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 - PS6: Biodiversity Conservation and Sustainable Natural Resource Management. Due to the project being developed on a reclaimed area inside the boundaries of the existing port, the project review did not identify impacts related to Land Acquisition and Involuntary Resettlement (PS5), Indigenous Peoples (PS7), or Cultural Heritage (PS8).

The proposed project is an expansion within the Odessa Port, the largest seaport of Ukraine and one of the Black Sea’s biggest ports. It is being developed in accordance with national regulatory requirements and modern industry standards. The existing container terminal is located on the southern end of Odessa bay and is spread over the area of 16.6 hectares. The new terminal will be constructed on a reclaimed area of 19 hectares. The Company’s operations at the existing and new container terminals will continue to involve only the handling of containerized cargo and, therefore, potential E&S risks and impacts are limited. The Company has demonstrated that it is able to control environmental, health and safety impacts from existing terminal operations. Because the terminal expansion indicates no impacts related to Performance Standards 5, 7 and 8, and only readily mitigated environmental issues under Performance Standards 1 through 4 and 6, this project is a Category B project.

The Company has presented plans to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with host country environmental and social requirements, as well as IFC’s Environmental and Social Performance Standards and industry 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: - Environmental and Social Assessment: The Quarantine Mole terminal was designed by OCSP and the Company in accordance with modern industry standards. The E&S assessment process for the proposed container terminal began in 2006 as part of the initial port development plan and in accordance with Ukrainian federal law. At later stages the scope of the project was adjusted from 82 hectares to 36 hectares and, finally, to 19 hectares. In 2009, the design was elaborated by Chernomorniproekt in a report that defines the main engineering parameters and construction items. The Company’s international consultant, Sellhorn Ingenieurgesellschaft mbH, has carried out an Engineering Evaluation of the project. Subsequent to this review, the Environmental Impact Assessment (EIA), tender level designs and drawings have been prepared by GT Project – Ukraine LLC, a local firm that is part of GT Corporation (GTC), in cooperation with local environmental consulting company MARPOL LLC. The revised design was approved in November 2009 by the authorities for its compliance with Ukrainian laws and regulations, ahead of construction start. - Environmental, health, safety (EHS) and social management systems: The Company and its contractors are expected to control impacts from construction activities to acceptable levels through application of standard construction environmental controls and mitigation measures recommended in the environmental assessment. The Company will contractually require its construction contractors to adhere to applicable social and environmental national requirements and IFC’s Performance Standards and fully implement EHS measures defined in the EIA and environmental and social management plan. A construction environmental and social management plan, summarizing E&S requirements and mitigation measures during construction, will be agreed with the Company’s contractor ahead of construction’s commencement. This plan will address impacts from construction activities (e.g. excavation/dredging of fill material and its transportation; dredging and disposal of dredged material; land reclamation), including fugitive dusts, increases in sediment loading, noise, waste generation and construction vehicle traffic disruptions. Contractor’s compliance with applicable social and environmental requirements will be supervised by an independent engineering firm as part of detailed construction supervision and enforced by special provisions in contracting documentation. In addition, the Company will nominate an EHS Officer responsible for implementation of the management program during construction and operation on the Company’s side. Besides, the Company will directly contract a consultant, responsible for the development and implementation of environmental monitoring as set up in the EIA. Monitoring reports will be provided to the supervising engineering firm with an agreed periodicity. Based on the monitoring data, the Company will pay compensation for the actual adverse impact to the environment in accordance with Ukrainian regulations. Through the contract specifications the Company will also ensure that its contractor (i) sources fill material from an existing quarry/borrow area approved by the state authorities and (ii) disposes all dredged material at an offshore disposal site designated by the responsible state authority. Otherwise, the contractors will be asked to carry out an environmental impact assessment of new sites and obtain environmental approvals by the state authorities. The existing container terminal is covered by the Port Authority’s ESMS, which obtained ISO 14001 certification in 2008 and i) provide MARPOL waste and wastewater handling for ships; (ii) manage all maintenance dredging in the port, and (iii) remove and dispose wastes and hazardous materials generated by on-land operations. Emergency response and stormwater management is also a responsibility of the Port Authority. Similar procedures will apply to the new terminal once it becomes operational. PS2: Labor and Working Conditions: Presently, the company employs approximately 490 people. The Company adheres to the Ukrainian labor laws, which are consistent with ILO core labor standards and Performance