1. kpmg Canfor Vavenby Division Audit Report April 20-21 2009 SUMMARY OF AUDIT FINDINGS Objectives Findings Conclusions SUMMARY OF AUDIT FINDINGS Objectives Findings Conclusions

2. kpmg Objectives ISO 14001, CSA Z809 and PEFC CoC periodic assessment as part of the sampling of Canfor FMS corporate EMS and CoC certificate and Canfor CSA multi- site certificate.

3. kpmg Findings Operational Strengths Prior Non-conformities New Findings Operational Strengths Prior Non-conformities New Findings

4. kpmg Operational Strengths 7.5.1 / 4.5.1 - File reviewed for follow-up on an un-authorized harvest (CP 263 Blk. M161) of a WTP. Issue was noted during 2008 year-end post harvest reconcilation of areas harvested and reported to MoFR C&E. Canfor Vavenby have done a good job investigating how the harvest occurred (RCA) and are implementing a process to ensure it is not repeated.

5. kpmg Operational Strengths 4.4.4 / 7.4.4 – Block files for completed harvest units reviewed and were well organized. All were complete with all required FMS forms / records (preworks and inspections) completed. 6.1 - Likewise PEFC CoC records and documentation was well maintained and accurate. 4.4.4 / 7.4.4 – Block files for completed harvest units reviewed and were well organized. All were complete with all required FMS forms / records (preworks and inspections) completed. 6.1 - Likewise PEFC CoC records and documentation was well maintained and accurate.

6. kpmg Prior Non-conformities The 2008 KPMG PRI external audit of the Vavenby Division did not raise any findings of non-conformance with respect to the ISO 14001, CSA Z809 and PEFC Annex 4 standards.

7. kpmg New Findings – ISO 14001, CSA Z809 & PEFC CoC 4.5.5 / 7.5.4: FMS at Section 16.2 requires annual internal audit at all divisions. Also, requires that all elements of the 14K / CSA standard are to be audited at each division over the 3 year period. Furthermore, divisions with CSA have elements of Z809 that are to be audited annually. The annual audit schedule states the standards and dates for each operation’s internal audit, but it is not apparent how divisions ensure that all elements of the standards (including the mandatory annual Z809 elements) are tracked to demonstrate that the intent of Section 16.2 is met over the course of a registration cycle.

8. kpmg New Findings – ISO 14001, CSA Z809 & PEFC CoC 7.2: While FMS Manual Section 16.2 lists PEFC Annex 4 as one of the Audit Criteria to be used during the annual audit it does not, in the Audit Schedule paragraph, describe the audit coverage (full standard or sampling approach) as is the case for the 14001 and CSA Z809 standards. Nor is it addressed in CoC SOP (Sept 08).

9. kpmg Overall Conclusions The ISO 14001 EMS continues to be effectively implemented. The SFMS continues to conform to the CSA Z809 Standard. The ISO 14001 EMS continues to be effectively implemented. The SFMS continues to conform to the CSA Z809 Standard.

10. kpmg Reporting Our findings will be summarized in a corporate summary report in November and a public summary report will be made available for review and comment once all action plans have been approved.

11. kpmg Focus Areas for the Next Assessment Implementation (if any) of the requirements of the new CSA Z809-2008 Standard. Active operations Implementation (if any) of the requirements of the new CSA Z809-2008 Standard. Active operations