities Sdn Bhd about FFB purchase agreement, signed on 31 March 2013, effective date 1st April 2013 until 31st march 2014. Pricing of the FFb supplied during a month shall be calculated using the feollowing price fromulation: {(A-B)xC} + {(D-E) X F} - G = FFB PRICE. A= MPOB monthly average traded price of CPO for peninsular Malaysia. B= MPOB cesses of RM13.00 actual transport cost RM31.00pmt of CPO as stated in the CPO tarnsport agreement, and any other charges or additional cesses/levies/taxes imposed by the relevant authorities. C= oil extraction rate: mill actual - 0.25% (mill margin)-penalty D= MPOB monthly average traded rpice of PK for peninsular malaysia E= MPOB or government cesses/taxes/levy if any F= kernel extraction rate (KER): 5.25% max or mill actual performance, whichever is lower G= Mill's processing cost of RM 39.00 [er metric ton of FFB

Compliance status: Full Compliance

Principle 7: Responsible development of new plantings

Criteria assessed: CR7.1, CR7.2, CR7.3, CR7.4, CR7.5, CR7.6, CR7.7 Criteria not assessed: -

Findings:

No findings related to new development area because the company has no development area program. According to company’s plantation statement document, and plantation history document such land almost all plantation is mature plantation, immature plantation only from replanting activities during 2008-2011.

Compliance status: Not Applicable

Principle 8: Commitment to continuous improvement in key areas of activity

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 33 of 52

Criteria assessed: CR8.1 Criteria not assessed: - Findings:

There was no significant change in the company’s performance during this surveillance audit. The company has demonstrated their performance to make correction and corrective action from last year audit finding such as improvement regarding the usage of PPE for almost all workers. The company has revised their Biodoversity document, and management of waste both domestic and scheduled waste.

Similar as during the previous surveillance audit, the company has documented general mitigation measures for negative environmental impacts and reduction of chemicals as identified in the Environmental Impact Assessment. There is also evidence of implementation of aspects of the plan, i.e. the estates have ceased usage of paraquat since year 2010 and replaced with alternative chemicals, vehicle drivers are trained to drive within speed limits to reduce air pollution due to excessive dust and scrap metal is collected by a supplier. The estates also have a documented action plan for management of identified wastes to reduce pollution as explained under CR5.3. While some aspects of the plan have not yet been implemented, such as composting of organic waste and recycling of domestic waste, certain aspects of the plan are being implemented, e.g. re-use of used tyres for landscaping and flower pots, reselling of used batteries to a licensed collector and reselling of scrap metal to collectors. All estates capture their performance and expenditure in social and environmental aspects in a monthly estate manager’s report which include details of monthly actual expenditure against budgeted actual expenditure for activities such as road maintenance works, weeding and manuring, desilting of drains, soil and water conservation (maintenance of platforms and terraces), and donations and activities carried out for workers and local communities.

Compliance status: Full Compliance

• RSPO SCCS Kerdau Mill is one of the palm oil mills owned by Sime Darby Plantation in Pahang State Malaysia. The mill was commissioned in September 1992 with a production capacity of 30 tons/hours. In November 1995 company increased their capacity from 40mt/hour the increase to 60mt/hour in February 2006 to cater for crops from the estates previously under Golden Hope, a plantation company which is now merged with Sime Darby Plantation Sdn. Bhd. The mill was initially under Austral Enterprise Bhd (AEB) before taken over by Sime Darby Plantation under Strategic Operation Unit 11 (SOU 11). SOU 11 Sime Darby Plantation consists of one palm oil mill (Kerdau mill) and 5 plantation estates called operating unit as FFB supplier, i.e. Kerdau estate, Jenor estate, Mentakab estate, Sungai Mai estate and Chenor estate. Beside crops from internal estate, the mill also receives crops from outgrowers under agent Sri Kerdau Commodities Sdn. Bhd. All production process conducted internally; there is no outsourced process to third party or subcontractor. Sime Darby plantation Sdn. Bhd has prepared a complete standard operation manual and standard operation procedure for all strategic operation unit for daily operation activities as seen on MQMS (Mill Quality Management System) documents. SOU 11 Kerdau Palm Oil Mill is producing CPO and PK, the company has a register for next transaction in the RSPO IT System. The control of IT system will be under mill manager responsibility. The following is a description of the company’s supply chain management system according to the RSPO SCCS requirements, including status of compliance of the company and their outsourced third parties to RSPO SCCS requirements:

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 34 of 52

1. Documented procedures

Findings :

There were several changes made to the company’s Supply Chain management system, following changes on company’s selected supply chain model. There is a set of existing standard operation procedure since incoming FFB until product dispatch, while incoming order procedure is handling by trading department in Sime Darby Head Office in Kuala Lumpur. Sime Darby Plantation provides Quality Management System as a part of compliance to this standard as determined on MQMS Standard Operation Manual and MQMS Standard Operation Procedure. The mill has identified all the processes needed. Their application, interaction and sequence are also determined. The company has established specific procedures regarding handling of certified and non-certified material including mechanism to tracking product from incoming FFB to product dispatch, has determined in the relevant procedure regarding SCC Model which will be implemented in Kerdau Mill according to characteristic of FFB supply base. In the MQMS Standard Operating Procedure ver.1 issued date of 1 Nov 2008 such as procedure of reception station, fruit handling station, sterilisation station, threshing station, pressing station, clarification station, depericarping station, kernel recovery station, boiler station, power generation, product storage and despatch, laboratory, oil recovery station, water treatment plant, effluent treatment plant, and workshop & maintenance. The company has Sustainable Plantation Management System Ver.1 Appendix 15 about procedure of RSPO Supply Chain Certification System and Treaceability rev.1 issued date of March 2013 too. This is procedure covering description of product, supply chain model on relevant outgoing document accompanying the dispatch of certified FFB, FFB receipt, processing and dispatch from POM include info of supply chain model, retention time for WB ticket, FFB consignment note, FFB receive notes, CPO dispatch notes, MPOB L3 forms, CPO dispatch authorisation note and any other relevant document are 5 years, handling material and document certified dan non certified, the validity of RSPO certification of suppliers shall be checked periodically, GTM shall specify the trade names in purchase and sales contracts e.g product name/MB, the mill shall keep records of receipt of RSPO certified FFB and deliveries of RSPO certified CPO and PK, this includes balance of all receipts of RSPO certified FFB and deliveries of RSPO certified CPO and PK on monthly basis, sales and goods out, handling non conforming material/document, outsourced activities, training and claim..

