APP Group 1. Major Milestones

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2. First QuArterly ProGress rePort

2.1. APP Group 2.1.1. Major Milestones Asia Pulp Paper Group has accelerated its roadmap com- mitments to sustainability by announcing a suspension of natural forest clearance in the environmentally-critical Jambi region of Sumatra in Indonesia, 3 months ahead of target. Two independent pulpwood suppliers in Jambi – Tebo Multi Agro TMA and Rimba Hutani Mas RHM - have agreed to join APP’s own Wira Karya Sakti WKS company in the region, by suspending natural forest clear- ance with immediate effect while HCV assessments are conducted. The Jambi moratorium will cover a gross concession area of 55,584 hectares - in addition to APP’s own WKS concession gross concession area of 293,812 hectares, where suspension of natural forest clearance is already in place. These two independent TMA and RHM concessions in Jambi are vital areas for a large land- scape forest conservation initiative. APP imposed moratorium of natural forest clearance across its supply chain in Jambi province. Two independent suppliers, TMA and RHM, joined APP- owned WKS’s HCVF commitment. MAjor Milestones 1 As of September 1st 2012 APP, working together with our independent pulpwood suppliers, is imposing a moratorium on all natural forest clearance across its supply chain in Jambi province until HCVF assessment is completed. APP is proud to report that in the first quarter of our Sus- tainability Roadmap imple- mentation, after our public announcement on June 5th 2012, we have achieved two major milestones. 4 APP Responsible and Sustainable Business Policies include: • Environment Stewardship Policy • Responsible Fibre Procurement Processing Policy • Corporate Social Responsibility Policy • Employee Welfare Policy • Chemical Substance Article Procurement Policy These policies have been developed by listening to our stakeholders and consulting experts in a variety of professional fields. This has taken place with the recognition that a balance of the three sustainability pillars – environmental, social and economic – is required for the long-term success of our business and for the long-term needs of the communities and forested areas in which we operate around the world. They are part of our management system and shall be regularly reviewed and revised as necessary in accordance with the current best practices. MAjor Milestones 2 APP has also completed its updated Responsible and Sustainable Business Declaration, which covers all aspects of our operations with key policies that support our commitment to operate responsibly and sustainably. Beyond Jambi, APP and its independent NGO partners are constantly reviewing our sustainabil- ity roadmap to implement and accelerate the HCVF commitments by our pulpwood suppliers in Indonesia. We are now looking to identify which areas should be prioritised for the next phase of HCVF assessment. 5 APP puts the responsible management of its fibre supply as a priority in its commitment to sustainable operations and environmental protection. The fibre that we use to manufacture our paper products is a combination of virgin wood fibre and fibre from recycled paper waste, from imported and local sources. The foundation of our supply chain is wood legality. To be a responsible consumer of wood fibre we have to go a step further to secure a sustainable source of wood. Therefore, we shall continue to drive processes to ensure that we only accept: • Wood that is properly checked and verified as to legal origin and chain of custody • Wood harvested that does not violate traditional and civil rights • Wood harvested in forests in which high conservation values are protected by forest management activities • Waste and wood residues, as set out by Government regulations, that are not listed under CR IUCN CITES Appendix I • Wood from forest management units free from genetically modified trees, unless assessed under best practice standards • Wood harvested in compliance of the ILO Core Conventions APP Responsible Fibre Procurement Processing Policy key Policies And Guidelines: 1 6 In support of our policies to protect the environment and procure our fibre responsibly, APP has developed this policy implementation guideline for our commitment to high conservation value HCV protection. This provides steps and a timeline to guide us and our suppliers in our efforts to ensure that the wood we use is harvested from forest in which high conservation val- ues are protected by forest management activities. The policy has eight principles: I. APP will be 100 reliant on sustainable pulpwood plantations by 2015. We will continue to develop ‘low carbon lands’ for plantations post 2015, having defined a cut off in TCHa for ‘low carbon lands’ as part of High Carbon Stock HCS research. II. With respect to APP owned concessions in Indonesia: High Conservation Value Protection Policy Guideline 2 a. Effective from June 1st 2012, we suspended natural forest clearance while High Conservation Value Forest HCVF assessments are conducted. b. We have engaged credible experts to conduct HCVF assessments, in accordance with HCV Resource Network best practice. The assessments will be based on a multi- stakeholder approach. c. We will accept and abide by the full HCVF Assessment results to protect and enhance HCV accordingly. To implement this commitment, we will: • Maintain systems and procedures to reasonably ensure that wood from illegal sources shall be rejected before it enters the mill. These systems and procedures will be regularly veri- fied and certified to the highest standards by independent and certified 3rd party auditors. • Ensure that a multi-stage environmental assessment process is conducted prior to forest plantation development. In addition to Government regulated assessments, we will also pursue the High Conservation Value Forest assessment in accordance with HCV Resources Network methodology and tools. • Expect that wood suppliers comply with our commitment above. • Ensure that wood suppliers who are found in breach of relevant legal requirements and the provisions of this policy shall be immediately warned and, for repeated violations, have their contracts reviewed for termination. 7 a. With an international NGO partner, we will engage, with immediate effect, our independent suppliers to adopt HCVF assessments, to be completed by end of 2014. b. We will review and re-evaluate supply agreements where HCVF assessments are not conducted. In addition to HCVF assessment on our wood suppliers’ production forest concession areas, APP will undertake the following activities in support of our effort to protect and conserve HCV areas: IV. We will enhance our multi-stakeholder strategies to conserve HCV forests. V. APP will lead an independent research initiative and multi-stakeholder engagement on High Carbon Stock HCS to define and implement an HCS cut-off point for pulpwood plantation development. VI. We protect peat land in accordance with the Government of Indonesia’s laws and regulations. VII. We will enhance our community engagement programmes to ensure that we are operating in line with best practice requirements for Free, Prior and Informed Consent. VIII. We will continue to review and further strengthen our traceability systems. III. With respect to APP’s independent pulpwood suppliers in Indonesia:

2.1.2. Progress towards 100 Reliance on Plantation Fibre

• APP’s target is to end the use of Mixed Tropical Hardwood MTH in the supply chain by 2015. • APP’s target is to achieve 100 reliance on plantation fibre by 2015, subject to a maximum 5 tolerance for MTH waste and residues. • APP is already ahead of its target to reduce MTH in the supply chain. These residues and waste are defined by strict Government regulations, and are not listed under CR IUCN CITES Appendix I. For examples residues may include wood from land clearing for Govern- ment infra-structure and settlement developments. • By June this year, MTH was calculated to account for just 8 of APP Group’s supply of raw materials, ahead of the target of 12. 8 Good progress has been made in accelerating the roll-out of our new HCVF commitments to both owned pulpwood concessions and independents. Progress on preliminary HCV assessment on APP owned concessions: • APP is on track to complete the HCV assessment process for its own pulpwood concessions by the first quarter of 2013. • For owned concessions in Jambi and Riau provinces, the HCV assessment process is over 80 completed, and is at the draft report stage. • For owned concessions in West Kalimantan, the HCV assessment process is over 50 completed, with site visits currently taking place. 2.2. APP Indonesia 2.2.1. Acceleration of HCVF Commitments