Standard 2. The list of additional social guarantees is agreed in the collective agreement, including medical insurance of employees, interest-free loans for housing, financial aid for family reasons and others. More than 70% of employees are organized in industrial trade union "Edinstvo (Unity) that forms a part of federal trade union of Workers of Sea Transport. All working disputes are being solved in line with the Law of Ukraine "About order of Settlement of Collective Working disputed (conflicts)". Staff’s turnover is 1% only. The company pays close attention to occupational, health and safety (OHS) requirements. H&S manager has a direct reporting line to the General Director. The Company trains workers in occupational health and safety as prescribed by Ukrainian regulations and provides a constant control over the employees for the observance of all instructions on labor safety by them. Besides, OHS issues at the terminal are also overseen by the safety responsible from the Port Authority. The workers are provided with PPEs, like helmets, signal vests, rubber gloves, etc. Safety/accident data reflect a well functioning safety organization with only 2 minor LTAs in the period of 2009-2010. The company proposed to hold the staffing at current levels while implementing the Project. However, further hiring may be needed at the later stages of the QMT expansion. The company’s labor and working standards, which are consistent with IFC’s PS2, will be extended to cover new personnel hired for the new terminal’s operations. Construction contractors will be required to adhere to applicable PS2 requirements, including prohibit of unacceptable use of child labor of forced labor. PS3: Pollution Prevention and Abatement: Pollution prevention and abatement aspects of relevance to the Company during construction and operation include: sourcing and transport of fill material; dredging and dredge spoil disposal; land reclamation; terminal’s runoff management; spill prevention and control during handling and storage of dangerous cargoes and hazardous materials. The Company will ensure that its contractor will source the 1.5 million m³ of sand fill material from an existing quarry/location in the sea bed already identified and approved by authorities. The OSCP has completed the replacement of soft soil under the quay wall structure (1 million m3) and will carry out capital dredging for basin, access channel and turning circle (estimated volume of 2,7 million m3) in 2012. The dredge spoils are disposed at an approved marine disposal site located about 22 km east/north-east of the port. The dredging activities under the Company’s responsibility will be limited as the subsoil of the new terminal area to be reclaimed consists partly of soft and silty material with a layer thickness up to 25 m. Dredging and disposal of these soft materials is expensive and economically unfeasible. Therefore pre-loading of the terminal area over a period of 2-5 years is proposed, to avoid major settlements subsequently during operation, after paving of the area. However, even for minor dredging activities, the company will ensure that the generated dredged spoils will be disposed at an approved disposal site. Some of the specific mitigation measures to be applied during the construction include: installation of sediment traps to reduce sediment in runoff generated during land reclamation; collection, storage and final disposal of liquid and solid wastes generated during construction through authorized treatment and disposal facilities; stop of work or less intensity work during fish spawning seasons; provision of water sprays to control dust. For QMT, storm water runoff that is not contaminated (from apron) will be collected in open drains with sand trips and discharged directly to the sea. Surface runoff from maintenance and fueling areas will be separately collected and pre-treated in oil/water separators up to the standard value of 0.05 mg/l, which is well within the IFC guideline value. Domestic water will be discharged to the public sewage system. For the existing terminal, the Company will confirm that surface runoff discharge meets local regulatory requirements or collaborate with the Port Authorities to develop an Action Plan to achieve the appropriate level of surface runoff treatment. If necessary, the Company will identify actions within its control that will supplement waste water treatment consistently with IFC guidelines. The Company’s acceptance of dangerous containerized cargos is and will be in future limited to those categories, storage of which at the port is allowed by Maritime Dangerous Goods Code (IMDG) regulations. This material could include flammable liquids, corrosives, oxidizing substances, etc. No radioactive materials or explosives will be handled. The Company implements systems for acceptance, storage and transport of dangerous cargo based on national standards and regulations, including establishment of a segregated storage area and training staff in relevant aspects of dangerous goods management at the ports. The container terminal is covered by the Port's emergency preparedness and response plans. A segregated area for storage of dangerous cargo at the new terminal will be equipped with secondary containment to capture and hold accidently released hazardous substances in line with IFC’s guidelines. As part of the Project, the Company will also improve spill control equipment and methods at the existing terminal to minimize the risk of spill until the new terminal becomes operational. The Port Authority handles all MARPOL waste and bunkering needs for ships, manage storm water runoff, remove and dispose wastes and hazardous materials generated by on-land operations. PS4: Community Health, Safety and Security: The OCT is covered by the Port Authority’s emergency preparedness and response plans