A person having overall responsibility for and authority over the implementation of these requirements and compliance with all applicable requirements has been assigned. There is assignment letter (dated of July 6, 2012) from mill manger about the person in charge as SCCS RSPO management Representive i.e. senior assistant engineer.

Compliance status : Full Compliance

2. Purchasing and goods in

Findings: Kerdau Mill has mechanism to receive FFB. The document to be verified from certified sources are: Delivery note including wet stamp from the origin estate and certified code. A person has been appointed to be responsible to check and ensure the FFB quality and quantity as per purchase documents. When receiving RSPO certified palm, personnel in the material warehouse are to verify the claimed category of the material under mass balance system, supplier supply chain certification number, and quality and quantity of products. It is activity above not carry out by weighbridge operator because there are not information in delivery note about FFB certified that like stated in SOP for RSPO SCCS and traceability (issue : March 2013) point 5.1. This condition was rised as Non-Conformity ( SCCS 2014-01 of 02 ). Weighbridge operator has understood about definition of FFB certified or FFB uncertified and handling of document/record has separated between FFB certified and FFB uncertified. The company has mechanism to inform the CB immediately if there is a projected overproduction.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 35 of 52

Compliance status: Non Compliance

NCR SCCS 2014-01 of 02 There is no information stated in SOP for RSPO SCCS and traceability (issue : March 2013) point 5.1 on outgoing documents accompanying the dispatch of FFB certified from estate requiring weighbridge operators to identify FFBs received as certified or non-certified (stated on SOP point 5.2.2.2)

3. Records Keeping

Findings: The organization has established a mechanism for control and maintenance of the data and document used in production process following MQMS Standard Operation Manual the retention time for all records and reports already defined for at least for five (5) years. The storage and maintainance of documents is the responsibility of the respective departments. The mill has record and balance all receipts of RSPO certified FFB and deliveries of RSPO certified CPO & PK on three months basis material balance period year 2013/2014. The information in mass balance, there are not selling CPO and PK under RSPO claim All volumes of palm oil that are delivered are deducted from the material accounting system according to actual daily conversion ratios. The material balance can show deliver product sales from a positive stock in three months. The company has not prodeced PKO so there are not crushing kernel activity in mill or outsources to thrid party

Compliance status: Full Compliance

4. Sales and Goods Out

Findings: The sales and goods out mechanism of the company are described in their procedure of sales of palm oil. Records of all sold RSPO certified materials are recorded in material balance sheet All products dispatched to buyer, every certified product delivered using Weight Bridge Slip (WBS), and information on WBS already included data about: Reference Nomber, Date of issued, Delivery Order number, Contract Number, buyer and address of buyer, the quantity of the products delivered and reference to related transport documentation. The company has will indicate supply chain model in their sales document including invoice, and other relevant transport document. The implementation will be after company get sales and claim product as CSPO or CSPK.

Compliance status : Full Compliance

5. Training

Findings: The Kerdau mill has training procedure and annual training program for their employee, such as training program for year 2013/2014 where SCCS training/refresh will conducted on June 2014. SCCS training has been carried out on 2012/2013 and records are available.

Compliance status : Non Compliance

NCR 2014-02 of 02

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 36 of 52

The personal in charge (PIC) to implement the requirement of SCCS is a new person such as mill manager, weighbridge operator and assistant manager II but the facility have not conduct SCCS training

6. Claims

Find ings: Kerdau mill has established a mechanism or SOP for claim certified product according RSPO communication and claim requirement. The implementation will begin after company reeives orders for certified products from buyers.

Compliance status: Full Compliance

3.2 Status of Previously Identified Non-conformities During this surveillance assessment, a total of 9 nonconformances were identified. These consisted of 2 major non-conformity and 7 minor non-conformities. For the major non-conformances, the company has taken the necessary corrective action to close these non-conformances within 60 days of completion of the assessment, and this was verified by the audit team through a document checked submitted by the company. For the minor non-conformances, the company has taken corrective action against these as well, and for those which could not be verified as closed through document checks, the closure of these minor non-conformities will be assessed during the next surveillance audit. A summary of all identified non-conformances, corrective actions taken and auditor conclusions is as below:

• RSPO P&C

Criterion 2.1.1 (Major indicator): Evidence of compliance with relevant legal requirements

Non -conformance 2013 -01 of 09 (Major non -conformity)

Evaluation of Compliance Score Card approved by Mill Manager and Estate Managers was found not reflecting actual compliance status as evidence found that some of the legal requirements wrongly decided as “Not Applicable” even actually those are “Applicable” and should be included in the evaluation of compliance process, such as: 1. Environmental Quality (Clean Air) Reg. 1978 requirements for written approval for chimney, fuel burning equipment, air emission standard etc, for the mill. 2. At Jentar estate, legal requirement register under page 8, for part V (Notice of occupation for Factory & Registration & Use of Machinery under Section 37,38,34,39,35,43,44. Factories and Machinery (Safety, Health and Welfare) Regulations, provision of Regulations 24, 25 and 26.

Correction Estate and Mill to change all the “Not Applicable” legal requirements in the LORR to “Applicable” and change the evaluation of compliance.

Corrective Action PSQM Department will review the LORR for estate and mill and advise estate & mill in compliance and implementation of the LORR requirement.

