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 During the appraisal, the land acquisition process was reviewed and found to be a combination of willing seller / willing buyer situations and public land leases with no impacts related to Land Acquisition and Involuntary Resettlement (PS5), no Biodiversity or Natural Resource Management (PS6) issues are expected as there is no land conversion, no Indigenous Peoples (PS7) are known to be in the project area, and there is no Cultural Heritage (PS8) on or near the project site.

The proposed project is being developed in accordance with national regulatory requirements by an experienced Sponsor committed to good environmental and social management. With no indication of impacts related to Performance Standards 5 through 8 and only readily mitigated environmental issues under Performance Standards 1 through 4, this is a Category B project.

The Sponsor has presented plans to ensure that the proposed project will, upon implementation of the specific agreed measures, continue to comply with host country environmental and social requirements, as well as IFC’s Environmental and Social Performance Standards and general EHS guidelines. The information about how these potential impacts are being/will be addressed by the project is summarized in the paragraphs that follow. PS1: Social and Environmental Assessment and Management Systems: Social and Environmental Assessment: According to Ukrainian legislation, the new stores will have to demonstrate through environmental impact assessment (EIA) studies that they will not have negative impacts on the architectural, social, environmental and geological situation at the site. The premises are put into operation only if there are appropriate operation permits issued by such state monitoring and controlling authorities as the district sanitary and epidemic station, district fire inspectorate, State Committee for Labor Protection, State Committee for Environment Protection, State Traffic Inspectorate, State Energy Supervision Inspectorate, state architecture and construction control authority and state district administration. As part of the EIA studies, the company is carrying out public consultations with the local residents. Their comments, suggestions and complaints are taken into account when design documentation is being developed. IFC will require evidence of compliance with these regulations following the review of construction plans by the local authorities. Social and Environmental Management System: Nova Liniya’s E&S management system is focused on compliance with Ukrainian Labor safety standards, including fire safety, electrical safety, and sanitary/hygiene safety. NL’s Collective Agreement includes a chapter on Labor Safety and agreed measures to secure Labor Safety. To ensure their implementation, a Life and Work Safety Commission is established, representing both administrative and work personnel. The Board of Directors approves annual schedules for health, safety, and environment measures including equipment upgrades, maintenance and training programs. The annual budget for Labor safety is 0.5% of company’s annual turnover, which is prescribed by the national Law "On Labor Safety". The corporate Labor Safety Department consists of 3 persons who are responsible for developing, revising and amending the instructions regarding labor protection for particular professions involved in the working process of a shopping center and other objects, as well as carrying out initial, follow-up, off-schedule and target safety training on labor protection, safety arrangements, electrical safety and fire safety. Safety engineers on the ground are responsible for carrying out continuous control over compliance by the personnel of shopping centers with the requirements of regulations on labor protection, safety arrangements, electrical safety, fire safety and occupational health. While management of OHS matters is centralized, management of environmental issues (air emissions from rooftop gas-fired heaters, solid waste management, energy conservation, hazardous materials management, cleaning of the adjacent territory, etc.) is done at store level only. Store managers carry final responsibility for Environmental safety. Corporate approach to environmental management may identify opportunities for better environmental practices and performance, ensure consistency and enhance efficiency of their implementation across stores. Therefore, the Company and IFC have agreed in the E&S Action Plan (ESAP) that corporate coordinator will be designated to provide corporate-wide support on technical, managerial, financial and knowledge-exchange aspects of environmental protection to individual stores. The company is selling wood products from Ukrainian and Russian suppliers. To ensure that contaminated wood is not sold, the company is contractually requiring its wood suppliers to demonstrate state certificates on sanitary and radiological safety of wood. PS2: Labor and Working Conditions: As of beginning of 2010, NL employed 5,742 people. Ukraine fully endorses the ILO core labor standards and they are incorporated in the national labor laws. Hereby the core labor standards, as defined in Performance Standard 2, are guaranteed for employees at companies like NL, which strictly follow the legal requirements. In addition to the requirements of the national legislation, terms of employment and dismissal, working conditions, wages and benefits for Company’s employees are addressed in Collective Agreement and internal labor regulations. All workers receive a written contract of employment. Information related to worker terms and condition of work is provided in Ukrainian language. While Russian is widely used, there is no reported problem for workers receiving information in Ukrainian. The induction packet of documents for new employees include a copy of Collective Agreement, Disciplinary Policy, Corporate Code of Conduct; Specific responsibilities for an individual’s job; Instruction on recording of working hours and Corporate Standards for particular job positions (salesperson, cashier and controller). Terms and conditions are regularly updated in the induction packets. These updates are provided to employed workers through store managers who maintain regular contact with the Personnel Department in Kiev. The majority of workers are employed on four-year fixed term contracts. Grievance procedure is based on the Labor Code. In addition, the company has introduced suggestion boxes in each individual store to provide for anonymous complaints. The grievance procedure envisages for centralized collection of grievances and tracking of frequency or themes related to grievances. In 2010 the company is also planning to carry out workers’ satisfaction survey on an anonymous basis. However, the high turnover rate remains one of the main problems. The average monthly turnover in 2009 was 15.6%. To address this issue, company’s management agreed on a number of measures to be implemented in 2010, which include salary increase for salespersons; carrying out of surveys on workers satisfaction; personnel management improvement through trainings for store managers and others. Special attention is being paid to the attraction of larger number of employees being 30-50 years old as part of the recently launched national social program. While not an issue of compliance with national law, age should not be referenced in job advertisements or recruitment decisions to avoid potentially discriminatory practice, as age is not related to the candidate’s ability to do the job. Nova Liniya instructs its employees on safety, fire prevention, sanitary norms, and electrosecurity. They are examined on these areas prior to starting employment and monthly thereafter. Over the last five years, Nova Liniya has had four lost-time accidents, which represents creditable performance. PS3: Pollution Prevention and Abatement: The existing and new stores use the city electrical grids. For heating purposes stores are equipped with rooftop gas-fired heaters. As a home improvement store, the facilities only generate domestic wastewater from employees. The stores are connected to the city sewer system and, as noted, will need to meet national norms to do so. Most of the waste generated by the stores is packaging material to be collected separately for further recycling. Small quantities of hazardous wastes, such as used fluorescent lamps, or accidentally generated hazardous materials, such as damaged paint or solvent containers, are collected separately, packed into a (leakage) protection wrapping and removed by specialized licensed companies. Any solid wastes that are not recycled are collected by municipal authorities and disposed of in a licensed landfill. The company will introduce the same environmental practices in new stores. Nova Liniya does not sell items on IFC’s exclusion list. While it does have a garden center in its existing store, it does not sell pesticides or herbicides. Greenhouse gas emissions from NL’s facilities in 2009 were estimated at 12,284 tonnes CO2 equivalent. PS4: Community Health, Safety and Security: The company designs and builds its retail outlets to conform to Ukrainian fire safety standards. The existing stores are equipped with fire and smoke detectors, fire alarm systems, sprinkler systems, fire exits (1 per 300 m2), and fire extinguishers and hydrants (1 per 100 m2). The company has developed an emergency response plan and implemented management systems to ensure that safety systems are maintained according to manufacturer’s specifications and local regulations and employees know how to respond in an emergency. While the company is compliant with local fire safety regulations, it is committed to implementing best international practices in this area. Fire hardware & procedural review will be undertaken by international consultant against international codes and standards for mercantile occupancies as defined by NFPA 101. The review will be followed by implementation of the necessary improvements, if any, as agreed in the ESAP.

