PROJECT DESCRIPTION

New Hope Group is the biggest "farm to fork" agribusiness conglomerate in China (http://www.newhopegroup.com/EN/). New Hope Liuhe Co., Ltd. (China) is one of the eight national leading companies in New Hope Group - and the largest poultry producer in China. It is an integrated supply chain operator from animal feed, livestock and poultry farming to slaughtering and meat processing.New Hope has grown into other emerging countries in recent years. To further improve its competitiveness and strengthen its brand, New Hope is currently consolidating its Southeast Asia operations under NHS.IFC is invited to provide a corporate loan of up to US$60 million to the company to support its long-term growth in the region. IFC's investment will help New Hope leverage its advantages and competitiveness in China to further build up its operations (comprising feed mills and poultry breeder farms) in Southeast Asia, including Vietnam, Indonesia, Philippines, Bangladesh, Myanmar, Laos, Cambodia and Sri Lanka (the "Project").

OVERVIEW OF IFC'S SCOPE OF REVIEW

IFC's environmental and social (E&S) review of this investment consisted of appraising technical, environmental, health and safety (EHS) related information submitted by New Hope Singapore Holdings (Private) Ltd. ("NHS" or "the company") and New Hope Liuhe Co., Ltd. (China) ("New Hope" or "Sponsor"), including: regulatory permits and licenses, Group level operational policy and procedures manual for New Hope; organizational charts; operational details about the company's existing operations; EHS and human resource (HR) policies and procedures as well as safety and food safety manuals for NHS facilities in China and Indonesia; EHS related monitoring records; and external consultant's Report on Assessment for Food Safety Management System (FSMS); etc.The appraisal also included site visits to the Sponsor's and company's headquarters in Beijing and operational feed mills in China and Indonesia; and discussions with senior management and technical teams.Information on the E&S risks associated with the supply chain of agro-commodities such as corn and soybean meal was obtained at US Department of Labor and ILO websites, and from other private third party information providers.As the proposed investment is a corporate investment covering multiple facilities spread across a number of countries in Southeast Asia, IFC's due-diligence reviewed the management systems at the corporate level - such as policies, procedures, organizational structure and capacity - to manage E&S risks and impacts at individual facility level. Visits to operational sites were thus made to assess the ground level implementation of these management systems.IFC's appraisal considered 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 Standards objectives.

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 SecurityIf IFC's investment proceeds, IFC will periodically review the the project's ongoing compliance with the Performance Standards

ENVIRONMENTAL AND SOCIAL CATEGORIZATION AND RATIONALE

Key E&S issues and risks associated with this Project are: New Hope's social, environmental, occupational health and safety and food safety management system and performance; assurance of fair and safe working conditions for company's employees and contractors; animal welfare and biosecurity management at its poultry breeder farm; utilization of equipment and operational practices that maximize conservation of energy, water and process materials, including recycling and reuse initiatives; management of emissions and wastes and their impacts on ambient environment and nearby communities; impacts of transport and warehousing infrastructure and biosecurity issues on the nearby communities.Continuous assessment of potential, additional Performance Standard requirements will be part of the company's responsibilities through PS1 and, where identified, IFC must be promptly informed and appropriate mitigation agreed. The applicability of PS1, 2, 3 and 4 has been determined through the appraisal process.The company does not acquire any land which might result in involuntary displacement. Land required for NHS's operations is either purchased outright through a willing-buyer-willing-seller type of voluntary market based transaction or is leased through a negotiation process with local government agencies in accordance with local land related regulations. The company's operations (existing and proposed) are all located in agricultural/semi-industrial areas and there is no presence of indigenous peoples or cultural heritage in the Project areas. Therefore, impacts related to PS5: Land Acquisition and Involuntary Resettlement, PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources, PS7: Indigenous Peoples and PS8: Cultural Heritage are not expected with this investment.

