Importance of Warehouse Inspection Procedures

1. Importance of WarehouseInspection Procedures

2. Value of Law No. 9 Proactive Approach to Protect the Integrity of the Indonesian Agricultural Markets Verses Today�s World Conditions in the Financial Markets

3. CoFTRA WarehouseInspection Procedures Legal Review of the Warehouse Operator - Business Entity Financial Review of the Warehouse Operator�s Certified Financial Statement for Real Assets in Comparison to Storage Obligations to Depositors

4. CoFTRA WarehouseInspection Procedures Assure Control of Warehouse Facilities Condition and Appropriateness of Warehouse Facilities Inventory and Assessment of Stored Grain Quantity and Quality Determination and Documentation of Grain Storage and Contract Obligations

5. CoFTRA WarehouseInspection Procedures Review and Evaluation of Record Keeping System Compliance Review of Law No. 9 Requirements Assessment of Warehouse Operators Business Practices Provide Proactive Training Education

6. CoFTRA WarehouseInspection Procedures Inspections Conducted on an Unannounced Basis 3 month cycle at the Beginning Consistent Frequency and Rotation (2 Visits in a Row) Risk Based (Statistically Sound) Preparation of Examination Reports and Corrective Actions

7. CoFTRA WarehouseInspection Procedures Maintenance of Audit History Central File Comprehensive Examination Review and Follow-Up Referral for Compliance Actions Compliance and Corrective Action Directives and Reviews

8. CoFTRA WarehouseInspection Procedures Maintenance of Operational History Central File Disciplinary Actions and Operational Restrictions

9. Warehouse Integrity All Storage Depositors Treated Equally No Favoritism Fees/Tariff Publicly Posted for All to View Prevent Illegal Activity No False Records No Fraud/Criminal Activity

10. CoFTRA Organization 3 Fundamental CoFTRA Legs Legal Staff Financial Staff Field and Central Office Inspection Staff All 3 Legs Work Together !

11. Three Key Items to Remember Indonesia Has a System to: Prevent Losses Manage Losses Improve its System Based Upon Your Recommendations

12. Role of PERFORMANCEGUARANTEES

13. Performance Guarantee Purpose � Protect: Storage Depositors Integrity of Warehouse License System (Warehouse Operators) Financial Integrity of a Negotiable Instrument - Warehouse Receipt � (Just like Cash)

14. Performance Guarantee Purpose � Protect (cont.): Agricultural Market Liquidity Bank Lending in Indonesian Agriculture Must be Cost Effective Indemnity Solution

15. World History History Shows Us Every Warehouse Receipt System has been Tested: There is Only 1 Chance to Succeed or Fail

16. World History There Has Never Been: A Warehouse Receipt System That Recovered and Operated Again Without a Performance Guarantee System

17. Performance Guarantee Law No. 9 Must Have the Ability to Recover From Warehouse Failures: Provide depositors 100% Financial Coverage of Storage Obligations Example Rice/Corn Warehouse Example Cocoa/Coffee Warehouse

18. Financial Assurance Corn/Rice Warehouse = 6,000 MT Storage Capacity x Commodity Value = Total Depositor Storage Value 6,000 MT x 4 Million Rupiah/MT = 24 Billion Rupiah 6,000 MT x $400/MT = $2.4 Million

19. Financial Assurance Cocoa/Coffee Warehouse = 6,000 MT Storage Capacity x Commodity Value = Total Depositor Storage Value 6,000 MT x 30 Million Rupiah/MT = 180 Billion Rupiah 6,000 MT x $3,000/MT = $18 Million

20. Indemnity Fund Initial Funding Provided by: Government Guarantee Government Borrowing Authority (Repay with Interest) Repayment? Assessments Collected from Warehousemen on Actual Amount of Commodity Stored � Monthly?

21. Indemnity Fund Suspend Collections When a Maximum is Reached Restart Assessments When a Minimum is Reached Different Fund AND Contribution Rate for Each Commodity Patty Rice/Milled Rice/Corn Cocoa/Coffee

22. Indemnity Fund Indemnity Fund Management Board of Directors All Interested Parties Represented CoFTRA Provides Operational Management Claims Management Claims Approved by the Board