Verification Result: The company provide the revised LORR to include all information required, there ia actual status of legal compliance determined on revised LORR, all applicable regulation has been evaluated and stated

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 37 of 52

as applicable, such as: 1. Environmental Quality (Clean Air) Reg. 1978, for written approval of chimney, fuel burning equipment, air emission standard etc. 2. Legal requirement register under page 8, for part V (Notice of occupation for Factory & Registration & Use of Machinery under Section 37,38,34,39,35,43,44. Factories and Machinery (Safety, Health and Welfare) Regulations, provision of Regulations 24,25 and 26.

Auditor Conclusion: Closed

Criterion 2.1.4. (Minor indicator): A system for tracking any changes in the law.

Non-conformance 2013-02 of 09 (Minor non-conformity) Found Revised Environmental Quality Act 1974 that was revised on August 2012 not identified and included in the Legal Register. The Mill and Estate sampled not aware of this changes as according to paragraph 6.1 of the Standard Operating Manual version 1:2008, stated that Identify changes of Legal and other requirements is the responsibility of the PSQM Department

Correction To liaise with PSQM Department to include the newly revised Environmental Quality Act 1974 in the Estate and Mill Legal and Other Requirement Register (LORR) Corrective Action PSQM Department will review the LORR for estate and mill and advise estate & mill on any new updates on Legal and Other Requirement Registers.

Auditor Conclusions: Closed The company already include the newly revised Environmental Quality Act 1974 in the Estate and Mill Legal and Other Requirement Register (LORR). PSQM Department already reviewed the LORR for estate and mill and advise estate & mill on any new updates on Legal and Other Requirement Registers.

Criterion 4.1.2. (Minor indicator): Records of monitoring and the actions taken are maintained and kept for a minimum of 12 months.

Non-conformance 2013-03 of 09 (Minor non-conformity) There was found an effluent analysis report dated February and March for pH and suspended solids parameters was exceeded the government standard, however there was no action taken by the mill.

Correction Mill has budget and plan for desilting under this FY12/13 in order to reduce suspended solids and pH. Mill has obtained approval from DOE for the desludging works. Mill also will seek advice from R&D to resolve or overcome this issue. Corrective Action Mill to continue with every year proper desilting plan to avoid solid accumulation

Auditor Conclusions: Closed. Mill has budget and plan for desilting under this FY12/13 in order to reduce suspended solids and pH. Mill has obtained approval from DOE for the desludging works. Mill also got advice from R&D to resolve or overcome this issue. Mill will continue with every year proper desilting plan to avoid solid accumulation

Criterion 4.3.1. (Minor indicator): Documented evidence of practices minimizing soil erosion and degradation (including maps)

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 38 of 52

Non-conformance 2013-04 of 09 (Minor non-conformity) The company has established map of locations which have potential erosion, but there is no company plan (documented evidence) of practices minimizing soil erosion and degradation such as for area 25° and sandy soil e.g Jerantut Division etc.

Corrections The areas with the slope of more than 25˚ were identified and Estate has notified the agronomist to conduct a GPS survey to confirm the area. The map of location which has potential erosion was established.

Corrective Action To establish ground covers by planting mucuna sp at 1 plant per palm at slope and open areas as to avoid any future soil erosion.

Auditor Conclusions: Closed The areas with the slope of more than 25˚ were identified and estate has notified the agronomist to conduct a GPS survey to confirm the area. The map of location which has potential erosion was established (it is block P95J amount of 38.01 ha). The company already established ground covers by planting mucuna sp at 1 plant per palm and neprolepis at slope and open areas as to avoid any future soil erosion.

Criterion 4.4.3. (Major indicator 2): Outgoing water into main natural waterways should be monitored at a frequency that reflects the estates and mills current activities which may have negative impacts (Cross reference to 5.1 and 8.1) Non -conformance 2013 -05 of 09 (Major non -conformity)

Sime Darby Plantation: Plantation Quality Management System, Appendix 7, Version 1, 1/11/2008 - SOP for taking water samples from streams/rivers has clearly described that frequency of water sampling shall be carried out on quarterly basis (Jan, Apr, Jul, Oct year 2012) however, records show that the sampling is not done according to schedule

Correction: For year 2013, both estates already sent water samples for testing according to the PQMS requirement.

Corrective Action: Estate already appoint person in charge to manage the water sampling quarterly. The person in charge as below: Sg. Mai Estate: The Asst. Manager Mentakab Estate : The Asst. Manager

Verification result:

The company submit result of water sampling testing both for Sg Mai estate and Mentakab Estate, according to the testing result from Sime Darby Research Sdn. Bhd, It was verified that water quality still comply with government regulation, such as: - Water test analysis result for Mentakab estate: IE-131/2013 period February 2013 for Lanchang Division; IE-127/2013 period February for Endensor Division. - Water test analysis for Sg. Mai estate IE-070/2013 for period January 2013

Auditor Conclusion: Closed

Criterion 4.7.1 .b (Minor indicator 2): All operations have been risk assessed and documented.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 39 of 52

Non -conformance 2013 -06 of 09 (Minor non -conformity) The Hazard Identification and Risk Assessment and Control (HIRARC) were not conducted effectively as evidence found: 1. Grass cutting activity that is being conducted daily at mill, quarters and workers housing area was not identified in the HIRARC document. 2. According to OSH Manual, under paragraph 7.5(b), control measures for newly identified high risk activities shall be recommended to the HIRARC team to be recorded in the HIRARC form and implemented. Found in the newly revised HIRARC (2013), there were no recommended actions taken for some identified high risk activities scored more than 8 but there was no proposal for action taken, i.e. for Section Boiler- Step 1 (Score 12), Road surfacing- Step 1 (Score=8) Construction of run-offs Step 1 (Score=8) 3. Potential Biological Hazard at workplace from old tyres kept at scrap yard near scheduled waste store in Sg. Mai Estate was not identified in the HIRARC which was newly revised on 19 th March 2013.