**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

- Social and Environmental Assessment:The company has obtained all the applicable regulatory permits from the relevant authorities to build and operate the operational feed mills and is implementing the stipulated action measures required by the permit's terms and conditions. For the development of the new facilities under the Project, the company will procure all necessary environmental, labor and life and fire safety approvals, as per the local regulatory requirements, prior to commencement of the operations. Whenever necessary, the company engages external consultants to provide specialist inputs - such as environmental monitoring, conducting environmental impact assessments (EIA) and developing environmental management plans (EMP).- Management Systems:New Hope's Internal Control Department (NH-ICD) has developed a comprehensive Internal Control System Manual, which documents all the policies and standard operating procedures. The manual covers areas such as: control environment, organizational structure (board, executives, independent directors, board committees), corporate governance, human resources, financial management, internal audits, corporate social responsibility (CSR), production management, quality management, safety management, environmental protection and resource conservation etc. Compliance with local regulatory requirements and Chinese law is a corporate requirement articulated by NH-ICD, for all the subsidiary companies, including those in Southeast Asia under NHS.Each of New Hope subsidiaries are required to develop its own operational manual and safety manual, customizing the corporate Internal Control Systems Manual; this is then implemented at the operating unit. NH-ICD regularly conducts independent internal evaluations to check compliance with standard operating procedures and policies.Moreover, it is a corporate requirement for all the subsidiaries of the New Hope to implement a quality management system as per ISO9001, environmental management as per ISO14001 and food safety management as per ISO22000. Accordingly, several New Hope facilities have additionally developed individual management system manuals for each facility and have received independent third party certification for these management systems; other facilities are in various stages of obtaining similar certification.Recently, New Hope conducted an independent assessment of the FSMS at its poultry facilities vis-a-vis the HACCP (Hazard Identification and Critical Control Point), and Good Agricultural Practices (GAP) requirements. Whereas they were judged to have obtained a high assessment score, this report also identified areas for improvement related to food safety and animal welfare and accordingly came up with an action plan, which New Hope is now implementing.Going forward, as a condition of IFC's investment outlined in the ESAP, New Hope will establish an overarching corporate sustainability policy in accordance withthis Performance Standard defining its objectives, principles and performance benchmark that will guide the company to achieve continuous E&S performance in its operations.Additionally, in an initiative taken by the corporate strategy and HR departments, all the subsidiaries are studying the requirements of SA8000 standard - one of the world's first auditable social certification standards for decent workplaces.- Organization:The Strategy Committee and EHS Committee of NHS Board provides the high-level strategic direction and oversight of all the EHS related issues across its operations. Under the supervision of the Board, three departments at corporate level oversee the EHS and operational management:NH-ICD is responsible for developing the policies and standard operating procedures (SOPs) for all its subsidiary companies and facilities. NH-ICD, with the help of external third parties, also evaluates the compliance of the subsidiary companies with these policies and SOPs;Investment and Development Department deals with the operational issues related to land, construction, equipment purchase etc., and is responsible for all the new developments as well as mergers and acquisitions; andCorporate Human Resources Department is responsible for corporate level HR policies and procedures, which are followed by all the subsidiary companies, with necessary localization and customization. Accordingly a comprehensive HR manual has been developed, which requires all the subsidiaries to comply with local and Chinese labor laws, and articulates policies related to salaries, benefits, training, performance evaluation, etc.At the facility level, the general manager (GM) is responsible for managing all the operational and E&S and occupational health and safety (OHS) issues. The GM is supported by the technical, administrative and HR teams. These teams also have a (dotted )reporting line to their respective counterparts in the corporate departments.New Hope has a dedicated purchase department which will be responsible for implementing the company's efforts to manage E&S risks in supply chain, as described below.- Monitoring & Reporting:New Hope has instituted a monitoring and reporting system, whereby, key performance indicators (KPIs) related to its feed mill and poultry farm operations (primarily related to productivity, quality and food safety) are regularly monitored, compiled at the corporate level on a monthly basis and benchmarked against local regulatory and industry standards.The independent assessment of FSMS conducted by external experts, in its action plan, however recommends further strengthening of monitoring of some of its KPIs in line with international best practices. New Hope is accordingly updating its monitoring program. In doing so, it will also review the applicable WBG-EHS Guidelines and include any additional parameters required to be monitored.New Hope will also review the applicability ofthe requirements of FAO/WHO Codex Alimentarius for maximum residue limits (MRLs) of antibiotics in its feed mill and will implement any corrective actions as needed.- Emergency Preparedness and ResponseAs part of its operational manual, New Hope has developed documented emergency preparedness and response plan covering emergencies related to fire, typhoon, earthquake as well as biological hazards such as infectious disease outbreak for its poultry farms.- Supply ChainCurrently, New Hope's subsidiaries in each country independently manage their procurement needs. With the consolidation of overseas subsidiaries, NHS is working on developing a central procurement platform for all the Southeast Asia countries. In addition to cost efficiency and better quality assurance, this centralized procurement will help the company in standardized screening of its suppliers, and address any E&S risks - such as child labor or occupational health and safety - in its supply chain.Main agricultural commodities in the supply chain of New Hope's feed mills are: corn (imported primarily from Brazil and Argentina) and soybean meal (imported from India, China as well as procured locally). Other raw materials such as flour and small quantities of chemical additives are sourced locally.Based on a literature review on global E&S supply chain risks for agro-commodities, it was found that corn from Brazil and Argentina and soybean meal from India and China do not present high risks related to forced labor, child labor or biodiversity issues. However, the company is sensitive to the increasing EHS and labor related risks in supply chains and will strive to implement international best practices for screening and monitoring for those risks.Hence, as a part of its supply chain consolidation effort, the company will, develop and implement by 2015 in a phased manner, elements of their overall management system that include policies and procedures to undertake mapping and risk assessment of potential harmful child/forced labor and biodiversity related issues associated with its supply chain.For this purpose, the company will articulate its commitment to assess and manage E&S risks in its supply chain, through its corporate sustainability policy. Further, to operationalize this commitment, company will update its purchasing policies and procedures to integrate E&S Supply Chain Risk Assessment and Management Procedures, including:developing and maintaining a supplier's database to collect information on suppliers' compliance with applicable IFC's Performance Standards requirements, especially on issues related to harmful child and forced labor, significant safety issues leading and conversion of natural and/or critical habitats leading to biodiversity loss,develop, as needed, awareness raising, training and extension programs for suppliers to mitigate and/or minimize the identified E&S risk in the supply chain;proactively engage with traders and farmers (in case of any purchasing directly from farmers) to promote Good Agricultural Practices and 3rd party certifications;(iv) ongoing supply chain monitoring and reporting.