in cooperation with the authorities. These plans address potential predictable emergencies, communication responsibilities, and procedures for assuring appropriate emergency response by either internal capacities or public / port authority emergency response systems. Port-bound truck traffic using the city road network has been facing growing congestion and was one of the main concerns of the public. To address this bottleneck, the port has recently completed and commissioned a 5 km long dedicated 2-lane highway overpass (bridge) that now connects the port to an inland dry port located to the north, avoiding use of public road. The overpass is currently carrying on average about 600 trucks per day and can handle a three-fold increase in traffic before there is a need to provide additional capacity. Dry terminal management has a plan to build a new road to provide the Dry Port with a separate access to the ring road. Odessa Port is ISPS code compliant and has its own security system. In addition, the entire perimeter of the OCT facility is fenced and the Company maintains its own (non-armed) security, outsourced to a licensed third party provider. PS6: Biodiversity Conservation and Sustainable Natural Resource Management Construction impacts on the marine environment and its biodiversity will be minimized through application of the mitigation measures, including use of appropriate dredging technology and to minimize sediment disturbance; disposal of the dredged material at the identified offshore location; use of sediment traps to reduce sediment in runoff generated during land reclamation; management of terminal storm water; spill control and accident contingency planning. Short term changes in the water quality during construction are not to be expected to be significant over the long term. In addition, the ESIA envisages stop of construction works during spawning seasons. Fish spawning periods are determined in the Order "On the Ratification of Industry Fishing Rules at the Black Sea Basin" dd. 08.12.2008 ? 164 adopted by the State Committee of Fish Economy of Ukraine: 1. Azov and Black Seas Grey Mullets – from February 15 till April 302. Brills – from May 1 till May 303. Flounders – from February 15 till April 304. Bullhead - from May 1 till June 15 The ESIA indicates that flounders and bullhead species are present in the area of construction and that the hydro technical works should be stopped completely or carried out with less intensity during the spawning periods. The latter option should be approved by local regulators and adverse impacts should be fully compensated in line with Ukrainian regulations. The Company will ensure these conditions are included in the construction contracts and environmental management plan.

The Odessa Port Authority initiated the process of public disclosure and consultation in 2006. Initial public consultation was conducted at the public meeting held in 2006 as part of the Concept of Development of Odessa Port for the years 2006-2010. There was wide mass media coverage of the Concept and lots of concerns raised in regards to the Port Authority’s expansion plans. As the result, the first Concept, which among other development plans also envisaged 82 hectares expansion of the OCT, was rejected by Odessa City Council and the Court Ruling was issued upon which all construction works on the Port Authority’s territories were prohibited until the examination of the case. Based on financial, technical and E&S considerations, the scale of terminal expansion was adjusted from 82 hectares to 36 hectares and, finally, to 19 hectares. To compensate for the shortage of space a decision was taken to develop on-land terminal on a 50-hectare land plot (former aeration fields) to the North of the Port in the city's industrial zone. To address public concerns related to growing traffic congestion, it was decided to construct a dedicated highway overpass that would connect the Port to an inland dry port, avoiding use of public road. This construction has been recently completed. The community engagement process continued with a site visit to the OCT for decision-makers from the Odessa City Council and public members in September 2009. It was followed by a public meeting that was held on September 23, 2009 and attended by 30 participants, including representatives from various NGOs. There was general support for the revised QMT expansion, a subject to the positive opinion of environmental authorities. The latter was obtained and the revised design was approved in November 2009 by the authorities for its compliance with Ukrainian laws and regulations, ahead of construction start. Going forward, the Company will keep the lines of public engagement open for any grievances that may arise from construction and operation, and that those will be documented and responded promptly. Both OSCP and the Company have web-sites in the Internet, which contain full contact information about the companies (telephone numbers, contact details of persons in charge, e-mails). In accordance with Ukrainian Law, any person can ask their questions and leave their comments on the project within working hours. As IFC’s condition of disbursement, the Company will strengthen the existing grievance mechanism provided by Law with transparent procedure and trained personnel to facilitate resolution of public concerns and grievances about the Company’s environmental and social performance.

The Company will make available for a public review the EIA and E&S management plan before the start of construction at the Company’s headquarter office located at 1, Tamozhennaya Square, Odessa. Inquires and comments about the Project may be directed to: Vera G. Yurova Administrative Director, HPC Ukraina, 1, Tamozhennaya Square, Odessa Tel: +38-048-729-40-45 Fax: +38-048-729-46-56. e-mail: hpc-director@port.odessa.ua