Correction 1. To include the HIRARC for grass cutting activity at mill and estate. 2. Will liase with PSQM-ESH to advise the recommended action taken for HIRARC with highest score and to include the recommendation in the HIRARC. 3. To include the biological hazard potential at scrap yard in the HIRARC.

Corrective Action Will request PSQM-ESH Safety Officer to advise estate and mill during reviewing the HIRARC for the next financial year.

Auditor Conclusions: Closed 1. The company included the HIRARC for grass cutting activity at mill and estate. 2. The company liased PSQM-ESH to advise the recommended action taken for HIRARC with highest score and to include the recommendation in the HIRARC. 3. The company included the biological hazard potential at scrap yard in the HIRARC.

Criterion 5.3.2. (Minor indicator ): Having identified wastes and pollutants, an operational plan should be developed and implemented, to avoid or reduce pollution

Non-conformance 2013-07 of 09 (Minor non-conformity) Storage of Scheduled Waste is not accordance to the Environmental Quality (Scheduled Waste) Regulations, 2006 where it was sighted that containers are not properly or clearly labeled as specified in Third Schedule and not marked with waste code as in First Schedule for identification and warning purposes. The date when the scheduled waste are first generated, name, address and tel no of waste generator are not clearly labelled on containers that are used to store the scheduled wastes.

Correction To do labeling to the schedule waste storage at estate as per EQ (Schedule Waste) Reg 2006.

Corrective Action Plan To conduct Scheduled Waste Refresher Training to SOU 11 on giving the awareness and competency in managing the scheduled waste.

Auditor Conclusions: Closed The company already labeled the schedule waste storage at estate as per EQ (Schedule Waste) Reg 2006. The company already conducted Scheduled Waste Refresher Training to SOU 11 on giving the awareness and competency in managing the scheduled waste.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 40 of 52

Criterion 6.1.2. (Minor indicator): Evidence that the assessment has been done with the participation of affected parties

Non-conformance 2013-08 of 09 (Minor non-conformity) The Social Impact Assessment report does not cover Orang Asli Community of the Jah Hut tribe who live in reserved area inside Sungai Mai Estate and Kampong Leleh community who live next to Mentakab Estate.

Correction: To seek advice from PSQM Department to include the Orang Asli Community of the Jah Hut tribe (Sg. Mai Estate) and Kampung Leleh (Mentakab Estate) in the Social Impact Assessment Report. Corrective Action: Will liase with PQSM Department on amendment of Social Impact Assesment Report.

Auditor Conclusions: Closed The company already conducted SIA including the Orang Asli Community of the Jah Hut tribe (Sg. Mai Estate) and Kampung Leleh (Mentakab Estate) in the Social Impact Assessment Report.

Criterion 6.1.3. (Minor indicator )

Non-conformance 2013-09 of 09 (Minor non-conformity)

There is no evidence that social impact action plan has cover management for impact to the Orang Asli of the Jah Hut tribe in Sungai Mai Estate and Kampong Leleh community in Mentakab Estate.

Correction To liase with PSQM Department to include Orang Asli of the Jah Hut tribe and Kampung Leleh in the Estate Social Action Plan.

Corrective Action Plan Will liase with PQSM Department on amendment of Social Action Assesment Report.

Auditor Conclusions : Closed The company already conducted SIA including the Orang Asli Community the Jah Hut tribe (Sg. Mai Estate) and Kampung Leleh (Mentakab Estate) in the Social Impact Assessment Report and covering the management plan.

• RSPO SCCS

SCCS Non-conformance No. 2013-01 of 02 The company has not clearly defined the selected supply chain model for Kerdau POM.

Correction:

Mill to obtain from PSQM latest status of supply chain model from PSQM Department.

Corrective Action Plan:

PSQM Department to inform Mill everytime there is changes in Supply Chain Model.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 41 of 52

Verification result : The company provided the document Supply Chain Models for SDP – Malaysian Operations dated 8th April 2013. The document includes a list of palm oil mill under Sime Darby plantation including statement on selected Supply Chain model to be applied by the mill, including for Kerdau Palm Oil Mill i.e Mass Balance . During surveillance audit that the mill still consistency to implement mas s balance system and document of SDP – Malaysia operations per march 2014 that there are revision about supply chain model in SOU Sua Betong mill and SOU Pagoh mill.

Auditor Conclusions : Closed

SCCS Non-conformance No. 2013-02 of 02 The company shall clearly state supply chain model used in relevant document sales or relevant documents, e.g. delivery notes, shipping documents and specification documentation, issued for RSPO certified oil palm products delivered.

Correction: PQSM will advise mill on the model of supply chain for Kerdau POM.

Corrective Action Plan: PSQM will include a list of Supply Chain Model in the latest SCCS SOP.

Verification result : The company provided a sample of contract which contains information about supply chain used, and procedure for certified product dispatch. According to information on the procedure all sales document including delivery notes, shipping document and specification documents will be contain information about supply chain model i.e MB stamp. During surveillance audit, implementation of stamp not usage because there are not dispatch or sell under RSPO claims.

Auditor Conclusions: Closed

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 42 of 52 3.3 Identified Non-conformances, Corrective Actions Taken and Auditors Conclusions

During this surveillance assessment, related to the Principles and Criteria, a total of 8 nonconformances were identified. These consisted of 4 major non-conformity and 4 minor non-conformities. For the major non- conformances, the company has taken the necessary corrective action to close these non-conformances within 60 days of completion of the assessment, and this was verified by the audit team through a document checked submitted by the company. For the minor non-conformances, the company has taken corrective action against these as well, and for those which could not be verified as closed through document checks, the closure of these minor non-conformities will be assessed during the next surveillance audit. A summary of all identified non-conformances, corrective actions taken and auditor conclusions is as below:

• RSPO P&C

Criterion 1.1.1: (Major indicator): Records of requests and responses must be maintained.

