PROJECT DESCRIPTION

The proposed IFC project comprises: i) an up to EUR50 million in structured equity investment into a special purpose vehicle, incorporated in the Netherlands by FrieslandCampina N.V. (FC) to acquire 51% of the shares of Engro Foods (Engro) alongside FC and FMO; and ii) a 10-year A-Loan of up to EUR100 million to FC to be used to finance part of the acquisition by FC. Under the proposed shareholding structure, FC, IFC and FMO will respectively have approximately 39.6%, 5.7% and 5.7% indirect shareholding of Engro, respectively. The remainder of Engro shares would be owned by Engro Corp. (EC), while 7-13% remains publicly traded. Engro Corp currently owns 87% of Engro and is a leading Pakistani industrial conglomerate and well-known strategic IFC client in good standing (with a satisfactory Environmental and Social Risk Rating).Established in 1879 as a Dutch farmer cooperative in the Netherlands and wholly-owned by Dutch dairy farmers (now over 19,000), FC is now the 6th largest dairy cooperative in the world with operations in 32 countries, selling consumer products (dairy-based beverages, infant nutrition, cheese and desserts) throughout Europe, Asia and Africa, supplying industrial customers (cream and butter products to bakeries and caterers), and also producing ingredients and half-finished products for infant nutrition producers, the food industry and pharmaceutical sectors worldwide. FC has a strong track record of entering emerging markets with recent acquisitions in Alaska Milk Corporation (Philippines, 2012) and Olam Ivory Coast (2014).One of FC's key goals in the project is to share its knowledge, best practices and improve yields, quality, living conditions and income of the estimated 220,000 milk farmers who are expected to constitute Engro's supply chain by 2020. AC will remain as a long term JV partner to FC while FC takes control over Engro.EC is one of the largest industrial conglomerates in Pakistan, with a varied business portfolio, including operations in fertilizers, foods, PVC resin, chemical storage & handling, trading, energy and petrochemicals. EC has been an IFC client since 1991, and there are currently 6 active projects with EC and its subsidiaries, with a total exposure of US$92 million as of February 2016.Engro, a leading dairy processor in Pakistan listed on the Pakistan Stock Market and established as a greenfield milk processing plant in 2005 by AC, has become the market leader in UHT milk. Engro has heavily invested in milk collection infrastructure including milk collection points reaching 150,000 dairy farmers and a nationwide distribution network serving over eight regions and over 300 cities in Pakistan. In 2015, Engro sourced 1.9 billion liters of milk and had a distribution network reaching 80% of all processed milk outlets in Pakistan. The core business of Engro is to process and sell dairy products under its own brand labels. The company's business units include dairy UHT (UHT milk, tea whitener, and Lassi/yoghurt beverage) representing 93% of revenues; ice cream representing 7% of revenues; powder is also produced but currently not sold under a stand-alone branded product. Engro produces annually 552 million liters of product from 261 million liters of milk sourced from company-owned milk collection centers in addition to 14,000 tons of imported powder.Company headquarters are located in Karachi, Pakistan with two processing plants located in Sukkur (built in 2006 on 29 acres with annual UHT milk production of 182 million liters and 1,300 tons of powder) and Sahiwal (built in 2007 on 101 acres with annual UHT milk production of 372 million liters, 4,400 tons of powder production, and 39 million liters of ice cream). Production processes generally entail reception of raw milk, treatment (pasteurization and UHT), mixing (depending on product requirements), filling/packaging, and on-site laboratory for quality testing; a dairy farm and ancillary structures including milking parlor and clinic (built in 2008 on 220 acres--with an additional 347 acres of rented land for fodder production--with over 5,000 cows representing an annual milk production volume of 12 million liters (20 liters per cow per day) with all milk production used internally, accounting for 5% of Engro's total raw milk requirements. Engro's raw milk supply chain is organized into 4 zones, which are further divided into 22 Area Offices that oversee 1535 company-owned Milk Collection Centers, where raw milk is collected (morning and evening only), tested, and stored/chilled prior to transportation to the processing facilities.

OVERVIEW OF IFC'S SCOPE OF REVIEW

IFC's environmental & social (E&S) appraisal took place on March 21st-24th, 2016, in Sahiwal, Sukkur and surroundings, and Karachi in Pakistan and included the following:-Meetings with key Engro staff, including at Sahiwal: General Manager, Production Manager, HSE Manager, HSE Assistant Manager, HR Assistant Manager, Administrative Manager; at Sukkur: HSE Assistant Manager, HR Assistant Manager, Quality Control Assistant Manager, Administration Assistant Manager, Process Engineer; at Nara Farm: Administrative and HR Manager, Engineering Services Manager, Livestock Manager, Warehouse Officer, HSE Officer, Production Assistant Manager, Milking Parlor Supervisor; at HQ: General Manager for Food, Health, Safety and Environment (FHSE), Quality Senior Manager, Procurement and Agricultural Services Director, Procurement and Agricultural Services Assistant Manager, HSE Manager for Transport, HR Director, Employee Relations Manager, Procurement General Manager, Senior Planning and Services Manager, and Technical Director; in the field: Area Office representatives, Field Operations Manager, Zonal Agri Services Manager, Agri Services Officer; and Strategic Milk Collection Agent.-Site visit to Engro Headquarters in Karachi; Sahiwal processing plant located in Punjab Province, 160 km south west of Lahore; Sukkur processing plant located in Sindh Province (500 km north of Karachi); Nara Farm located 70km east of Sukkur; an Area Office (responsible for oversight of 84 milk collection centers) near Sahiwal; 3 Milk Collection Centers, a Village Milk Collection center, a Commercial Dairy Farm, a Large Farm, and the office of a Strategic Milk Collection Agent near Sahiwal.-Review of technical documents provided by Engro, including Environmental Approval Certificates, Integrated Food Safety, Health, Safety and Environment (FHSE) Policy and Manual and environmental data, Integrated Organization Structure, Standard Operating Procedure for Safety Committees, Certifications (ISO 14001, OHSAS 18001, FSSC/ISO 22000, Global GAP, BRC Global Standard for Food Safety, and ISO 9001) and related supporting documentations, Procedure for Environmental Aspect/Impact Analysis, Procedure for Internal Audits, Procedure for Health & Safety Risk Analysis and occupational health and safety data, Integrated Pest Management Plan, Master Control Security Manual, Standard Operating Procedure for Emergency Response, Emergency Preparedness and Contingency Planning, Procurement Manual, HR Policy Manual Top Talent, Code of Business Conduct, Engro corporate presentations; by FC, including CSR Report 2014; ISO 26000 certification and supporting documentation; FC's Corporate Safety, Health, and Environment Manual and supporting documentation; and FC corporate presentations.IFC's appraisal considered the environmental and social management plans for the project and gaps, if any, between these plans and IFC requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and in the agreed Environmental and Social Action Plan (ESAP) disclosed in this review summary. Through implementation of these management plans and the ESAP, the project is expected to be designed and operated in accordance with Performance Standard objectives. As the use of proceeds is intended to be at the level of Engro (which is the primary focus of the appraisal), Engro will be responsible for implementation of the ESAP. As a party to the special purpose vehicle and ultimately majority shareholder of Engro, FC's E&S practices are also reviewed and it is anticipated that FC will contribute its experience and provide assistance to Engro with implementation of the ESAP. Given that the date of effective transfer of ownership from EC to FC is anticipated to be 1 January 2017, the timing of completion of the various actions under the ESAP have been scheduled accordingly especially if these require additional costs for implementation that would need to be approved by the Board of the newly structured company.

