While all Performance Standards are applicable to this investment, IFCs 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. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
PS 6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
PS 6 is applicable in part due to the nature of the company’s relationship with soy providers located outside of Serbia. Whereas in normal years (with adequate rainfall) Serbian farmers can provide sufficient quantities of (non-GMO) soy beans to the crushing plants; in drought years (as occurred in 2009, 2010 and is happening to the harvest in 2012) supplemental supply is required. This supply has traditionally originated in Brazil, where some soy originating in the north of the country has been associated with deforestation of the Amazon and the Cerrado areas. As such, the supply chain section of PS 6 is applicable to the Group’s sourcing operations and is addressed in the relevant section below. The relationship of the Group with the Serbian-based farmers is based upon establishing a seasonal contract with farmer cooperatives, i.e. the company itself does not own farmland nor does it engage directly into farming; the relationship is limited to provision of inputs (pre-finance in the form of seeds, fertilizers, pesticides, and also technical advice) and commodity (e.g., soy, sunflowers, rapeseed, corn, etc.) off-take agreements. The supply chain requirements, as described above in conjunction with soy sourcing from Brazil, are not relevant to the primary production of soy, sunflower, rapeseed, etc., in Serbia as farming is taking place on consolidated agricultural areas.

Impacts related to the following Performance Standards were not identified during IFC’s review: PS5: Land Acquisition and Involuntary Resettlement: existing facilities (especially production plants) are limited to sites obtained either through willing-buyer, willing-seller and/or legal leasehold transactions and were earmarked for such industrial uses. There are no Indigenous Peoples located at or near company facilities (therefore PS 7 is not applicable) and no discoveries of Cultural Heritage have occurred to date (making PS 8 not applicable) nor would be expected.

Other minor non-core activity that falls under the Group umbrella, but will not benefit from IFC’s use of proceeds, includes a right to develop a phosphate mine. This is currently a non-operable mine (being at the pre-exploration phase only) and given it is not a core activity within the Group and the Company has fulfilled its financial obligations associated with the gain of the right, it was stated by members of management that the Company is currently considering the nature of its ownership of this asset. Regardless, IFC will encourage the client to manage environmental and social risks consistently in all its operations in accordance with the Policy on Environmental and Social Sustainability; this is reflected in the Environmental and Social Action Plan (ESAP).

This investment is classified as a Category B project in accordance with IFC’s Policy on Environment and Social Sustainability. Based on information reviewed by IFC, this investment will have limited adverse E&S impacts that are few in number, are generally site specific, largely reversible and readily addressed through mitigation measures, as outlined in the ESAP attached to this ESRS. The main environmental and social (E&S) issues include the ongoing management of E&S impacts associated with the production plants and how the Group is planning on developing its corporate E&S management program to better coordinate this activity and promote performance improvements. The movement of commodities and products (and their impact upon matters of resource efficiency and pollution prevention) and ensuring OHS of those engaged in industrial operations is provided for through adequate systems and resources.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

PS 1: Social and Environmental Assessment and Management Systems

Environmental and Social Assessment and Management Program.

At the Group level, the E&S management function is relatively new and is currently evolving through the addition of management and staff and the development of policies and procedures. The responsibility of defining the program resides with the Chief Operating Officer who has recently joined the Group and brings the requisite experience and background to promote an approach to E&S management consistent with the IFC Performance Standards. This new emphasis on roles, responsibility and accountability will also be implemented at the plant level, along with a training program to promote new practices aimed at elevating overall E&S performance. This represents a change in culture; traditionally each production plant was responsible for its own E&S management and performance. The new corporate-led approach will leverage good practice across production sites and identify opportunities for improvements, where necessary. Defining and implementing greater Group involvement within the commodity supply chain is also being considered (such as promoting farmer training, traceability and certification, etc.,) so as to develop new premium markets for the Company’s products.