Non -conformance 201 4-01 of 0 8 (Major non -conformity)

There was no evidence of response from Kerdau mill regarding to letter no. CBA,7020.600-3/1/10 ( ), on 17 July 2013 from Sekolah Kebangsaan Kerdau 28010 Temerloh pertaining to request for donation for Ihya' Ramadhan. program

Correction The PIC of handling social issues (Mill Assistant Manager) responded to Sekolah Kebangsaan Kerdau and the evidence was prepared.

A logbook for external communication to record all requests and corresponding responses has been established.

Corrective Action The PIC of handling social issues has requested the Chief Clerk (CC) to record all matters related to External communication/request and social issues must be forwarded to him for action as per Procedure,SPMS.

The PIC of handling social issues will verify all the complaints/request in the External Communication Logbook on a monthly basis to ensure that all complaints/requests are responded to or acted upon.

Verification Result:

The company provide the Evidence: 1. Letter response from KKS Kerdau to Sek Keb Kerdau 2. Email from PIC to CC 3. Provision in the External Communication Logbook for PIC verification. Auditor Conclusion: Closed Closure date: 25 April 2014

Criterion 2.1.1. (Major indicator): Evidence of compliance with relevant legal requirements.

Non-conformance 2014-02 of 08 (Major non-conformity) Reviewed Evaluation of Compliance Score-Card approved by respective Mill and Estate Managers indicate 100% compliance in all legal and other requirement was found not reflecting actual compliance status as noted in the sampled evidences as follows:- Kerdau Mill:- 1. 5 selected employees time attendance i.e. punch cards and time slip records for the month of June, Aug and Oct 2013 including Jan 2014 details they were working 1 to 5 rest days in a month (consecutively ranging from 7 to 30 days). For e.g. 2. Employee A , B & D was working on 2, 9, 16, 23 & 30th June 2013 3. Employee C was working on 5,12, 19 and 26th Jan 2014

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 43 of 52

4. Employee E was working on 4, 11, 18 and 25th August 2013

5. 2 selected employees time attendance i.e. punch cards and pay slip records for the month of Jan 2014 details they were working more than 12 hours per day (normal 8 hours + 4 hours overtime). For e.g. 6. Employee A was working 14 hours per day on 7, 8, 20, 22, 23 & 24th Jan 2014 and was working 13 hours per day on Jan 9th Jan 2014 7. Employee B was working 13 ½ hours per day on 26th Jan, 2014

Sg Mai Estate:- 8. Review of the time attendance and pay slip records for the month of Feb 2014 indicates the harvesters and sprayers were working 1 to 3 rest days (consecutively ranging from 7 to 21 days) in a month. For e.g. 9. Employee A was working on 9 and 16th Feb, 2014 10. Employee B was working on 2, 9 and 16th Feb, 2014 Further probe indicates other employees in the same categories were working 1 to 4 rest days (consecutively 7 to 30 days) in a month as detailed in the Estate Daily Attendance Record and Checkroll Report. Jentar, Kerdau and Mentakab:- 11. CPL 1987 still evaluated in the LORR at page 3 of 5, where it was supposed to be replaced by Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013. 12. For Fire Services (Fire Certificate) Regulations 2001 required to have fire certificate, while actually no fire certificate being awarded by BOMBA yet. 13. Sect. 49A of EQA 1974 revised 2012 was still not included in LORR and no competent person available for management of scheduled waste as required. A discussion was made at HQ level with DOE Putrajaya on this matter but action plan to comply was not yet established. 14. Environmental Quality (Scheduled Waste) Regulations) 2005 reguirement for disposal of SW410 category of scheduled waste not fully complied as evidence found rags, cotton glove or paper contaminated with scheduled waste except filters were not collected, included and disposed accordingly to prescribed premise.

Correction Management had communicated with Pejabat Tenaga Kerja Termeloh, EN Nik Azri Bin Nik Busu, Pegawai Tenaga Kerja for clarification via phone call (+609 296 1207) regarding the working on restday. PTK has no issue if the overtime has been paid accordingly as per Section 60.

Corrective Action KKS Kerdau Manager sent memo to KKS Kerdau process department on guideline of working on rest day.

KKS Kerdau manager sent memo to Process department and decided to change the working hours of shift (not sure if this is what you want?) dated 12 April 2014 to ensure KKS Kerdau comply with the overtime requirements.

Evidence: 1. Memorandum dated 12 April 2014 (BEKERJA PADA WAKTU CUTI REHAT). 2. Memorandum dated 12 April (PERTUKARAN WAKTU KERJA SHIFT UNTUK PEKERJA PROSES SAHAJA). 3. All issues regarding to the above, management will refer to Industrial Relationship Department for clarification.

Auditor Conclusions: closed Closure date: 12 April 2014 Criterion 2.1.3. (Minor indicator): A mechanism for ensuring that relevant legal requirement are implemented.

Non-conformance 2014-03 of 08 (Minor non-conformity) Kerdau Mill and Sg Mai Estate:- Mechanism for ensuring compliance is enforced was detailed as follows in “Level 2; Standard Operation Manual (SOM); Appendix 5.2.4a Procedure For Legal and Other Requirements; Issue No: 1; Issue Date: 1st Nov, 2008; 6.4 All requirements shall be evaluated at least once a year. Should there be any non-

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 44 of 52

compliance or potential non-compliance to the regulation or other requirements, necessary corrective and preventive action shall be taken“. However as per finding reported in point 1 (C2.1.1) above there were no evidence sighted that necessary corrective and preventive action were taken. Correction Ldg Sg Mai and KKS Kerdau to review LORR.

Evidence: LORR review by Ldg Sg Mai and KKS Kerdau dated 16th April 2014.

Corrective Action The mechanism or updating, training and montioring of the LORR has now been parked under Group Compliance instead of PSQM. The progress and expected completion date of the new initiative is shown in Attachement (Gant Chart on the progress of EGRC). The project/initiative has already kicked off where the pilot project has already been completed at South Johor (Ldg Lambak and KKS Bk Benut dated 24-25 March 2014).

Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of implementation to verified at next audit.

Criterion 2.1.4.(Minor indicator): A system for tracking any changes in the law.

Non-conformance 20144-04 of 08 (Minor non-conformity) Mill and All Estates:Mechanism for tracking changes any changes in the law was detailed in Level 2; Standard Operation Manual (SOM); Appendix 5.2.4a Procedure For Legal and Other Requirements; Issue No: 1; Issue Date: 1 st Nov, 2008. The changes later was to be documented in the Legal and Other Requirement Register (LOR).

However this was insufficiently tracked and updated as the reviewed LOR does not detail for e.g. and not limited to Employment Act (Amendment) Act 2012, Holiday Act 1951 (Act 369), Immigration Act 1959/63 and Passport Act 1966 was reviewed.

New legal such as Occupational Safety (Classification, Labelling and Safety Data Sheet of Hazardous Chemicals) 2013 was not updated in the Legal and Requirement Register (LORR) reviewed in 2014 at Jentar, Kerdau, Mentakab Estates.The Environmental Quality Act 1974 revised 2012 particularly on Section 49A still not yet included in the LORR. Corrections PSQM will assist to update LORR in the interim. To include Holiday Act 1951, Immigration Act 1959, passport Act 1966 and CLASS 2013. This will be sent to all Operating Units.

Evidence: Updated LORR and records that it has been distributed to the OUs.

Corrective Action The mechanism or updating, training and montioring of the LORR has now been parked under Group Compliance instead of PSQM. The progress and expected completion date of the new initiative is shown in Attachement (Gant Chart on the progress of EGRC). The project/initiative has already kicked off where the pilot project has already been completed at South Johor (Ldg Lambak and KKS Bk Benut dated 24-25 March 2014).

Evidence: Gantt Chart of Group Compliance initiative on LORR matters.

Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of implementation to verified at next audit.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 45 of 52

Criterion 4.6.3. (Major indicator): Pesticides shall be stored in accordance to the Occupational Safety and Health Act 1994 (Act 514) and Regulations and Orders and Pesticides Act 1974 (Act 149) and Regulations. Non -conformance 2013 -05 of 0 8 (Major non -conformity)

At Kerdau Estate, found new chemical store not safe and hazardous in term of design and arrangement as the store was built higher than the ground that will create problem for loading and unloading activity and potential fall of chemicals to ground. The staircase was built without handrail and can potentially lead fall if unbalance as auditor himself was falled down when he use it during audit. The 2 exhaust fans were wrongly fixed with poor circulation of air as both blowing in the air from outside. Suppose it should blow out the air from inside the chemical store. No railing of guarding fixed to the exhaust fan too that can cause potential injury to hand. The fire extinguisher was not available in the chemical store. Another door that lead to the fertilizer store not having any staircase built and if you open the door and walk forward, you will fall down 1.5 meter down.

Correction: Handrails is built at the staircases of chemical store. The exhaust fans have been properly re-installed to ensure that air is blown from the inside out. Guard railings have also been installed at the exhaust fans to prevent hand injury. A fire extinguish has been placed at the chemical store. The side door that leads to the fertilizer store has been locked and safety/warning signage has been placed. Evidence: Photographs of all the above.

Corrective Action: To establish and conduct chemical safety training yearly basis.

All workplace inspection result will be clearly briefed and discussed during Safety Committee Meeting for information and further action.

To include/ establish guidelines for design before, during and after construction works.

Verification result:

The company submit result of water sampling testing both for Sg Mai estate and Mentakab Estate, according to the testing result from Sime Darby Research Sdn. Bhd, It was verified that water quality still comply with government regulation, such as: - Water test analisys result for Mentakab estate: IE-131/2013 period February 2013 for Lanchang Division; IE-127/2013 period February for Endensor Divisin. - Water test analysis for Sg. Mai estate IE-070/2013 for period January 2013

Auditor Conclusion: Closed Closure date: 10th May 2014

Criterion 4.7.1 .b (Minor indicator 2): All operations have been risk assessed and documented.

Non -conformance 201 4-06 of 0 8 (Minor non -conformity , Major escalated) Kerdau Estate Office : 3) A chemical and fertilizer store at Kerdau Estate Office was completed in early March 2014. However, the activities which observed may possibly create new hazards) specifically related to chemical store were not asssesed since the last HIRARC assessment was last conducted on 15th July, 2010. 4) Documented evidence to indicate the HIRARC was revisited since an accident has occured on 17th March, 2014 was not sighted.

Kerdau Mill : The Hazard Identification, Risk Assessment and Risk Control (HIRARC) in Kerdau Mill was not done properly according to requirement of OSH Manual Version 1, 2008, under Chapter 6, Annexure Verification. According to Risk Level Table (Annexure C) for activities found with risk score of score 4-8 (Medium), the Risk Control measure shall need to be improved. Evidence found in HIRARC revised

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 46 of 52

08/02/14, activities found with risk score 4 and above still not having any recommendation for Risk control (Example Breaking up press cake at press discharge (score=6), Workshop Mechanical, Set welding ration correctly (score=6), Cut off electric supply for machinery involve (score=6). In the HIRARC for Jentar Estate which was last reviewed on 01/04/13, it was found at section welding (workshop), the risk assessment score 4, 6 and 8 also did not have any recommended risk control.

Correction Kerdau Estate to review the HIRARC for chemical store and the accident involving motorcyclist on 17th March, 2014, as per SOP

Evidence: 1. Reviewed HIRARC for chemical store (Kerdau Estate) 2. Reviewed HIRARC for motorcycle accident (Kerdau Estate). 3. Risk control measures for sections with risk assessment scores of ≥4 (Kerdau Mill).

Corrective Action To improve the mechanism to trigger HIRARC reviews, OUs to evaluate competency of person incharge for HIRARC review and training to be conduct periodically.