IDENTIFIED APPLICABLE PERFORMANCE STANDARDS**

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.PS 1 - Assessment and Management of Environmental and Social Risks and ImpactsPS 2 - Labor and working conditionsPS 3 - Resource Efficiency and Pollution PreventionPS 4 - Community Health, Safety and SecurityPS 6 - Biodiversity Conservation and Sustainable Management of Living Natural ResourcesIf IFC's investment proceeds, IFC will periodically review the the project's ongoing compliance with the Performance Standards

In addition to raw milk from Engro's own operation (Nara Farm), the remaining 95% of Engro's total raw milk requirements are sourced from the following groups: 43% from farmers (of which 11% from direct farmers (owning typically 2-4 animals) and progressive farmers (5-10 animals), 14% from commercial dairy farmers (11-30 animals), and 13% from large farms (more than 30 animals)); 26% from village milk collection points; 10% key farms (250-500 animals ); 8% from dodhis (middleman/trader); and 5% from strategic milk collection agents. The relationship between Engro and these different groups of suppliers is based on formal, exclusive contractual agreements only at the level of commercial dairy farmers, large farms, key farms, and strategic milk collection agents. As such, it is judged that Engro has reasonable commercial leverage over these operations and for the purpose of this review, their environmental and social impacts are therefore considered under the scope of applicable Performance Standards. Although Engro has provided technical assistance in the form of equipment and process improvements to village milk collection points in exchange for in-kind payment, there is not exclusive contractual arrangement in place. There are currently no exclusive contractual arrangements in place with direct farmers, progressive farmers, and dodhis. However, moving forward, Engro plans to formalize agreements with progressive farmers. It is therefore judged that Engro has no reasonable commercial leverage over these operations and for the purpose of this review, these will be considered as primary suppliers for which PS2's related supply chain requirement applies.Issues related to PS5: Land Acquisition and Involuntary Resettlement are not expected as the company currently has no plans to acquire more lands for additional plants/operations or dairy farming. Issues related to PS7: Indigenous Peoples and PS8: Cultural Heritage are not expected with this investment for the following reasons: there is no presence of Indigenous Peoples or known cultural artifacts within the company's operational footprint. In the event that issues anticipated by these PSs arise, Engro will promptly inform IFC. Screening and assessment of these issues against PSs requirements will be done through the company's E&S management system (ESMS).

ENVIRONMENTAL AND SOCIAL CATEGORIZATION AND RATIONALE

This proposed investment is expected to have limited environmental and social impacts which are expected to be site-specific and none is expected to be significant. Those impacts can be avoided or mitigated by adhering to recognized performance standards, procedures, guidelines and design criteria as described in the following sections. Thus, this is a Category B project in accordance with IFC's Environmental and Social Sustainability Policy. The project is designed to avoid, minimize and manage E&S risks and impacts of the company's operations in compliance with Pakistani legal and regulatory requirements, IFC's Performance Standards (PSs) and applicable World Bank Group (WBG) General and sector-specific (Dairy Processing and Mammalian Livestock Production) Environmental, Health and Safety (EHS) Guidelines.Key E&S risks associated with this investment are: (i) poor practices and awareness of dairy farmers on practices related to the handling of livestock; (ii) inconsistencies in HR manual with respect to requirements of the national Labor Code, ILO Conventions ratified by Pakistan and Performance Standard 2; (iii) HR non-compliances and management practices of third-party service providers; (iv) gaps in tracking water usage across all company operations and the lack of a study on water resource availability in the absence of legally mandated water extraction limits; and (v) lack of sufficiently stringent wastewater treatment prior to discharge into surface water and absence of any wastewater controls at all Milk Collection Centers prior to discharge to the surrounding area.

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

ENVIRONMENTAL AND SOCIAL MITIGATION MEASURES

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFC's 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: ASSESSMENT AND MANAGEMENT OF ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS

Environmental and Social Assessment and Management System. To manage the environmental and social risks across all of its operations, Engro has developed an integrated strategy and framework for addressing Food Safety, Health, Safety and Environment (FHSE) issues, which is reflected in a document entitled the Integrated Management Policy and Manual. The specific elements of the framework are described in further detail in each of the sections below. The framework is considered to be consistent with most of the requirements of this Performance Standard and by addressing the action items as outlined in the ESAP, Engro's framework, moving forward, can be expected to be in compliance with this Performance Standard. As part of this framework, Engro has received the following certifications at the level of individual production units: 1) ISO 14001 in 2011 for raw milk procurement and processing at Sukkur and Sahiwal plants; 2) ISO 9001 in 2011 for raw milk procurement and processing at Sukkur and Sahiwal plants; 3) FSSC 22000 in 2014 processing at Sukkur and Sahiwal plants; 4) BRC Global Standard for Food Safety in 2012 for processing raw milk at Sukkur and Sahiwal plants; 5) Global GAP in 2013 for dairy farm operation at Nara Farm; 6) OHSAS 18001 in 2011 for raw milk procurement and processing at Sukkur and Sahiwal plants.Every FC production facility implements an environment and health & safety management system (Foqus Corporate Safety, Health, and Environment, dated 2013) that complies with the specifications of ISO 14001 and OHSAS 18001 and is safeguarded by means of internal and external audits. The specific elements of the framework are described in further detail in each of the sections below. The framework is generally considered to be consistent with the requirements of this Performance Standard.Policy. Engro has established an Integrated Management Policy, which reflects the company's commitment to managing food safety, health, safety and environment (FHSE) and meeting Pakistani legal and regulatory requirements as well as best international practices (as stipulated under various certification schemes). The policy has been signed by the CEO and communicated to all employees.Sustainability is an integral component of FC's route2020 business strategy, which lays the broader foundations for the company's Corporate Social Responsibility (CSR) practice, consistent with the approach of ISO 26000. CSR Programs are implemented in areas such as further increasing the sustainability of dairy farming, the production chain and dairy distribution; making knowledge and expertise available to small dairy farmers in Asia and Africa so they can improve their productivity and quality and increase their families' income; and striving for climate-neutral growth both at the dairy farm and company level. Furthermore, FC supports the principles of the Dairy Sustainability Framework (which it was instrumental in developing), the Sustainable Agriculture Initiative, and the Supplier Ethical Data Exchange.Identification of Risks and Impacts. In accordance with Pakistani law, Engro completed separate Environmental Impact Assessments (EIA) for each of the operating facilities, which were approved in 2008 (for Sahiwal and subsequent approvals for expansions in 2009 and 2013); 2005 (for Sukkur and subsequent approvals for expansions in 2009 and 2011); and 2008 (for Nara Farm) by the Provincial Environment Protection Department. The EIA approval process required risk assessments to be carried out at company operations, compliance with National Environmental Quality Standards, implementation of mitigation measures outlined in the Environmental Management Plan, and establishment of a comprehensive emergency response system to ensure necessary safety measures are in place to protect workers. This was commensurate to the scope, risks and impacts of operations and can be deemed to be in compliance with the requirements of this Performance Standard. Engro undertook additional identification of risks and impacts as part of the process for obtaining various certifications for the following operational units: 1) ISO 14001 in 2011 for raw milk procurement and processing at Sukkur and Sahiwal plants; 2) ISO 9001 in 2011 for raw milk procurement and processing at Sukkur and Sahiwal plants; 3) FSSC/ISO 22000 (FSMS) in 2014 for raw milk procurement and processing at Sukkur and Sahiwal plants; 4) BRC Global Standard for Food Safety in 2012 for processing raw milk at Sukkur and Sahiwal plants; 5) Global GAP in 2013 for dairy farm operation at Nara Farm; 6) OHSAS 18001 in 2011 for raw milk procurement and processing at Sukkur and Sahiwal plants.Through FC's Foqus Corporate Safety, Health, and Environment, a standardized analysis of the environmental and health & safety risks has been undertaken at all the facilities.Management Programs. As part of the EIA process, Engro was required to implement specific Environmental Management Plans (EMP) to manage environmental aspects related primarily to the construction phase and to manage air and wastewater quality during the operations phase. Engro has reported on a regular basis to relevant national authorities [See ESAP item 1]. Engro's Integrated Management Manual and supporting FHSE Standard Operating Procedures are implemented across all operations to manage impacts during the operations phase of each facility. Engro has developed additional management measures to address additionally identified aspects as noted above in the Identification of Risks and Impacts Section and as stipulated under various Certification requirements. Practices related to the handling of livestock at Nara Farm comply with the requirements of Global GAP, which are consistent with IFC's Good Practice Note on Improving Animal Welfare in Livestock Operations as referenced in the sector-specific WBG EHS Guidelines for Mammalian Livestock Production.FC has management programs in placeacross its operations to address the following areas: climate-neutral growth (greenhouse gas emissions associated with production); sustainable purchasing; sustainable production (reduction in energy and water consumption at production sites through the use of sustainable energy and tracking the use of fossil fuels associated with the transport of milk and finished products); animal health & welfare; meadow grazing and biodiversity. All sites have an environmental management system in place and 66% have been certified to ISO 14001. FC safeguards food safety and food quality through Foqus Food Safety & Quality (FS&Q), a broad-based quality system that applies to both the member dairy farms and FC's production and distribution facilities. This is based on national and international legislation and Codex standards and takes into account the expectations of customers, consumers and social organizations. All FC companies have an independently evaluated HACCP system that complies with the standard of the Global Food Safety Initiative (GFSI) and which has been ISO 22000 and FSSC22000 certified.Organizational Capacity and Competency. Engro has defined roles, responsibilities and the necessary authority for implementing Engro's FHSE Integrated Management System across all operations. Engro has designated a General Manager (GM) for Food Health Safety and Environment, who reports to the Vice President for Supply Chain. Reporting to the GM is an HSE Manager, who has oversight of Assistant HSE Managers found at each plant and the farm. Each Assistant HSE Manager is responsible for ensuring that all activities are undertaken in compliance with the HSE policy. They also participate in the company's Safety Committee. Additional staff with HSE responsibilities have been designated in procurement and agricultural services. A Senior Manager for Quality and Good Safety oversees Assistant Managers at each plant. During