Specific assessment of E&S impacts, and then their management through implementation of mitigation measures, is undertaken as part of the various certified management systems in place at production facilities. For example, Sojaprotein has maintained independently certified ISO 9001 (quality management), ISO 14001 (Environmental Management Systems) and Hazard Analysis and Critical Control Point systems (HACCP) since 2005. In addition, they have been similarly certified to OHSAS 18001 (occupational health and safety management system) and ISO 22000 (food safety management) since 2008. Victoria Oil has in place certified systems to ISO 9001 (since 2008), 14001 and 18001 (since 2010), HACCP (2009), International Food Standard, IFS, for Oils and Fats: Production of Crude and Refined Edible Oil (2011) and GMP Feed Safety Assurance scheme (Production of Feed Ingredients, GMP B2) since 2011. Other requirements that inform the assessment process include local and national Serbian regulations, EU directives (such as Integrated Pollution Prevention Control - IPPC found under 2008/1/EC) and the International Sustainability and Carbon Certification Program (ISCC) which the Group has successfully achieved for that portion of its commodity supply chain that is related to biofuels production.

The above assessments are used to develop management policies, plans and procedures which are implemented at the plant level. For example, Sojaprotein uses a monitoring plan to sample air and waste water emissions; a waste management plan has been developed to minimize, collect, segregate, dispose and keep records on waste generation. Energy efficiency is targeted using a plan that is responsive to the IPPC directive. There is also a plan that pertains to managing impacts associated with plant closure and decommissioning. Other production sites have similar plans and procedures, depending on the nature of their operations and the impacts and risks therein. For example, Fertil conducts its own risk assessment and has developed plans to manage fire risks and waste management from the fertilizer blending operations.

As noted above, objective setting and coordination of E&S management at the corporate level is currently evolving; for example, in addition to the COO, an individual responsible for E&S management at Fertil has recently been promoted to a Group-level Environmental, Health and Safety (EHS) position. A new HR Director was also hired in 2011; the Director has assembled a team in Belgrade responsible for HR talent and development, compensation and benefits, and a Novi Sad-based individual responsible for recruitment.

Given the nature of IFC’s investment, the development of a corporate approach to E&S management within the Group including defining an E&S policy that will guide the growth of the Group and incorporate corporate assessment and management activities, is addressed in the ESAP. This broader perspective will include the development of Group performance measures, will involve affected communities as appropriate and the development and implementation of Group monitoring and reporting targets and metrics and provide for Group senior management engagement

Organization and Training and Emergency Preparedness and Response. As noted above, the EHS function is presently organized at the plant level using the framework of recognized certified international standards, all of which include the need to assign roles and responsibilities, define and implement a training component to ensure those responsible for E&S matters are provided with the necessary information upon which to act, and the requirement to develop and implement measures that provide for emergency preparedness. Site visits provided IFC assurance that those responsible for E&S matters had appropriate background and/or experience, were supported by management and provided the necessary resources (budgetary and human) to fulfill their roles. The development of the corporate management and the requirement to report to senior management is already addressed above.

Monitoring and Reporting. This is managed at the site level using staff and/or consultants or third parties. Each site undertakes key parameter monitoring; for example, documentation describing the monitoring required of significant E&S issues at the Sojaprotein plant (air emissions including dust, effluent quality, and waste generation) was provided for review. Data and other pertinent information is maintained and used within the site-level management systems to manage compliance with objectives, targets, regulation and permits. Monitoring of the air emissions from the recently commissioned biomass boiler at the Sojaprotein plant indicated non-compliances with regulatory limits for particulate matter (PM) (Serbian limits are set at 20mg/Nm3). The plant is currently upgrading its pollution control equipment to address this issue; progress on installation was observed during the site visit and documents reviewed that showed the technical specification of the equipment to be installed is designed to reduce PM concentrations to the required limits (which are below the limits required by IFC under the World Bank Group (WBG) General EHS Guidelines for boilers of that size). A similar biomass boiler in use at Victoria Oil is in compliance with regulatory limits.