PS 2: LABOR AND WORKING CONDITIONS

- Human Resource Policy and Management:As of Dec 31, 2013, New Hope Liuhe had a total workforce of 66,739 between the corporate headquarters and 18 operational facilities of NHS. Women employees comprise over 35% of the workforce - working primarily in the non-production activities. The company currently has a pipeline of 18 new facilities under design or construction, which will become operational during 2014-15. For these new facilities, company expects to hire 1598 employees. All the employees are/will be regular employees with long term contract; the company does not hire any temporary workers.New Hope's corporate level HR manual articulates the HR policies and procedures, which cover: HR planning, recruitment, terms of employment (compensation, benefits), training and career development, labor relations management, HR management tools etc.This master corporate HR manual serves as the guidance template to all the subsidiary companies, for developing their own customized and localized HR manual, policies and procedures. The subsidiary companies are required to comply with local and Chinese labor laws.In addition to the written contract, all the new employees receive HR induction upon taking up the job, and are given detailed information about the terms of employment and HR policies and procedures.New Hope's corporate HR department currently has 545 full-time HR officers and executives. The HR staff at each facility is responsible for HR management at the respective facility in line with the corporate HR policies and procedures. Dedicated staff from New Hope's corporate office regularly conduct internal compliance audits of the HR practices across all the subsidiaries.- Training:As articulated in its HR manuals and policies, training is an inherent internal requirement for each employee. Accordingly, the HR department with the help of each department undertakes training needs analysis every quarter and develops training plan accordingly. In addition, each new recruit undergoes an induction training, which also includes topics related to biosecurity and OHS.- Freedom of AssociationNew Hope respects the staff's Freedom of Association and, hence does not prevent formation of employee unions. Currently several of New Hope's facilities have active staff unions.- Grievance MechanismEmployees can raise their grievances through regular face-to-face meetings with their managers or by talking to HR department. In addition, they can share their grievances, even anonymously, by using a dedicated email address provided by HR department. All new employees are informed about these grievance redressal channels during their induction training.- Child LaborThe company does not employ child or forced labour. This is ensured at the time of recruitment by the HR Department through verification of necessary certificates for all employees. No evidence of child labor practices was found during the site visit conducted at New Hope's facilities during appraisal.- Animal Welfare, Biosecurity and Occupational Health and Safety:Key issues for New Hope's poultry business are animal welfare, biosecurity and related food safety, which also has a direct bearing on employees' health and safety. As part of the company operational manual, detailed biosecurity and health and safety management protocols have been articulated, including farm layout and design, access controls, quarantine procedures, monitoring and day to day operational SOPs. These will be implemented in the new broiler breeder farms being developed by NHS.