Evidence: 1. Training evaluation for PIC HIRARC review and participant training. 2. Management Program include training peridically basis.

PSQM is in progress of establishing New Manual; Plantation Sustainability Management System (PSMS) for easy reference. Target completion PSMS is expected on 31 December 2014. Auditor Conclusions: Closed Closure date: 15 April 2014

Criterion 5.3.2. (Minor indicator ): Having identified wastes and pollutants, an operational plan should be developed and implemented, to avoid or reduce pollution

Non-conformance 2014-07 of 08 (Minor non-conformity) There was no evidence of waste management implementation since: 1. There were found rubbish scattered at backyard of the worker housing 2. Found rubbish in the tray mixed between plastic, leaf and domestic waste. (mill, Jentar, Kerdau, Mentakab, Chenor) 3. Found hazardous waste (minyak hitam / black oil) in open container scattered at backyard of worker housing at Mentakab division. Correction Cleared all rubbish at the backyard of workers housing area, separate waste before disposal and handling of spent oil as per scheduled waste requirements. Workers are also briefed regarding the waste management and handling procedure. Evidence: Waste management training records i.e. attendance list, training material, photographs

Corrective Action Plan Medical Assistant as the PIC (management personnel) shall include segregation of domestic waste and scheduled waste as one of the items to be monitored during the linesite inspection.

Evidence: 1. Improved linesite inspection logbook. 2. A procedure for handling domestic waste, which includes recycling (SPMS Appendix 9 Procedure for Handling Domestic Waste) and also the Waste Management Plan FY13/14 were available.

Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of implementation to verified at next audit.

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 47 of 52

Criterion 5.5.3. (Minor indicator): No evidence of burning waste (including domestic waste).

Non-conformance 2014-08 of 08 (Minor non-conformity) There was evidence of burning waste at worker quaters, for example: 1. House no.8 at mill (KKS Kerdau) 2. House no. 4B 2004 at Jentar estate 3. House no. 27, 28, 29 at Mentakab division Correction: Cleared all traces of open burning and educate workers on no open burning/ waste handling. Evidence: Records of training on No Open Burning i.e. attendance, training materials.

Corrective Action: PIC of linesite inspection shall include open burning as one of the items to be monitored during the linesite inspection. To place No Open Burning signboards at strategic locations. Evidence: 1. Improved linesite inspection logbook. 2. Photos of No Open Burning signboards

Auditor Conclusions: Evidence of immediate action taken was accepted. Effectiveness of implementation to verified at next audit.

• RSPO SCCS A total of 2 major non-conformities were identified. Actions taken to close the non-compliances raised are as described below

SCCS Non-conformance No. 2014-01 of 02 There is no information stated in SOP for RSPO SCCS and traceability (issue : March 2013) point 5.1 on outgoing documents accompanying the dispatch of FFB certified from estate requiring weighbridge operators to identify FFBs received as certified or non-certified (stated on SOP point 5.2.2.2)

Correction: RSPO and Certification Unit has conducted Internal Training on SCCS requirement. Revision is planned to be done to the darft SOP on 15th May 2014 by Supply Chain Working Group in PSQM.

Corrective Action Plan : RSPO & Certifications Unit (Supply Chain Working Group) to revise and improve SOP on SCCS and distribute to all Sime Darby Plantation Mills

Verification result : The company has provided draft SOP on 15 May 2014 about clause 5.1 FFB receipt and stamping guidelines for RSPO Certified.

Auditor Conclusions : Closed

SCCS Non-conformance No. 2014-02 of 02 The personal in charge (PIC) to implement the requirement of SCCS is a new person such as mill manager, weighbridge operator and assistant manager II but the facility have not conduct SCCS training.

Correction:

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 48 of 52

RSPO and certification unit has planned to conduct Training SCCS at KKS Kerdau on 12th May 2014 as per email attached.

Corrective Action Plan

The mill will conduct peridically awareness training to person in charge to implement the requirements of SCCS. All training record will keep as evidence.

Verification result : The company has provided about memo from PSQM to mill manager (Kerdau mill) about invite of SCCS training on 12 May 2014, list of participant (weighbridge, mill manager, assistent manager) and documentation.

Auditor Conclusions: Closed

3.4 Noteworthy Positive Components

No. Criteria Positive observation 1. 5.1 Very clean in all company’s facility such as mill and estate. 2. 8.1 Good company commitment regarding implementation of RSPO 3. 4.3 Good implementation of action to prevent erosion such as construction of terracing for replanting area, construction water bunds in terracing area etc.

4. 6.5 Good attention to all workers including foreign workers, they all satisfy with company salary 5. 6.10 Good relationship between company and local community 6. 4.7 Good signages, warning and labeling on the aspect of safety and health observed at chemicals store, mixing area, workshop and by the road side.

7. 6.5.1 Company regulation regarding Service Gratuity Payment still not understod by the workers.

3.5 Issues Raised by Stakeholders and Findings Pertaining to Issues

Below is a summary of issues raised by stakeholders interviewed on-site

No. Issues Raised Management Response Audit Verification

Interview with local Company has good communities, most of This is part of company’s social 1. relationship with local them has positive responsibility stakeholder impresion for company’s performance. It was sighted that Workers are satisfied with Company aware that without company provide good 2. company’s facilities and workers, company will not have housing, mosques, salary received. good income. churche, sport center etc.

QMF: RSPO-007b-11 RSPO 3'd Annual Surveillance Audit Report fUVRtreinland@ - Sime Darby Plantation Sdn'Bhd- Frecisely Eight. Kerdau Palm Oil Mill'Pahang'

Page 49 of 52

4.0 CERTIFIED ORGANISATION'S ACKNOWLEDGEMENT OF INTERNAL RESPONSIBILITY

4.1 Date of Next Surveillance Visit

The next surveillance visit is planned for April 201 5

4.2 Acknowledgements of tnternal Responsibility and Formal Sign-Off by Client

the aS- It is acknowledged that the assessment visit was carried out as described in this report and we accept sessment findings and repod content.