Currently, there is little concerted group reporting on E&S issues; a proposed KPI-based monthly reporting system, modeled on the reporting practice already in place at Victoria Oil, is planned at the Group level. This is addressed in the ESAP. The company does report on environmental and social matters (at the plant level) to the European Bank for Reconstruction and Development (EBRD) on an annual basis as a requirement of a previous equity investment (investment dated from 2009). A report summarizing activities for 2011 was reviewed by IFC; this report indicates suitable progress on E&S issues identified at the time of investment (such as the need for increased air emissions monitoring, better separation of waste streams, application for water extraction permits, etc.) and also provides monitoring data on air emissions and effluents, the consumption of natural resources and the generation and recycling of wastes. Observations and discussion regarding these matters made during the site visit confirmed progress has been made.

Human Resources Policy and Terms of Employment. The HR function has seen significant development over the last year, moving the management of HR issues from individual plants to Group level. A Group-level HR Director was hired, a corporate HR policy is in place and an HR manual provides descriptions of the key elements of HR management procedures. According to the HR Director, the aim is to continue to develop the program, driven from the Group level and implemented by both Group managers and responsible HR managers at each plant. For example, significant development on formalizing recruitment, developing position descriptions with roles and responsibilities and attendant pay and benefits (a market survey on salaries has been conducted), developing a performance-based review approach, codifying how and when promotions can occur, working with line managers at plants to define training programs, and budgeting for and reporting on aspects of HR management throughout the Group have either been completed or are well underway and are slated for completion by the end of 2012. The company complies with Serbian Labor Law at a minimum; worker rights and benefits, either as part of collective agreements or individual contracts generally exceed these minimums. Completion of the program changes and their communication to workers, to ensure compliance with PS 2, is addressed in the ESAP.

Employee Organizations. The Group does not preclude workers from joining unions if they so choose. For example, unions are in existence at Sojaprotein, SP Laboratorija, Fertil and Veterinarski Zavod which all have collective labor agreements in place. In Group’ companies that do not have unions, workers are bound by individual labor contracts. Despite the different approach to worker agreements, the Group takes the position of promoting parity among the different companies with regards to worker rights and privileges to facilitate internal moves and promotions amongst operating companies.

Grievance Mechanism and Non Discrimination and Equal Opportunity. Several forms of grievance mechanism exist. For example, feedback forms can be used by workers at plants to raise issues, the company intranet (VGPortal) provides a means for anonymous reporting and the HR Director makes herself directly available to those wishing to raise an issue.

Retrenchment. Retrenchment is not expected to occur as the project seeks to develop new products and increase production. When it has occurred in the past, it has been conducted in accordance with applicable national labor laws.

Occupational Health and Safety. Employees and those working on behalf of the plants (such as contractors) are included in the OHSAS 18001 management system. These are certified and regularly audited. Such management systems are required to include assessment and active management of matters related to health and safety. Overall, based upon interviews, observations made during site visits, and documents reviewed it appeared that matters of OHS management are satisfactory (for example, only 2 reportable incidents occurred in 2011 in a workforce of 292 at Victoria Oil and none involving contractors). Despite these past results, some contractor employees at Victoria Oil were seen during the site visit to not be using appropriate personal protective equipment while exposed to construction hazards (for example, hearing protection was not universally being used); this element of OHS management should therefore be reviewed to ensure that, during periods of construction activity, all those working at the site are aware of measures designed to protect their health and to make sure that responsible parties within the Victoria Group impress upon their contractors the need to enforce safe and healthy work practices. This is in keeping with the intent expressed by the COO to drive performance with respect to OHS matters at the plant level and is addressed in the ESAP.

Pollution Prevention, Resource Conservation and Energy Efficiency. Consumption of natural resources (such as water, electricity, fuels, etc.) is monitored year-on-year against production at the plant level as are amounts of waste generated and amounts recycled. Amounts of energy consumed are subject to reduction targets through imposition of improved operational and maintenance oversight programs, upgrading of equipment, etc. Benchmarking of operations will be implemented at a Group level under the new E&S management structure.

