While all Performance Standards 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 Systems; PS2 – Labor and Working Conditions; PS3 – Pollution Prevention and Abatement; PS4 – Community Health Safety and Security; PS5 – Land Acquisition and Involuntary Resettlement; and PS6 – Biodiversity Conservation and Sustainable Natural Resources Management;

IFC’s environmental due diligence included review of a detailed environmental and social questionnaire completed by the client and a physical visit to Frikom and Nova Sloga operating facilities. The data provided and physical visits confirmed that, apart from upgrading wastewater treatment systems, there are unlikely to be significant issues associated with Frikom's frozen food, pastry, ice cream and bottled mineral water plants. Frikom’s production facilities in Serbia are ISO 9001(Quality Management) and Hazard Analysis of Critical Control Points (Food Safety) certified to Codex Alimentarius. Further strengthening of food safety in field and processing activities, OHS and resolution of incomplete wastewater treatment will be incorporated into the updated Environmental and Social Action Plan (ESAP). Frikom and Nova Sloga have already completed numerous items of IFC’s previous project’s ESAP dated June,16, 2009 (http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/69e1a311e42a32c7852576ba000e2dbf?opendocument), including: - Frikom and Nova Sloga teams have performed an implementation analysis between integrated farm quality assurance and food safety program Global GAP for Nova Sloga Cooperant Operations in July 2010; - Frikom and Nova Sloga teams have prepared Nova Sloga Food Safety Implementation Plan for Operations for implementation and certification of a HACCP food safety program for all Nova Sloga food processing (bottled water and frozen vegetables and fruits) and manufacturing operations. A food safety consultant has visited the facilities and prepared a plan. Nova Sloga team have been fully included in relevant standard trainings; - Frikom signed a contract with IFC for a clean production program in February, 2010. According to that contract, an external consultant firm (Cleaner Production Center of Serbia) has been hired in June, 2010. The scope of the contract engineering services will be for: water demand and wastewater production; design of segregated sanitary waste and treatment system; design pretreatment systems for vegetable processing and ice cream/pastry wastewater; and design of Industrial Waste treatment system. Clean production engineering audits will aim to reduce treated effluent volume and shall be in full compliance with Serbian regulatory and IFC General EHS Guideline limits for wastewater discharged to the Danube (e.g. BOD5 <30 mg/l; COD <125 mg/l); - Frikom has constructed an independent sanitary waste water pipeline and separated sanitary waste water channel from industrial one. Bio-disk plant has been commissioned in 2010 and the effluent pollution parameters are now in line with IFC’s and local requirements; - Frikom and Nova Sloga have planned and implemented vehicle operator safety program consistent with IFC’s General Guidelines; - As required by IFC’s Performance Standard 2, a Human Resources policy and job descriptions have been prepared and distributed to Nova Sloga employees. Upon institutionalization of the indicated good international industry practices, the project will be in compliance with applicable IFC performance standards and applicable sections of EHS guidelines. Accordingly, a B categorization is justified.