Signed on behalf of Sime DarbY Signed on behalf of TUV Rheinland MalaysiaIndonesia

Fadli Position: Lead Auditor Date: r-6l1hY Date: '1 6 September,20'14

OMF: RSPO-007b-1 1 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 50 of 52 APPENDICES Appendix 1: List of Abbreviations

BOD Biological Oxygen Demand CHRA Chemical Health Risk Assessment CLASS Classification, Labelling and Safety Data Sheet of Hazardous Chemicals CPO Crude Palm Oil DOE Department of Environment DOSH/JKKP Department of Occupational Safety & Health / Jabatan Keselamatan & Kesihatan Pekerja EAI Environmental Aspect and Impact EIA Environmental Impact Assessment EIE Environmental Impact Evaluation EMS Environmental Management System ERTs Endangered, Rare & Threatened species EQ / EQA Environmental Quality / Environmental Quality Act ESH Environmental Safety & Health FFB Fresh Fruit Bunches EFB Empty Fruit Bunches FMA Factory and Machineries Act HCV High Conservation Value HIRARC Hazard Identification, Risk Assessment and Risk Control HQ Headquarters IPM Integrated Pest Management JPAM Jabatan Pertahanan Awam Malaysia (Malaysia Civil Defense Department) KER Kernel Extraction Rate LCC Leguminous Cover Crops LTA Lost Time Accident LORR Legal and Other Requirement Register MOP Muriate of Potash MSDS Material Safety Data Sheets MQMS Mill Quality Management System NGO Non-Government Organization NUPW National Union Plantation Workers OER Oil Extraction Rate OSH Occupational Safety & Health PERKESO Pertubuhan Kebajikan Sosial (Social Welfare Organization) PIC Person-in-charge PKO Palm Kernel Oil PMT P Permit/Pendaftaran Mesin Tekanan (Permit / Registration of Pressure Machine) POM Palm Oil Mill POME Palm Oil Mill Effluent PPE Personal Protective Equipment PSQM Plantation Sustainability and Quality Management QMO Quality Management Officer R&D Research and Development SDP Sime Darby Plantation SDPA Sime Darby Plantation Academy SIA Social Impact Assessment SPMS Sustainable Plantation Management System SOCSO Social Security Organization SOP Standard Operating Procedure SOM Standard Operation Manual SOU Strategic Opération Unit SW Scheduled Wastes

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 51 of 52 Appendix 2: List of Stakeholders Interviewed and Contacted

Name of No. Institution - Address Remark Stakeholder Stakeholders Interviewed On-Site 1. Salahuddin Safety Officer-Kerdau Estate 2. Kamarul Sg. Mai Estate Manager 3. Batumalaisamy Estate Manager-Jentar Subramoniom 4. M. Azlan b. Md Nawi Assiatant Manager-Jentar 5. Densy Nazrulizwan Sungai Mai estate 6. Amirrudin Abdul Darman Jentar Estate 7. Balakrishnan Mentakab estate 8. Muhammad Zulkefli bin PZO Md Isa 9. Harun A Rusli PZO 9. Nurul Atiqah bt. Johari Kerdau estate 10. Muhammad Shokkeri Job Sg. Mai estate 11. Nasrudin M. Sharif Kerdau estate 12. Nazrulizwan Mohamed Sg. Mai Estate 13. Mohd Ezry Shazam Asst. Manager Chenor estate 14. Mulyadi Mill worker from Indonesia 15. Mr. Hairurrozikin, Mill worker from Indonesia 16. Mr. Tahiruddin, Technical supervisor Kerdau Estate 17. Mrs. Noriati, Kerdau Estate 18. Mr. Randir, Gardener at Kerdau Estate 19. Mr. Senduk, Gardener at Kerdau Estate 20 Mr. Lalbahadur, Manurers mandor at Kerdau Estate 21 Mr. HArendra, and Vijay Workers at Kerdau Estate) Prakash 22 Mr. Indra and Mr. Herman Harvesters from Indonesia) 23 Supervisor East Division at Kerdau Es- Mr. Khairul Azhar tate 24 Mrs Salina and Mrs Daycare worker at Kerdau Estate Rohani 25 Mr. Rahim, Indonesian worker 26 Mr. Saprah, Indonesian worker 27 Mr. Saman Arifin Indonesian worker 28 Mr. Hamdi Indonesian worker 29 Mr. M. Izri Chenor estate manager 30 Mr. Heri and Mr. Junaidi FFB loading worker at Chenor estate 31 Mr. Jariah and Mr. Nur- Harvester at Chenor estate samin and Mr. Junaidi 32 Harvesting supervisor panen at Mr. Hamdani Chenor 33 Madam Tan Leader of village Sungai Jerik 34 Mr. Ahmad Yani Carpenter at Chenor estate 35 Head of Union Worker at Chenor es- Mr. Jefri tate 36 Mr. Zainal Harvester at Mentakab estate 37 Paramedic Mentakab estate

QMF: RSPO-007b-11 RSPO 3rd Annual Surveillance Audit Report - Sime Darby Plantation Sdn.Bhd–

Kerdau Palm Oil Mill- Pahang-

Page 52 of 52 Appendix 3: Observations and Opportunities for Improvement

No. Observations / Opportunities for Improvement Criteria 1. At Kerdau Mill, the first aid box was kept inside Chargeman Room and locked, Man- 4.7.1 dore should keep first aid box at field and in proper condition and order. 2. Observe no continual improvement activities for segregation maximizing recycling 8.1.3 and minimizing domestic waste generated from office, housing. 3. Waste management Action Plan need to be improved by having actual type of ac- 5.3.2 tual waste generated, location where it generated from and proper actions needed to avoid and reduce pollution.

QMF: RSPO-007b-11