IFC's site visit, and based on discussions with key individuals at individual sites, staff were generally found to be competent and knowledgeable of plant operations and the potential environmental risks and impacts.Engro has in place a rigorous HSE training plan to support effective implementation of the FHSE Integrated Management System. The HR department is responsible for coordinating the roll-out of the training plan and maintaining employee/training need assessment records as well as responding to the needs for additional FHSE trainings based on the findings of regularly conducted internal safety compliance audits of operations.FC has in place a governance structure with joint oversight and implementation of the company's CSR policy, comprising the CSR Governance Board and the Corporate Sustainability Department, the CSR coordination team and four steering groups responsible for the company's priority areas (Nutrition & Health, Dairy Development in Asia and Africa, Efficient and Sustainable Production Chains, and Sustainable DairyFarming). The Corporate Sustainability Department's responsibilities include setting up and updating the CSR strategy and the CSR policy; conducting the dialogue with stakeholders; coordinating the implementation of the CSR policy and facilitating implementation; involving external interested parties in the CSR policy; communicating the sustainability activities to the internal and external stakeholders; and helping the business groups translate the corporate CSR policy into brand policy. Foqus Corporate Safety, Health, and Environment outlines the roles and responsibilities as well as monitoring and reporting structure that is required for implementation of the management system at each facility.Emergency Preparedness and Response. Engro has in place a hierarchy of documents including a group level Security Policy, Integrated Security Plan, and Master Control Security Manual to ensure that the necessary security standards are in place to protect all personnel and assets. The Security Head at each Engro facility is responsible for establishing and implementing site-specific procedures, and monitoring actions to ensure that the intent of the security policy is met. This includes a comprehensive, security manual that stipulates the practices and procedures to be undertaken so as to ensure the dangers identified in the detailed risk assessments (such as terrorist attack, kidnapping, sabotage, labor unrest/strike) can be avoided, minimized or mitigated. The manual also details the steps to be taken regarding coordinating emergency/crisis planning and responses with the police and relevant authorities. This also includes a Standard Operating Procedure for Emergency Response, which summarizes the key risks (fire, hazardous spill and medical emergency) and procedures for addressing these risks, including evacuation plan and roles and responsibilities, as well as a procedure for Emergency Preparedness and Contingency Planning, which outlines training requirements, arrangements with local authorities, and a community awareness plan (see section below in Performance Standard 4).All sites are equipped with the necessary fire prevention system, including alarms, a combination of fire extinguishers, gas suppression system to suppress electrical fires, and a hydrant with dedicated water reservoir in accordance with Pakistani standards. Engro undertakes regular inspections of the fire extinguishers and the hydrant system. At Engro's Area Offices and Milk Collection Centers, fire safety and first aid drills are conducted on a quarterly basis as well as sessions on emergency response, which are conducted once every 1-2 months. Engro plans to initiate the process of reviewing its existing life and fire safety procedures against the requirements of the National Fire Protection Association (NFPA) [see ESAP item 2].Monitoring and Review. Engro has established procedures for internal audits and performance monitoring of FSHE aspects at all sites, which results in regular safety inspections (food safety, health and environment), the results of which are tracked through a dedicated software program. Incident investigation reports are prepared in case of non-compliance that are reported to the Safe Operations Committee on a monthly basis by the EHS managers; timeframes for follow up actions are established as needed. Engro monitors energy and water consumption at each site to identify further opportunities for reduction/process improvements; all data is aggregated annually and included in a group-level sustainability report [see ESAP item 3]. Engro regularly monitors air emissions and wastewater quality and reports on a quarterly basis to relevant authorities. Additional external audits are undertaken once a year to confirm on-going conformance to certification requirements. Data on volume of solid and hazardous waste generated and wastewater discharged is tracked at the site level.All FC facilities report their environmental, health and safety results each year through the company's CSR data collection system, and CSR performance indicators are monitored and reviewed annually. The company prepares an annual CSR report for external stakeholders through a CSR report.Supply Chain. In addition to sourcing raw milk from Nara Farm, Engro sources raw milk from commercial dairy farmers, large farms, key farms, and strategic milk collection agents with which it has exclusive agreements in place. Engro has in place an Agricultural Services program (consistent with the principles of Global Good Agricultural Practices) through which farmers receive training on handling practices, quality of milk, productivity of animals, managing animal health/diseases, subsidized vaccination, aflatoxin awareness and management, animal nutrition/feed and fodder management, and farm economics/record-keeping. To date, this has impacted approximately 15,000 farmers in 6,000 villages and 1,400 medium and large commercial farms. Furthermore, materials to raise farmer awareness of issues such as livestock disease, nutritious feed, and hygiene are posted at all Milk Collection Centers. Agri-Services Officers support the implementation of these programs through regular field demonstrations and can be reached at any time through the Milk Collection Centers. Also, a veterinarian is located at each Area Office to oversee the vaccination program, which focuses particularly on Hemorrhagic Septicemia and Foot and Mouth disease, which are of particular concern in Pakistan and can be especially devastating to smallholder farmers where husbandry and preventive practices are poor and free-range management is common. However, the practices related to the handling of livestock by dairy farmers could be further improved to be consistent with best practices such as IFC's Good Practice Note on Improving Animal Welfare in Livestock Operations (as referenced in the sector-specific WBG EHS Guidelines for Mammalian Livestock Production) [seeESAP item 4].FC has in place a Dairy Development Program, which is consistent with the principles of the Dairy Sustainability Framework of the international dairy industry, and includes providing training on good dairy farming practices (animal health, milking hygiene, animal feeding and water, animal welfare, waste management and handling of chemicals). Working with partners, the program has been rolled out in Africa, Asia and Europe and entails a variety of tools to provide training (on the ground, practical knowledge transfer by local FC dairy development officers and/or by Dutch dairy farmers), consultancy services by internal and external dairy experts, establishing centers for knowledge transfer, demonstration, research and innovation, and financing local infrastructure such as milk collection centers, boreholes, milk collection trucks, etc.