PS1 - Social and Environmental Assessment and Management Systems – Frikom commenced implementation of quality and food safety management systems in 2006. Hazard Analysis and Critical Control Point (HACCP) food safety certifications are in place for ice cream, frozen vegetables and frozen pastry lines. ISO 9001-2000 Quality Management system is in place as well for all production lines, including primary production. The most recent certificate for ISO22000 was granted in March 2010. Monitoring audits for both HACCP and ISO 9001:2000 have also been performed in March 2010. Frikom will pursue certification to ISO 14001 (environmental management) and OHSAS 18001 (occupational health and safety). Considering reported performance of the existing occupational safety management function, OHSAS certification will be an important addition to Frikom’s operations. Disparate staffs are responsible for implementing environmental and social affairs. These staffs are distributed among several departments. Occupational health and safety (OHS) currently is the responsibility of the legal and general affairs department; environmental affairs are under the Quality Assurance Unit; and water supply and wastewater treatment is managed as a small, separate unit under Production Department. In accordance with the attached Environmental and Social Action Plan (ESAP) Frikom will reorganize these functions to achieve comprehensive and efficient internal services. Nova Sloga’s current bottling operation does not have ISO or HACCP certification. There is one individual in charge of production and another staff with currently assigned responsibility for OHS and public health affairs. Quality control and microbiological monitoring are performed by the Regional Institution for Public Health in Krusevac. In accordance with the attached ESAP, Nova Sloga will be required to implement and certify food safety and quality programs in the near term. Nova Sloga has not yet performed an environmental assessment for the proposed modernization and expansion project; however, the company will conduct this EA study, as part of the documentation required for the expansion. Frikom has started to establish Global GAP (Good Agricultural Practices) system requirements for its own and cooperants’ farming operations. Consultant company visited the farms and submitted an Action Plan (4/30/2010). Frikom reported that certification process will be finalized in 2010. Nova Sloga will also start preparations for Global GAP certification in 2010 and targets to be certificated in 2011. Soil analyses of farms are performed annually and pest control plans and optimal irrigation schemes are implemented regularly for Frikom’s and Nova Sloga’s farms and their cooperants. Same environmental and social practices will be implemented in Frikom’s and Nova Sloga’ supply chain. Neither Frikom nor Nova Sloga has a Stakeholder Engagement program or a public Grievance Mechanism in place. Consistent with the ESAP, both will be prepared and disseminated to the public for Frikom and Nova Sloga operations to facilitate receipt and management of external questions, concerns and expressions of interest in the company and its operations. PS2 - Labor and Working Conditions – Frikom has a Human Resources policy that meets PS2 overall requirements, including the transparency requirements. Specifically, there are three unions in Frikom and an employee grievance mechanism in place in accordance with the collective agreement. Each worker has a negotiated contract based on this agreement. Frikom developed a plan in the event of future retrenchments that includes a temporary paid furlough (2 years) during which 65% of the monthly salary and other benefits are paid to affected workers. Company reported that its wage scale is slightly higher than local and regional averages. Frikom and Nova Sloga will ensure that contracted entities and contractors operations are in accordance with its defined labor practices and transparency. An OHS and life and fire safety risk assessment was conducted by regional government authorities as part of the process to obtain working permits for the factory. Required permits are in place; and without these, an operational license cannot be approved by the relevant Ministry. Frikom conducts regular training of the workforce and provides orientation for new employees and operating equipment, PPE is provided for workers involved in cold storage operations and other areas, as needed. Reported lost time accidents and lost work days for employees and contractors are high (1150 days lost in 2009). Nova Sloga prepared a formal human resources policy and employee grievance mechanism. The company does have an open door policy in case of complaints. Employees are organized in one union. They have a signed collective bargaining agreement. Each employee has a negotiated contract based on the collective agreement. Workers wages are slightly above regional averages. An OHS risk assessment has been prepared for each Nova Sloga workplace by an authorized agency. New hires are required to attend an induction course. Originally, an OHS risk assessment was carried out as part of the operational permit for the factory, which is the same requirement for Frikom. Without the risk assessments and mitigation measures in place, operational license are not approved by relevant Ministry. Frikom and Nova Sloga will institutionalize and internalize OHS into its operations and generally strengthen all measures needed to reduce accidents and lost time in accordance with the ESAP. In the future, Nova Sloga will work with ~100 cooperants or independent farming operations that will sell products to the company. At the present time, Nova Sloga does