Fenglin was listed on the Shanghai Stock Exchange (Stock Code: 601996) on September 29, 2011. It is headquartered in Nanning, and has operations in Guangxi and Guangdong Provinces. The Project Sponsor is Mr. Yichuan Liu, the founder and the biggest shareholder of the Company. The current shareholding structure of the Company is: (i) Fenglin International Limited. 53.94%; (ii) IFC 2.92%; (iii) Nanning Fengcheng Investment Management Co. 4.22%; and (iv) Public float 38.92%.

Total Project cost is estimated to be US$79 million. The proposed IFC investment is a RMB equivalent of US$30 million A Loan for IFC’s own account.

30.21 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	30.21
Equity

* These investment figures are indicative

The Project will be located at Nanning, Guangxi Autonomous Region, a frontier region in China, and Huizhou, Guangdong Province.

1. Sustainable natural resources management:
As Fenglin invested in upstream forestry operations, it is committed to adopting best practices and standards in forestry operations. Part of its plantations were already FSC-certified, and it is committing to adopt Controlled Wood Certification for the rest of its plantation. This will be a significant development impact in Fenglin''s wood supply chain. Fenglin is also producing some of its panels at the FSC-certified standard, which is expected to have an important demonstration effect in the wood product sector in China.

2. Job creation in frontier region
It is expected that Fenglin will create more than 200 direct jobs (based on the projected ramp up size of the plant) and additional indirect jobs in MSMEs through the support services to its plants. These jobs will benefit local livelihoods in a poor area of an interior province.

3. Local wood sourcing
Fenglin had a total production capacity of 500,000m3 in 2012. In 2013, it has established Mingyang Plant (200,000m3) and has acquired Huizhou plant (200,000m3), and has arrived with a total production capacity of 850,000m3. It is expected that Fenglin will double its local wood sourcing to about 1.28 million tons from the farmers when the two new plants ramp up.

4. Sustainable products
Fenglin''s products have received CARB certification (California Air Resources Board) and have reached China''s national standard of E0/E1, both are the highest standards for toxic control from formaldehyde. It is expected that the Project will help Fenglin promote the sustainable, lower emission panel products to the market.

1. Support a low cost, high quality and environmentally-friendly panel producer
IFC will continue to support the sustainable growth of a strong player in China''s wood panel industry. Fenglin is a disciplined company focusing on product quality and resource efficiency. IFC''s support will help strengthen the Company''s position as a possible consolidator in the industry .

2. Frontier region investment and catalytic role
Although Guangxi Province has been growing in the past 10 years, it is still one of the poorest provinces in southern China and local investment activities are still limited compared with other regions. IFC''s investment in the Project would demonstrate investors'' confidence in the Company''s growth in Guangxi, and enhance its visibility for its expected secondary issue in the capital market.

3. Industry expertise
IFC''s wide ranging experience in forestry, plantations and wood products investment will be a valuable resource for the Company as it continues to grow. IFC industry specialist has strongly encouraged the Company to formulate a long-term wood supply strategy, which will strength the Company''s long term competitiveness in the market.

4. Long-term financing and capital market development
IFC will provide long-term local currency debt financing that suits the cash flow cycle of the Project. To provide the local currency financing, IFC will utilize the new RMB product approved by the People''s Bank of China, promoting the development of onshore-offshore RMB capital market.

5. Environmental & social best practice
IFC will continue to help Fenglin improve its capacity in environment and social management systems as well as sustainable natural resource management. IFC will continue to provide guidance and technical support to Fenglin to further improve its wood sourcing and panel manufacturing.

Key risks for this provisional category B project include: Energy consumption, air emissions, and management of liquid effluents from Particle Board and Medium Density Fiberboard plants located in urban areas of Guangdong and Guangxi Provinces. Other risks and impacts to be reviewed will include general ESM Systems, labor conditions and workforce safety in forestry and processing operations, use of hazardous materials, and management of solid wastes at plants. Review will also include assessment of litter, dust, odors, noise and security of communities located proximate to the processing facilities. Given the volume of raw wood supply and finished product transportation safety will be assessed and appraisal team will consider the sources of wood supply, the company’s traceability systems. The potential risks to natural habitats and priority ecosystem services will also be considered. The Company is a repeat client and has been found to possess good management systems and practices for management E&S risks and impacts during prior investments.

Please refer to the related Environmental and Social Review Summary (ESRS) document for this project.

Please refer to the Environmental and Social Action Plan (ESAP) tab in the related Environmental and Social Review Summary (ESRS) document for this project.