PS 2: LABOR AND WORKING CONDITIONS

Engro employs approximately 1,586 employees fulltime (242 at Sukkur, 376 at Sahiwal, 26 Nara Farm, at HQ and administration, and the remainder in milk procurement) to perform core business functions. In addition, 4,000 employees (560 at Sukkur, 1,800 at Sahiwal, 200 Nara Farm, at HQ and administration, and in milk procurement) are employees of third-party service contractors to perform non-core business functions (packaging, warehousing, and logistics/transportation at the processing facilities; farmers and livestock operations at Nara Farm). All employees are typically hired from the surrounding regions but this is not specifically stipulated in the company's HR policy.FC has over 22,000 employees worldwide.Human Resources Policies and Procedures. Engro has an HR policy and manual, which describes the company's principles related to the management of employees and is accessible by all employees on the company's HR portal. It is pending translation into Urdu and will be disseminated through the company's website by end of April 2016. All employees are informed about the company's HR policy and are provided with a copy of the HR manual during induction. The HR manual describes the recruitment process for employees, the compensation and salary structure, procedures for medical examination before hiring, training for professional development, transfer and relocation, medical benefits, leave (sick, maternity, and annual), incentives (shift premium, target incentive allowance, and housing and utility allowances), performance appraisal, disciplinary measures and termination, complaint resolution guidelines including non-discrimination and harassment policy, and other benefits (such as company car and phone allowance, performance awards, and education assistance). All Engro employees are issued written appointment letters and are provided with a copy of the HR manual.Requirements related to HR management practices of third-party service providers are stipulated in Standard Operating Procedures for Service Provider Eligibility Criteria and in their contracts, managed through the procurements department. Engro also has a Code of Business Conduct, which every employee is required to acknowledge on an annual basis and addresses, among other items, ethics and integrity, and matters related to health, safety and the environment. Under Pakistani labor code, there is no requirement for a company to submit its HR policies and procedures for review and approval by national authorities. However, Engro will request for an external verification by a lawyer against the national Labor Code to verify full compliance [see ESAP item 5].HR issues are overseen by a Human Resources Manager at Headquarters and by HR Assistant Managers at each site, who are also knowledgeable of the provincial labor rules and regulations that apply to their site. HR Assistant Managers at each facility provide information sessions on the HR policy and any updates to employeesas necessary. Refresher information on specific sections of the HR manual is also emailed, posted on the company intranet site or posted on a bulletin board on a regular basis.FC has a worldwide Human Resources (HR) strategy, which was developed to support the company's route2020 ambitions, and entails three core themes: involvement, talent and change. The HR strategy also focuses on talent development and guidance through changes within the organization. FC has developed a Code of Conduct to promote the ethical conduct of its employees and also reflects the company's commitment to the United Nations' Universal Declaration of Human Rights. Other issues included in the Code are the exclusion of corruption, child labor, forced labor and discrimination of employees, and respect for the employees' right to organize themselves in trade unions. Compliance is monitored annually and reported to the Supervisory Board's Audit Committee. FC has a whistle-blower policy to promote transparency and integrity by encouraging employees to report any actions that are in non-compliance with the Code of Conduct.Working Conditions and Terms of Employment. Engro conducts market surveys on wages/salaries and uses this as a benchmark for setting its salary scale. All Engro staff are paid competitive wages above the national minimum wage (which currently stands at 13,000 rupees/month). Employees work 6 days (followed by 2 days off) in 3, 8-hour shifts and are given a break for tea and lunch. Working overtime or in consecutive shifts is not allowed. There have been no strikes related to employee discontentment. The union at the Sukkur facility threatened to strike in 2013 but a Memorandum of Settlement was agreed to instead by the company and the union. There are several litigation cases against the company involving HR matters, which Engro considers to be low risk and is confident will be settled in favor of the company. Engro respects the requirements of the Collective Bargaining agreement in place (renegotiated every 2 years, with the next revision due in February 2017) at the Sukkur facility; all other contracts are individually negotiated at the Sahiwal facility and Nara Farm.As part of the company's internal audit function, Engro undertakes quarterly compliance reviews against all company procedures including HR procedures. Most findings were related to the third-party contractor (see below). Per applicable provincial laws, the relevant government authorities representing the EOBI, Social Security, Health Safety, Civil Defense, and Labor undertake regular inspections of the company's premises to verify compliance with rules and regulations. The company has not received any fines or penalties.Each facility is equipped with drinking water fountains, separate changing rooms, toilets and showers for men and women, a cafeteria with food for sale and sufficient indoor seating (with ceiling fans). A small dispensary/clinic for first aid treatment including an on-site doctor is found at Nara Farm. On-site accommodation (guest house) is available for overnight stays for senior level staff. Furthermore, at each site, there is an Assistant Manager for Industry Relations who reports to the Administrative Manager with oversight of the adequacy of these basic services.Workers' Organization. Engro supports the rights of employees to form or join workers' organizations including unions, if they chose to. Currently, only employees (non-management level excluding third-party contractors) at the Sukkur facility are represented through a union (Engro Food Labor Union, which is affiliated with the National Labor Federation) and covered by a Collective Bargaining agreement. Consistent with the Industrial Relations Act of 2013, a workers' management council is in place and operational. There are weekly interactions at the site level between management and union representatives and the relationship between union representatives and the company is considered to be good. There is no union activity at the Sahiwal site because there has been no interest expressed by employees. National law allows for freedom of association, which Engro respects: if non-management employees at the Sahiwal facility and Nara Farm wanted to organize into a union, they are free to do so and submit an application to the national union.Non-discrimination and Equal Opportunity. The company's Code of Business Conduct includes a policy on equal opportunity and promoting a harassment-free workplace. Furthermore, the HR manual defines the responsibilities of managers, supervisors, and all employees to prevent discrimination and harassment. All employees receive awareness training on harassment at the work place and if harassment were to arise, there is a procedure in place for reporting this on a confidential basis to a harassment committee. Engro also encourages gender diversity and has tasked a management committee to review practices for improving gender diversity across its operations through the provision of infrastructure (for example, day care service and lactation room) at its facilities to facilitate the inclusion of female employees and develop a more conducive work environment (for example, flexible work options and part-time). Women currently constitute 6-8 percent of Engro's direct employees and typically work in the quality assurance laboratory of the facilities or in administrative functions.Retrenchment. According to projected headcount planning, Engro plans to increase the number of fulltime employees by 9 percent and as such does not anticipate any retrenchments. Engro currently does not have a formal plan or procedure in place to handle this nor are there specific requirements under the national labor code related to compensation other than letting go first of the most recent