not have the internal capacity to address quality issues, pest management, and other issues related to the supply chain of fresh fruits and vegetables. Frikom and Nova Sloga will strengthen its quality assurance and food safety functions and institutionalize integrated pest management in its supply chain in accordance with the ESAP. Frikom and Nova Sloga will improve OHS requirements for personnel working for contractors and contracted personnel to ensure safe and healthy working conditions and transparency and compliance with national labor law. Services and other contracts will be modified to ensure that each contractor provides an OHS management program equivalent to IFC General EHS Guideline requirements and is responsive to Frikom’s Human Resources policies. PS3 - Pollution Prevention and Abatement – Frikom has installed a new vegetable processing line in 2010. The equipment is from Western Europe and incorporates dry peeling with water recycling that reduced production of industrial wastewater from 19,5 m3/ton to 4 m3/ton at vegetable processing line. Frikom’s main issue resulting from its operations is industrial wastewater. The existing system provides primary treatment, including oil skimmers, sedimentation and effluent mixing to reduce the strength of wastewater discharged to the industrial sewer. Frikom has a permit to discharge wastewater from its primary treatment into an industrial sewer and then into the Danube. In the vicinity of Frikom, there are ~4 other privately owned food processing plants or the privatized elements of the former state-owned PKB consortium: Implek Dairy; Imes Slaughterhouse; Energotehnika; and, other elements of the PKB (e.g. vacant land, grain production, storage silos, processing). Energotehnika provides periodic wastewater and sludge removal from individual septic tanks for households in the region. Collected materials are discharged to the PKB main sewer and then untreated wastewater from these operations is discharged to the Danube. Neither PKB nor the other operations have discharge permits. In April 2009, untreated wastewater from this industrial sewer was implicated for pollution and destruction of ~1 metric ton of fish in the Danube. Local authorities audited all the entities discharging to the sewer and ordered them (with the exception of Frikom) to obtain discharge permits. Frikom was mentioned in the press as the only company that has permit for discharge. Frikom and Nova Sloga will upgrade industrial waste water treatment to ensure that treated wastewater discharged to sewers and to the Danube is in compliance with discharge limits in Serbian regulations and the IFC General EHS Guideline, as set forth in the ESAP. Frikom pro-actively seek IFC’s assistance in being included in the cleaner production program of February, 2010. Field visit of IFC cleaner production expert confirmed that the company could significantly reduce its water operational costs and the required capacity and related investment of the waste water treatment plant by at least 40 percent. Several other hazardous materials management issues will be resolved in accordance with the attached ESAP. These include containment for used hydrocarbons storage; confirmation of the integrity and monitoring of a 50m³ underground diesel storage tank, and management of ammonia in accordance with good international industry practices (e.g. International Institute of Ammonia Refrigeration Process Safety Management Guidelines for Ammonia Refrigeration); and capture, replacement, and destruction of all R-502, R-22 and other Ozone Depleting Substances (ODS) refrigerants subject to phase out and bans in fixed facilities and in the transport fleet in accordance with best international industry practice (e.g. 404A). Frikom’s vegetable production area of ~2300 ha for grains, peas, etc is bolstered by four (4) cooperants or suppliers (PKB, Dijamant, Titan, and Agros) that provide ~50% of its total grain and vegetable volume packaged and sold each year. Frikom contracts these entities and in these contracts defines the relationship and the technical assistance to be provided as well as other issues, including pest control and use of pesticides, harvesting, quality control, and other considerations. Frikom and Nova Sloga will implement integrated pest management (IPM) programs for owned agricultural operations as well as for cooperants. These programs, in accordance with the attached ESAP, will adhere to the requirements of IFC performance standards and sector specific EHS guidelines for scientific analysis of pest problems of economic significance, maximization of non-chemical controls, and highly selective and controlled use of any chemical control methods deemed necessary. PS4 - Community Health Safety and Security – Frikom is situated in the industrial zone described above. There are no immediate households or neighbors in the vicinity of Frikom operations. Security operations and fire prevention and management are operated in compliance with local legal requirements. Frikom employs private security contractors; the scope of work and services proved are defined in a contract. Frikom’s security is armed, provides entrance control in factory building as well as escort for money transfers. In accordance with previous projects’s ESAP, Frikom ensured that security contracts for Frikom and for Nova Sloga are guided by principles of proportionality, good international industry practice in terms of hiring, rules of conduct, training, equipping and monitoring of such personnel, and applicable law. Frikom will also conduct periodic and pre-contract investigations to ensure that selected contractors are not implicate in past abuses. Nova Sloga operations are adjacent to a