Boilers at both production plants (Victoria Oil and Sojaprotein) were recently converted from natural gas to biomass. This was facilitated in large part through an investment from the EBRD. EBRD had previously made an equity investment of 40M Euros into Victoria Group. Previously the boilers (used to generate steam for use in the production of various foodstuffs derived from soy and sunflower seed) were fired with natural gas; the conversion to burning biomass (hulls from sunflower husks fat Victoria Oil or example) has reduced gas consumption to zero. Pollution control equipment are already in place at Victoria Oil and will be in place at Sojaprotein in the next few months to ensure compliance with Serbian emissions limits (which for boilers of this type are more strict that IFC’s limits as included in the WBG EHS General Guidelines). A contract with performance indicators to this effect was reviewed by IFC while on site at Sojaprotein; completion of the upgrade in pollution control equipment is addressed in the ESAP.

Good management of hexane (used in both production plants in the extraction of oils from soy beans and or/sunflower seeds and rapeseeds) is practiced thereby reducing emissions of this solvent to the air. For example, loss rates of 0.4kg hexane/ton of raw material processed are recorded at Victoria Oil; this compares favorably with amounts referenced in Guidance documents associated with the VOC Solvent Emissions Directive in the EU (Directive 1999/13/EC) which list a range of typical hexane emissions of 0.5 – 1.0kg/ton of sunflower seeds processed.

Possible opportunities for improving energy efficiency (for instance in elevating soy to the top of the Sojaprotein storage silos) were discussed; the company will continue to expand the review of their operations (as is already mentioned above and that is being done in many locations to meet the demands of the IPPC program) and benchmark performance (such as against the values included in the WBG/IFC EH&S Guidelines for Vegetable Oil Processing) in order to identify and quantify such opportunities for improved performance. Data depicting resource efficiency (amongst other areas) will be collected monthly and submitted to Group management as part of a new group-wide E&S Key Performance Indicator (KPI) Program which is already addressed above in reference to an action item in the ESAP.

Wastes and hazardous materials. Wastes generated at production facilities are collected and segregated according to hazard class and then collected by a licensed disposal contractor. Records detailing amounts of waste and the destination are maintained by site personnel. Non hazardous wastes are collected and segregated according to their ability to be recycled (such as tires, papers, cardboard, glass, metals, etc.). Waste oils are also recycled.

Process waste waters from the Sojaprotein and Victoria Oil plants are treated in site-based primary treatment facilities and then discharged to canals which convey them to their respective city wastewater treatment plants. Effluents are monitored prior to discharge on a quarterly or more frequent basis so as to inform regulatory agencies, and the waste water treatment plant, of the nature of the discharge to be treated. Currently, Victoria Oil is subject to a requirement to provide increased capacity to treat its effluent prior to discharge to the city sewer network due to recent increases in production capacity within the plant. This is addressed in the ESAP.

Greenhouse Gas Emissions. Group data on resource consumption that contributes to greenhouse gas emissions is not currently collated; individual plants do however monitor amount of electricity consumed, etc. This data was input to the IFC Carbon Emissions Estimator Tool (CEET) to produce an estimate of approximately 46,000 equivalent tons of CO2 annually (based on consumption of electricity and/or natural gas and/or diesel at Sojaprotein, Victoria Oil and Victoria Logistics). Given that the total estimate for the Group exceeds 25,000 tons, the Group will fully quantify emissions using an internationally recognized methodology; this is addressed in the ESAP.

Emergency Preparedness. Examples of provision of equipment, and description of training of personnel to act in the event of an emergency (such as the fire brigade found at Victoria Oil) were seen while on site. As noted above, the certified management systems require design and implementation of emergency response procedures commensurate with identified risks.

Pesticide Use and Management. The only chemicals used around production plants are minor pest control chemicals typically found in such settings. As the company does not farm, the direct use of pesticides in farming obviously does not occur. However, the Logistics division does distribute pesticides as part of its pre-finance program; these pesticides are subject to approval and permit to which the company complies and which were reviewed during appraisal.