Nova Liniya has developed a customer feedback section on its corporate web-site. This section gives an opportunity for customers with the help of a user-friendly interface to send their suggestions and comments concerning work of the specific trade center. Monthly report is drawn based on the results of received suggestions and comments. As well, there is a telephone hotline operating 7 days a week to ensure prompt reaction to problems and suggestions as well as to provide information support for the customers. By contacting the hotline, customers can receive various information on the work of hypermarkets and leave their complaints, which are recorded and sent to the company’s central office in electronic form, so that prompt action could be taken to address the problems encountered. Weekly and monthly reports are prepared on the complaints received via the hotline. There is a customers’ board in all trade centers where each client can leave a notice in the complaints and request books. All notices are processed within several business days. As well, NL trading centers are actively participating in the local social programs, including regular charity events for ordinary or orphan’s children gardens.

Local disclosure of environmental and social information related to the Project will be done in accordance with Ukrainian legislation. The ESIA reports will be made available to the public at the local administration buildings. Local disclosure will also include publishing of this ESRS and ESAP in Russian on company's website: http://novalinia.com.ua/ starting from 01.06.2010.For inquires about the Project please contact: Name: Elena Hoteeva Position: Finance Director8, Odesskoe shosse,                Chabany, Kiev region,              08162 Ukraine                Head Office "Nova Linia CJSC"            Attn.: Elena Hoteeva (addressee)                Tel number: + 38 044 206 37 92