employees. However, previously Engro has had to close down a pilot project involving 60 employees and made sure to retain and reposition all of these in other company operations.Grievance Mechanism. There are several platforms by which Engro employees and third-party contracted worked can voice workplace concerns: a whistleblower policy related to ethics and responsible behavior (which can be used to report matters related to safety, environmental performance, harassment, HR-related matters or other non-compliances with company policies). Through this mechanism, any employee or worker contracted through a third-party provider can voice a complaint (hotline or email), which is then investigated (and mediated with the third-party provider if necessary) and includes a process for addressing complaints related to harassment or discrimination. In the case of the Sukkur facility, concerns can be voiced through the union representative and workers' management committee. Furthermore, at the site level, any work-related issues or conflicts that arise can be brought to the immediate attention of the HR Assistant Manager or General Manager who holds regular open-door sessions to listen to employee concerns [see ESAP item 6]. Engro regularly undertakes employee engagement surveys with 100% employee participation rates to improve its HR management practices and based on the most recent survey, areas for improvement were identified as compensation & benefit, training & development, and work-life balance.FC conducts an employee survey once every two years to continuously improve its practices. The most recent survey was undertaken worldwide in 2014 and had an 87-percent completion rate among the company's 22,000 employees. The results of the survey showed a high level of involvement and pride among the employees and 90 percent of the employees considered FC to be a socially responsible company.Protecting the Work Force. All Engro employees and those employed by third-party contractors are above the national legal minimum age of 18. As part of the hiring process, all employees are required to provide evidence of their age. The company does not employ forced or compulsory labor and working overtime is only on a voluntary basis. However, this is not stipulated in the HR manual.Occupational Health and Safety. Engro is committed to ensuring that all facilities are operated in a manner that is safe and healthy for all employees, as reflected in the company's Integrated Management Policy. To this end, Engro has identified hazardous operations and has completed Job Hazard Analyses by job function for each facility to assess the physical, chemical, and biological hazards that are inherent to the activities undertaken at each site. Based on the outcomes of the assessment, Engro has subsequently eliminated tasks or operations, substituted materials or practices, provided controls (including warning signage), trained personnel, and/or issued Personal Protective Equipment (PPE) so as to ensure workers are only exposed to acceptable levels of residual risk in carrying out their jobs.Engro has a process in place for recording and tracking work-related accidents and injuries. All such cases are communicated directly to the HR unit but the FHSE Manager and Assistant Managers are responsible for analyzing all occurrences and determining the need for corrective and preventive actions. The company reported no fatalities in the last 5 years and a Total Recordable Injury Rate (calculated per 200,000 hours worked) of 0.15 in 2012, 0.18 in 2013, 0.16 in 2014, and 0.16 in 2015, which is well below the industry benchmark for the dairy sector. All Engro sites are certified to the requirements of the OHSAS 18001 standard on occupational health and safety.FC is committed to achieving the safest possible working environment for its employees and suppliers and has implemented a global safety program including seven life-saving rules. It describes the safety standards that must be adhered to and meets the requirements of OHSAS 18001. The Global Safety Program comprises five safety programs: i) leadership and behavior, ii) life-saving rules, iii) supplier management, iv) process safety, and v) effective two-way communication. FC's lost-time injury frequency rate has decreased continuously by 83% between 2010 and 2014. In 2015 the number of accidents requiring sick leave per 200,000 hours worked dropped to 0.24 (compared to 0.33 in 2014) and the lost-time injury frequency rate in the first quarter of 2016 has decreased to 0.15. The company's target for 2020 is zero accidents and the company believes that all accidents can be prevented and that accidents should be prevented at all cost.Workers Engaged by Third Parties. Engro engages third-party contractors to provide services for performing all non-core functions (such as loading, warehousing, and logistics/transportation), which have greater expertise in these areas than Engro. Contracts are centrally coordinated on a yearly basis through company headquarters in Karachi based on the production needs at each site. As part of this process and as stipulated in Standard Operating Procedures for Service Provider Eligibility Criteria, Engro verifies with contracting companies that they pay at or above minimum wage, only contract workers above age 18, and comply with labor code requirements such as providing benefits and registering all workers with the national Social Security and Employees Old Age Benefits Institute (EOBI) by requesting receipts as evidence of payment of contribution. Workers are also entitled to organize into a union if they so choose, which is the case at the Sukkur facility. Third-party contracts also include clauses that the service provider complies with the labor code and is required to ensure that employees have medical insurance and that they comply with Engro's FHSE policy including proper use of Personal Protective Equipment. Based on the internal audit of the processing plants in 2015, findings related to third-party contractors included the following: a lack of written appointment letters, missing salary slips and personnel files; a lack of resignation acceptance/leave records (as per Factories Act 1934); and, that staff were not registered with EOBI. Timeframes for completion of these findings were communicated to the third-party contractors [see ESAP item 7].Supply Chain. Engro purchases raw milk from direct farmers and progressive farmers, village milk collection points, and dodhis (middleman trader) with which it has no exclusive contractual agreements in place. Although child labor is prevalent in Pakistan in the agriculture sector, this has not been flagged by the U.S. Department of Labor (2014 findings) as an area of particular concern in the dairy sector. Nonetheless, it is common in small family farms and villages that children participate in tending to livestock along with the rest of the family and there are instances of some farms engaging children below age 17 as low-wage workers. However, these practices were not observed at the time of the appraisal. The occupational health and safety risks associated with handling of livestock are related to direct contact with sick animals (Hemorrhagic Septicemia and Foot and Mouth disease), exposure to pathogens from handling manure without adequate protection (with bare hands and barefoot/in sandals), and storage and use of pesticides. This is typically due to a lack of awareness of the hazards and risks and use of proper Personal Protective Equipment [see ESAP item 8].Besides the procurement of raw milk, Engro also purchases Hydrogenated Palm Oil (HPO) and sugar, which respectively represent 8% and 2% of overall goods procured. HPO is sourced from local companies (which are supplied from Malaysia and Indonesia) and imported (from unknown origin); sugar is sourced locally. Although the company has a Procurement Manual, which stipulates the promotion of responsible sourcing and sustainability, there is no indication whether Engro requires goods to be sustainably produced as verified by a recognized certification standard (such as by the Round Table on Sustainable Palm Oil, RSPO, for HPO and Bonsucro for sugar) [see ESAP item 8].FC has a goal to procure, by 2020, 100 percent of its agricultural raw materials (cocoa, soy, palm oil, selected types of fruit, cane sugar, beet sugar, starch and paper for packaging) from sources that are managed completely sustainably. This entails procuring products with recognized certification or developing a sustainable development plan in cooperation with suppliers. In 2015, among other commodities, palm oil came directly from a sustainable source based on the criteria of RSPO (of which it is a member), and five percent of the purchased cane sugar was Bonsucro certified.