newly acquired 1.5 ha parcel that is planned to be used for expansion. The public road is used by local communities. Although the road is outside of the company’s premises, Nova Sloga will ensure that operations guidance and manuals incorporate measures to prevent traffic incidents and that any materials spills (e.g. Hydrocarbons) are promptly collected and affected soils are removed for appropriate disposal. PS5 - Land Acquisition and Involuntary Resettlement - Nova Sloga signed contract for purchase of a 1.5 ha vacant land to facilitate construction of an adjacent building to be used for several purposes, including a water analysis and quality assurance laboratory in 2009. The purchase of this expansion land was in a willing buyer/seller transaction between Nova Sloga and the land owner; there were no physical or economic displacements. No other land acquisitions by Nova Sloga or Frikom are anticipated. PS6 - Biodiversity Conservation and Sustainable Natural Resources Management – Frikom is situated in a large industrial polygon surrounded by a number of industrial entities. All of the land in the polygon has been disturbed for some time. The company extracts local ground water for operations from six ground water wells with the capacity of 18, 15, 16, 9, 10, 17 l/s respectively). Water from wells is transported through a pipeline to pretreatment then to a storage pond then to rapid sand filters to remove Fe, Mn, and NH3 from water. Treated water is disinfected with chlorine and stored in a potable water tank to be used in manufacturing. Treated water is used for potable purposes, including drinking, raw material for beverages, vegetable processing line, hygiene, steam production, cooling unite, sanitary use, etc. Drinking and sanitary use in 2009 included: 150 m3/day; Cooling unit use: 246 m3/day; Steam production: 82 m3/day; others use: from 280 m3/day to 3500 with the average of 821. This large range results from the seasonality of work performed by Frikom. In the winter time, the usage of water is on the lower end of the range, while the usage of up to 3,500 m3 per day is observed in the summer months. Water is used in ice cream production (it makes up a significant part of the final product) and in the processing of vegetables. In the peak season, Frikom operates on a 24/7 schedule to process all harvested vegetables. The processing includes vegetable washing, cleaning, and blanching and water is used in all these stages. Production of ice cream and vegetables at maximum capacity results in significantly higher water consumption during a few peak months. The investment in a new production line has diminished the water usage from 19,5 m3/ton to 4 m3/ton at vegetable production line and total process water usage by 20%. Frikom has undertaken studies of the ground water to demonstrate long-term sustainability of the resource and documented that peak rate of usage is sustainable and there are no negative impacts on regional industrial or municipal water users. The final report of the studies approved by the Ministry of Environment mentions that Frikom is currently using 25% of the maximum allowable capacity of wells. In 2008, Nova Sloga commissioned a hydro-geological evaluation of the existing ground water resource by the Mining–Geological Faculty in Belgrade. The study proved that the reserves of ground water allow for the proposed extraction increase from 9 million liters/year to 65 million liters/year while maintaining sustainability, quality and its unique taste. Using the final hydro-geological report, Nova Sloga submitted a request to the Ministry of Environment (MoE) for the proposed extraction increase. The company received the authorization permit in March, 2009.

IFC promotes good relations with host communities in areas of influence of client projects. To facilitate and consolidate relations with host communities in areas of influence, the company will prepare and fully institutionalize management system procedure(s) to achieve interaction and open communication with host communities and to attend to any grievance related to the Frikom and Nova Sloga operations, including agriculture, processing and transport facilities. This mechanism will allow Frikom and Nova Sloga to receive and consider opinions about company operations and respond to them. The process will be fully communicated to employees through procedure orientation and periodic training and individuals will be clearly assigned responsibility for implementation. The process and procedure will be understandable, transparent, culturally appropriate and easily accessible for community members at no cost and without fear of reprisals. This mechanism will not interfere with or prevent access to other administrative or judicial recourses. Frikom and Nova Sloga will inform local communities about the mechanism through its existing channels of community engagement and disclosure of project related documents.

Regarding the availability of the ESRS/ESAP for public review, the document will be available at the following places: Municipality Palilula Ul. Takovska 12 11000 Beograd Ministry of Agriculture Ulica Nemanjina 22-26 11000 Beograd In addition, the Sponsor will be requested to place an advertisement in a local newspaper to inform the public that results from IFC’s environmental and social review and ESAP is available for access on its corporate website or provide a web- link to IFC’s disclosed ESRS and ESAP. Members of the public can view the Environmental & Social Review Summary report until November 15th. Questions may be directed to Frikom, Zrenjaninski put bb, 11213 Padinska Skela, Beograd, telefon 011 2074- 125, faks 011 2074 118, attn : Mr. Dane Mincic, dane.mincic@frikom.rs .