The Group has in place management systems to ensure food safety. For example, Sojaprotein has in place HAACP and ISO 22000; Victoria Oil has been certified to HACCP since 2009, and both the International Food Standard (IFS) for Oils and Fats: Production of Crude and Refined Edible Oil and Good Manufacturing Practice (GMP) Feed Safety Assurance scheme (Production of Feed Ingredients, GMP B2) since 2011. Trucks, used predominantley in the Logistics division, are owned and maintained by third parties. Victoria Logistics ensures that only fully licensed operations third parties are engaged.

Community Engagement. Risks and impacts associated with company operations are limited due to the nature of the operation. For example, the food production facilities are purposely located in areas suitable for large scale industrial operations (i.e. on the outskirts of towns and cities in industrial areas); other developments (such as the Fertil and port operations) are similarly located away from immediate population centers. Victoria Group has posted contact information of all corporate departments (with email addresses and telephone numbers) on the corporate website; the same information is applied to each of the member companies to be used by those wishing to contact the company.

The company practices a variety of corporate social responsibility (CSR) programs. These include programs providing assistance to those less well off, children with disabilities as well as projects initiated by local communities where Victoria Group member companies operate. The CSR practice will be retained in future years for socially or health-wise challenged citizens in need of assistance. However, a new approach is to be launched in autumn 2012 through which Victoria Group will conduct a public call for project submissions in four key fields of corporate social responsibility (sustainable agriculture, environment, work place and community investment). Winning submissions will receive funding for their projects.

In relation to the supply of soy from outside Serbia, the Group maintains a system to ensure it only receives non-GMO soy. The system provides a means to trace the commodity from origin to processing plant. This system will be enhanced, and incorporated into the management system described under PS 1 above, to allow evaluation of the origin of the soy to ensure it is not sourced from areas that are contributing to significant conversion of natural and/or critical habitats. This is addressed in the ESAP.

Contact: Chief Financial Officer
Name: Jasmina Vukosavljević
Address: Bulevar Mihajla Pupina 115b
11070 Novi Beograd
Tel: + 381 11 3532 320
Fax: + 381 11 3532 728
Email: jasmina.vukosavljevic @victoriagroup.rs

Broad Community Support is not applicable for this project

Title	Anticipated completion Date	Status	Comments	Completion Date
1.Develop a Group/Corporate-based ESMS. The E&S management system at this level (which will include OHS of both employees and contractors and community engagement) shall include an E&S policy, incorporate assessment and management procedures and practices, include appropriate management and staff to operationalize the ESMS, involve affected communities as appropriate, define Group monitoring and reporting targets and metrics (Key Performance Indicators or KPIs that are at least as responsive to IFC's PS and applicable EH&S Guidelines) and also provide for Group senior management review.	12/31/2013 12:00:00 AM	Completed	Completed	04/27/2015 12:00:00 AM
2.Communicate changes in HR management and oversight to all workers. Victoria Group will complete the enhancements to the HR program that are currently underway and communicate them to workers in compliance with Performance Standard 2	12/31/2013 12:00:00 AM	Completed	Completed	04/28/2015 12:00:00 AM
3.Complete installation and commissioning of Boiler Pollution Control Equipment at Victoria Protein.	01/31/2018 12:00:00 AM	In Progress	Due date revised as agreed with IFC client
4.Complete upgrades to WWTP at Victoria Oil. Upgrades will be completed in accordance with applicable Serbian requirements and will provide for compliance to applicable discharge requirements.	04/30/2017 12:00:00 AM	In Progress	Due date revised as agreed with IFC client
5.Enhance the current system of tracking non-Serbian originated soy. The Group will enhance its supply review process for soy purchased from overseas to engage with its primary suppliers to ensure it is not sourced from areas that are contributing to significant conversion of natural and/or critical habitats. Procurement will be limited to areas where such conversion is absent.	12/31/2012 12:00:00 AM	Completed	Completed	02/13/2013 12:00:00 AM
6.Quantify CO2 Emissions Group-wide. Chose a methodology to quantify direct and indirect emissions from all Group operations; the methodology must be internationally recognized such as those provided by either the IPCC or Serbian regulation.	01/31/2014 12:00:00 AM	Completed	Completed	04/27/2015 12:00:00 AM