PS 3: RESOURCE EFFICIENCY AND POLLUTION PREVENTION

Energy and Material Efficiency Projects. Engro operations are powered by self-generated electricity as the national power grid is unreliable, using primarily natural gas and some diesel. The total energy production capacity is 25.18 MW at the Sahiwal site, 10 MW at the Sukkur site, and 1.5 MW at Nara Farm. Data on energy consumption (in kWh) by fuel type is tracked at each site and Engro has benchmarked its energy consumption against others in the same sector to determine how efficiently its operations are performing. Engro has undertaken efforts to identify energy conservation opportunities at all sites. In addition, each of Engro's Area Offices and Milk Collection Centers are also powered by on-site generators primarily to meet the energy needs of the chillers. However, energy consumption is currently not tracked.Water. Water at Nara Farm is used primarily for irrigation purposes (to grow fodder), which is sourced from surface water (through a private canal drawing water from a government-managed canal (Nara Canal) emerging from the Sukkur Barrage), representing annually approximately 1.48 million m3 of water in addition to 452,699 m3 of water extracted from on-site wells (3 wells) used for cleaning. However, there are no records of water intake from the canal or metered readings at the wells. Water is used at various stages of operations in the processing plants (to add to the product, flush and clean equipment, and in the boilers to generate steam). Engro operates on-site water wells at all facilities (9 wells at the Sahiwal site and 20 wells at the Sukkur site) and based on the Pakistani regulatory framework, Engro is not required to request a separate extraction permit (which is already granted through the EIA process) nor is required to limit the total volume of water extracted. Raw water is treated on-site (by multi-media filter, reverse osmosis, softening and arsenic filtering) and water quality is tested on a regular basis, and was found to be in norm with national standards for drinking water.Engro currently extracts annually 2 million m3 of water at the Sahiwal facility and 990,512 m3 at the Sukkur facility, and although water extraction is currently not monitored at each well, water consumption is monitored through separate meters installed at various key locations of the process. To date, no water feasibility study has been undertaken to assess the levels of ground water available to support company operations without adversely impacting other users. However, water recovery projects have been identified and are in the process of being implemented at both Sukkur and Sahiwal, which have resulted in the recovery of 1850 m3 of water/day at the Sahiwal facility (representing approximately 35% of the total wastewater currently generated) and 200 m3 of water/day at the Sukkur facility. Engro has established reduction targets in water consumption by 5% (compared to 2015) per liter of product produced and is currently using 3.3 liters of water per liter of UHT milk produced at the Sahiwal facility (compared to the national industry benchmark of 3 liters and the international industry benchmark of 1.0-1.5 liters). The company also has a Road Map to Zero Water Discharge, which includes the following phases: 1) Minimize water consumption for milk processing; 2) Identify opportunities for recycling water after primary use, before sending it to wastewater treatment plant; 3) Reuse wastewater effluent after further treatment; and 4) Use activated sludge from wastewater treatment plant for biogas.In addition, there are water wells at each Area Office and Milk Collection Center, where water is used primarily for cleaning equipment and washing milk collection tankers. Water wells are not equipped with meters and there are no records of water consumption [see ESAP item 9].GHG Emissions. Engro has estimated its current direct greenhouse gas emissions from boilers and generators, which were reported to be 60,458 tons of CO2 equivalent. Engro is using alternative fuels to reduce greenhouse gas emissions and at Sahiwal, a steam purchase agreement is in place with two external companies, which have installed biomass-based boilers on-site using corn husks as a fuel. However, Engro currently does not have a systematic monitoring process in place for quantifying reductions in greenhouse gas emissions as a result of this [see ESAP item 10]. Engro is also initiating a Vehicles Emission Monitoring Regime (to be started in the third quarter of 2016) to monitor greenhouse gas emissions of vehicles used in the procurement and transport of raw milk.Air Emissions and Ambient Air Quality. The various production processes across Engro's operations generate air emissions from the operation of boilers and generators and fugitive emissions of ammonia. To avoid the potential impacts associated with improper management of these sources of pollution, Engro has adopted the following measures across its operations to avoid or reduce negative impacts: 1) all boilers undergo an annual maintenance inspection to ensure that they are operating efficiently and safely; and 2) air emissions are regularly monitored to review effectiveness of air emissions control system.Engro undertakes monthly monitoring of air emissions at the boilers and generators and reports to national authorities on a quarterly basis. Air quality data complies with national environmental quality standards; however, some of these parameters (PM10 and NOx) were found to be less stringent than those stipulated in the WBG EHS Guidelines for point source emissions to air (PM10: 50mg/Nml; NOx: 460mg/Nml from diesel and 320mg/Nml from gas) [see ESAP item 11].Wastewater Treatment. The various production processes across Engro's operations generate annually 2.6 million cubic meters of wastewater aggregated across the Sahiwal and Sukkur processing facilities. To avoid the potential impacts associated with improper management of these sources of pollution, Engro has adopted the following measures across its operations to avoid or reduce negative impacts: given the wastewater characterization, on-site wastewater treatment facilities plants for chemical, physical, and biological treatment have been installed at the two processing facilities prior to discharge to the municipal system for the Sahiwal facility and discharge to the Indus River for the Sukkur facility. The necessary authorization by government authorities (on 10 April 2006) was granted to Sukkur for the disposal of treated wastewater in the River Indus and to Sahiwal (on 29 September 2015) for the disposal of treated wastewater to the municipal wastewater system. Among the top 10 Capex projects identified for 2016, Engro has set aside dedicated budget for making efficiency improvements to wastewater treatment processes. At Nara Farm, wastewater generated from cleaning the barn undergoes physical and limited chemical treatment prior to being discharged to surrounding cultivated land. As the wastewater does not undergo biological treatment, it is likely that it contains pathogens in addition to high BOD and COD loads. Wastewater generated from the milking parlor is used for irrigation purposes. The remaining wastewater stream generated from equipment cleaning and chillers is discharged to an on-site evaporation pond. Wastewater generated at Area Offices and Milk Collection Centers are discharged to existing community water drains or to adjacent fields as there generally is no municipal sewage system. Limited treatment to remove fatty materials prior to discharge is undertaken through fat traps that have been installed at all Area Offices. However, none of the Milk Collection Centers have been equipped with these [see ESAP item 12].Engro undertakes monthly monitoring of the wastewater effluent prior to discharge and reports to national authorities on a quarterly basis. Wastewater quality data complies with national environmental quality standards; however, some of these parameters (BOD5, total suspended solids, and total nitrogen) were found to be less stringent (or not measured in the case of total phosphorus and total coliform bacteria for effluent) than those stipulated in the WBG EHS Guidelines for effluent from diary processing levels for discharge to surface water (BOD5: 50 mg/l; total suspended solids: 50 mg/l; total nitrogen: 10 mg/l; total phosphorus: 2 mg/l; and total coliform bacteria: 400/100 ml) [see ESAP item 12].Solid Waste Management. The various production processes across Engro's operations primarily generate the following non-hazardous waste streams: i) defective product; ii) defective packaging, general packaging materials such as cardboard and plastic; iii) equipment parts and scrap; iv) office waste such as paper and printer cartridges; and vi) household waste from operations of the on-site kitchen and cafeteria. The processing facilities have received the necessary government approval by the local Environmental Protection Agency for the collection/transportation, and safe disposal of non-hazardous waste material. Defective packaging material is processed by a recycling facility. Furthermore, large quantities of livestock waste are generated at Nara Farm, where it typically accumulates in the barns when cattle is brought to the milking parlor. This is removed on an-going basis to prevent accumulation and spread out for conversion into manure, to be used later in fodder cultivation around the farm or given to surrounding farmers. Finally, cows no longer used in milk production or breeding are sold to be slaughtered and if deemed unfit for human consumption, cattle is relocated to an area of the farm to die of a natural death and buried according to good agricultural practices.Engro operations also generate limited quantities of hazardous waste, which entail: i) chemical products and residues from the on-site laboratory for product quality testing; ii) empty chemical waste containers; iii) medical waste from on-site clinic; iv) veterinary waste from livestock operations; and v) machinery maintenance products, used-oil, empty containers, and contaminated rags. These wastes are collected and stored on site prior to disposal by an authorized contractor. These wastes are disposed of using the services of an approved waste management contractor.Hazardous Materials. Engro stores the following quantities of hazardous materials used in its operations: i) diesel (110,000 liters at Sukkur; 710,000 liters at Sahiwal; and 25,000 liters at Nara Farm) to power operations of the boilers and generators as primary source of electricity; ii) sodium hydroxide (15,000 liters at Sukkur and 50,000 liters at Sahiwal) and nitric acid (15,000 liters at Sukkur and 30,000 liters at Sahiwal) used for cleaning equipment; and ammonia (5.46 tons at Sukkur; and 25 tons at Sahiwal) for chilling purposes. Diesel is stored in above-ground storage tanks with appropriate secondary containment structures consisting of walls capable of containing more than 110 percent of the tank volume in the event of a leak, for which each site has obtained the necessary approvals from relevant authorities. These were observed to be properly maintained and Standard Operating Procedures for handling potential spills are including in the Procedure for Emergency Response. Ammonia is delivered in container trucks and transferred to on-site storage tanks, according to required industry safety procedures. Furthermore, Engro has Standard Operating Procedures for verifying the integrity of ammonia tanks and leak detection sensors have been installed in key locations. Pesticides and vaccines/medicines for livestock at Nara Farm are stored in separate and secure locations and to prevent expiration of the chemicals, Engro implements a first in/first out procedure. Limited quantities of diesel and chemicals (such as sulfuric acid) used for testing milk quality are also stored at theMilk Collection Centers. These were stored with appropriate secondary containment and each site was equipped with procedures for the safe handling of chemicals including the necessary Personal Protective Equipment and Material Safety Data Sheets.Pesticide Use and Management. Engro has in place the basis of an integrated pest management (IPM) approach across its operations including Nara Farm and has retained the services of an external contractor (for example, C-Shine Pest Management) to apply preventive treatment against potential insect or rat infestations across processing plants. This entails monitoring, controlling (through UV lights, traps, spray and fumigation) and prevention (through facility design and air curtains). Engro maintains a list of approved chemicals and associated Material Safety Data Sheets for the products (pesticide and bait) used to fight insects and rats, a usage log and summary of inspections including map of each facility listing control devices, as well as records of approved suppliers.

