While all Performance Standards (PS) are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards: PS1: Social and Environmental Assessment and Management System; PS2: Labour and Working Conditions; PS3: Pollution Prevention and Abatement; PS4: Community Health, Safety and Security. The following Performance Standards were screened for but not found relevant for the actual project: PS5: Land Acquisition and Involuntary Resettlement as all current operations are carried out within the existing plant areas. PS6: Biodiversity Conservation and Sustainable Natural Resource Management as the Company has no involvement in natural resource operations. PS7: Indigenous People as all current projects are carried out in the developed urban areas and there are no indigenous people relying on traditional livelihoods around the project sites. PS8: Cultural Heritage as all land used by Monocrystal has been converted to industrial uses for decades. The Company and IFC have identified some environmental, health and safety issues, related to the existing operations, which will be addressed as part of the project implementation. These issues are covered in the attached Environmental and Social Action Plan (ESAP).

Neither Monocrystal nor Atlas is scheduled for major retrenchments, closure, or expansions outside their territories. This is a category B project according to IFC’s environmental and social review procedure, because potential adverse social and environmental impacts are limited and readily mitigable.

The Company has presented its plans to mitigate the project’s environmental and social impacts and risks. IFC has reviewed those plans and concludes that, upon implementation of the specific agreed actions described below, the project will comply with IFC’s Policy and Performance Standards on Social and Environmental Sustainability (PS or Performance Standards). The findings of the IFC’s review and conclusions are summarized for each applicable PS in the paragraphs below. - PS:1 Social and Environmental Assessment and Management System (ESMS) E&S Assessment To further develop its sapphire business, the company acquired Belgorod-based Atlas in early 2008. Upgrading is taking place within existing facilities and does not require additional land acquisition. As such, the project does not need E&S assessment and public consultations. Management Program As part of the ISO 9001 Quality Management System, Monocrystal has developed and implemented Environmental Safety standard and designated a full time specialist with responsibility and authority for E&S issues. The Company is currently in the process of integrating Atlas into Monocrystal, mostly by transferring established processes and systems to the new entity. As part of this merger, the company will ensure that Monocrystal environmental procedures are implemented at Atlas and management of E&S issues is consistent at both enterprises. As the first step, the company will carry out a gap analysis to identify compliance status of Atlas operations against requirements of local environmental regulations and IFC PSs. Based on the findings, the Company will develop and present to IFC an Action Plan to address the identified issues, and establish a Management Program to stipulate continuous improvement actions in the future. - PS2: Labor and Working Conditions At the moment of appraisal, Monocrystal employed 920 people in Stavropol and 400 at the Atlas facility in Belgorod. As of May 2009, number of employees reduced to 863 people and 277 accordingly. Labor efficiencies are done to respond to the current financial situation. While implementing layoffs, Monocrystal is committed to comply with national laws. Monocrystal’s hiring strategy at the management level involves identifying talented university students in various fields, from law and statistics to engineering and economics, and tracking them until graduation. The main feeder university is the one in Stavropol. The Company also allocates places for internships through which students can be offered positions if successful. Once hired, there is a strong focus on training, mobility and grooming people from within. Successful professionals are rewarded through promotions and significant responsibility at a young age. Presently, there is no organization of workers at Monocrystal. In the absence of collective bargaining, the Client has adopted HR Policy and internal Code of Conduct, which address terms of employment and working conditions consistently with Russian Labor Code and regulations. Going forward, the Client will not discourage workers from forming or joining workers’ organizations of their choosing or bargaining collectively and provide a grievance mechanism for workers to raise reasonable workplace concerns consistent with the requirements of PS2. Occupational health and safety (OHS) at Monocrystal is managed by the nominated responsible persons. The procedures on safety issues have been developed in line with federal OHS regulations. The safety record statistics represents a fully acceptable performance. -PS3: Pollution Prevention and Abatement: Water consumption and effluent discharges: Monocrystal is receiving water from the public water supply system. Process wastewater is receiving final treatment at an internal wastewater treatment plant (WWTP) and is recycled as process water. Last year, Monocrystal spent 110 mln. Rub for the reconstruction of water recycling system and is planning to expand its dry-cooler system which will significantly reduce the consumption of fresh water. Sanitary water is delivered to the municipal waste water treatment system together with the limited industrial waste water from the production. Storm water is discharged directly to the river Medvedka. Effluent discharge standards are based on Russian standards for sensitive fisheries. Values of some of the pollutants in the storm water are in excess of local standards. The Company and IFC agreed in the ESAP to develop and implement a Program to achieve local water quality requirements. Solid waste management: Annual generation of waste at Monocrystal is 340 tonnes. None recyclable solid waste streams, as well as hazardous waste streams (e.g. used mercury lamps) are handled by licensed contractors or municipal disposal systems. Greenhouse emissions: The combined CO2 emission from consolidated operations of Monocrystal has been estimated to 17715 tons. Energy efficiency: Monocrystal is paying close attention to energy efficiency and resources preservation, and develops annual programs to improve energy efficiency and utilities consumption. One of the projects under consideration is the introduction of CHP system (a trigeneration unit). - PS 4: Community Health, Safety & Security The company’s standard operations do not result in community health, safety and security issues. Monocrystal has Emergence Response Plan in place. The plan covers potential emergency situations, identifies development scenarios of the emergency situations, formulates personnel emergency warning systems, includes emergency detection and response scenarios, and provides plans for evacuation from hazardous zones. The emergency response is a part of health and safety training of the workers and is coordinated with the city authorities.

Current community engagement typically include sponsoring of the selected city events and organizing various social activities for employees and their families, close cooperation with local educational institutions, charitable activities, etc.

The project does not involve any new construction and, therefore, no environmental impact assessment was carried out for this project. Company’s Action Plan based on the ESAP agreed between Monocrystal and IFC will be published in Russian on the corporate web-site of Energomera at www.energomera.ru. Going forward, in the framework of environmental, health and safety management system Monocrystal will develop mechanisms to provide periodic updates to the public on environmental, health and safety performance and action plans to be taken for continual environmental improvements.