PS 4: COMMUNITY HEALTH, SAFETY AND SECURITY

Transportation Safety Management. Engro owns 394 insulated tanker trailers for raw milk collection and transport is undertaken by third-party contractors (contracts negotiated with 5-7 firms representing almost 500 drivers). Engro has a separate Traffic Safety Management Program to specify safety requirements for drivers including driver training and selection, fitness for work, drug testing, parking protocols, and route hazard assessment. Engro has developed a rigorous training program, which is administered in association with the National Highway Authority. All vehicles undergo a weekly check to confirm they are fully operational. Daily driver safety briefings are held to remind truck drivers of dos and don'ts. Although trucks are currently not equipped with speed trackers (but there are plans to install GPS devices), this information is tracked through an electronic log book, which keeps a record of the specific route driven (based on milk collection points) and the arrival times at each location. Engro also has a Driving Policy that applies to safe operations of company vehicles by employees. There have been no serious incidents involving company vehicles or third-party contracted drivers.Food Safety Impacts and Management. As stated in the section Identification of Risks and Impacts, activities at Engro's processing facilities are performed in accordance with the principles and practices of Hazard Analysis Critical Control Points (HACCP) for which all facilities have received FSSC/ISO 22000 and BRC Global Standard for Food Safety certifications. This reduces risk related to hygiene and food safety and mitigates potential impacts to the community. As part of HACCP requirements, the design of each of the processing lines at the facilities is organized such that products move from "dirty" to "clean" areas to avoid contamination and is undertaken by pumping raw materials stored in bulk tanks through each step of the process (standardization, pasteurization, heating/UHT, mixing, and filling) and filling of the finished product is undertaken through an automated processes, thus removing the potential for contact between workers and the finished product. Procedures are in place for ensuring daily cleaning of equipment and removal of solid waste. All staff have received training on food safety issues and have been issued the necessary work clothes (clothes, gloves and hair coverage) commensurate with the extent of contact with the finished product.Within Engro's raw milk supply chain, procedures are in place at Area Offices and Milk Collection Centers for verifying the quality of milk received from farmers and Village Milk Collection centers. Upon reception, this entails a preliminary taste, smell and appearance test to rapidly segregate poor quality milk. Additional tests are undertaken to test temperature, fat content, solids non-fat (SNF), clot on boiling (COB), and Alcohol Precipitation (APT). Additional tests (11 quantitative and 15 qualitative) are undertaken at the field laboratories of the Area Offices (which are certified under ISO 9001 and ISO 22000) on all the milk brought in by collection trucks. The tests are repeated again once the products are delivered to the processing facilities at Sahiwal and Sukkur. Pathogen testing is currently not undertaken but is planned to commence starting June 2016 [see ESAP item 13].Emergency Preparedness and Response. Each operating site has a procedure for Emergency Preparedness and Contingency Planning, which includes a community awareness plan [see ESAP item 14].Security Personnel. Each site is equipped with a Closed-Circuit Television to monitor unauthorized access and armed security guards are employed through a third-party contractor (Askari Guards) in 3, 8-hour shifts. The company's Master Control Security Manual outlines the requirements for security guards (which is also reflected in the contract with the third-party), including criminal background checks prior to joining their duty at each facility, physical and mental competency to properly perform duties, formal training on use of approved weapons and regular practice, weapons storage under lock and key when not in use and inventory, and rules of engagement, (only in case of self-defense and there is no other way to protect a company employee). There have been no incidents related to armed security guards and the surrounding community. All potential incidents are reported and investigated.

PS 6: BIODIVERSITY CONSERVATION AND SUSTAINABLE MANAGEMENT OF LIVING NATURAL RESOURCES

Protection and Conservation of Biodiversity. Nara Farm is adjacent to the Nara Canal, the largest man-made canal in Pakistan. The project site is an existing modified habitat within the Thar Desert ecoregion with natural habitat patches (riverine forest and natural grassland). The broader region occurs within the Central Asia Bird Migration Flyway. Current data available from the company indicates that the site overlaps the known boundaries of the Nara Canal wetlands (including Soonhari, Sadhori and Sanghriaro lakes) key biodiversity area (KBA) and according to the EIA, that it may just be touching the boundaries of the Nara Game Reserve (IUCN Category unknown). Given the close proximity to the Game Reserve, the EIA stipulated precautions and controls to preserve environmental quality during the construction phase of Nara Farm, including the prohibition to hunt, capture, or trap wildlife and keeping land clearance for project activities to a minimum [see ESAP item 15].The Nara Canal KBA potentially triggers critical habitat for globally significant concentrations of migratory water-bird species that use the canal and adjacent wetland areas as well as other biodiversity values [see ESAP item 15]. No impacts on these values are expected as the farm is an existing facility with no plans for further conversion, expansion or other significant changes in land management. Similarly, no impacts related to alien invasive species or on ecosystem services are expected but these have not yet been assessed in detail. Special care must, however, be taken to identify and manage potential downstream risks related to water abstraction and effluent management (see PS3).Sustainable Management of Living and Natural Resources. Livestock operations at Nara Farm are being sustainably managed and have received Global GAP certification.Supply Chain. Aspects have been addressed under PS1 and PS2.

Based in the Netherlands, FC is a dairy cooperative 100% owned by its cooperative members. FC intends to invest in the Company through a special purpose vehicle, in which IFC intends to co-invest.The Company, which is listed on Pakistan stock exchange, is controlled by Engro Corporation, which in turn is controlled by Dawood Hercules Corporation Limited, a prominent and well respected business group in Pakistan.

The proposed IFC investment includes an A-loan up to €100 million, and an equity investment up to €40 million. IFC's Investment as Approved by the Board: USD 156.13 (Loan: USD 111.52; Equity: USD 44.61)

ACCOUNTABILITY MECHANISM OF IFC

The Compliance Advisor Ombudsman (CAO) is the independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an IFC or MIGA- financed project. If you submit a complaint to the CAO, they may assist you in resolving a dispute with the company and/or investigate to assess whether the IFC is following its own policies and procedures for preventing harm to people or the environment. If you want to submit a complaint electronically, you can email the CAO at CAO@worldbankgroup.org. You can learn more about the CAO and how to file a complaint at http://www.cao-ombudsman.org/

CONTACTS

Pieter Blomjous – FrieslandCampina – Director Business Development and M&A
+31 (0)33 713 33 33
mailto:Pieter.Blomjous@frieslandcampina.com