PS 3: RESOURCE EFFICIENCY AND POLLUTION PREVENTION

- Resource Efficiency:New Hope has articulated its environmental protection and resource conservation policies and procedures in its group-wide Internal Control System Manual, and these serve as the guidelines for implementing resources efficiency measures in all its farms. Corporate policies thus require that all construction projects must pass strict environmental and energy saving assessment and the applicable laws and regulations related to environment and energy saving.The company has consistently applied new techniques, new equipment, and new materials throughout its operations for enhanced resource efficiency. For instance, with the implementation of its energy conservation assessment system, every production facility has been closely inspected and audited. As a result, company has reported savings of energy cost of more than 10 million RMB in 2006, when this program was first launched. This was achieved through optimization of operational parameters of its equipment and changing over to more efficient equipment, lighting system etc., whenever possible.Similarly, design and construction of new feed mills being built under the Project, includes measures to maximize the natural light and ventilation, and reduce the heat load; such as - for example, thermal insulation of the roofs in the storage areas.- Waste ManagementProduction of animal feed involves relatively a simple process, comprising of following steps: Milling (of raw materials such as corn), mixing, steaming, palletizing and cooling. Other than some dust generated at the loading and unloading stations and in storage areas, no significant wastes are generated from this process. Much of the operation is enclosed and does not involve human contact or exposure.Considering the simple nature of operation, and very little process waste generation, waste management at all the feed mills primarily involves management and disposal of domestic waste from offices and/or dormitories. These are handled through the local government waste management services. Necessary air pollution control equipment (such as bag filter) is built in the production process equipment - such as at loading / unloading bays - and employees are provided with necessary personal protective equipment (PPE) such as masks.Poultry production operations generate significant quantities of animal waste, mainly manure, but also including other materials such as bedding. Other solid waste generated during poultry production includes waste feed, animal waste, carcasses, and sediments and sludge from on-site wastewater treatment facilities (which may contain residual amounts of growth enhancers and antibiotics, among other hazardous constituents), packaging (e.g. for feed and pesticides), used ventilation filters, unused/ spoilt medications, and used cleaning materials.Waste management at poultry farms is / will be done as per the company's SOPs and applicable local regulatory requirements. Manure will be sold to farmers for land application as fertilizer.- Emissions and Air QualityElectricity is sourced from the grid, while diesel generators are provided for backup power. Small- to mid-sized diesel or coal fired boilers are used to produce steam required for production of feed. Air emissions are regularly monitored as per the environmental permit conditions.- Carbon Footprint:GHG emissions resulting from the proposed Project are estimated based on coal and electricity consumption at the company's facilities. The Project's GHG footprint is thus estimated at about 19,150 tonnes CO2eq / year using IFC's Carbon Emission Estimator Tool (CEET), which comprises of both Scope 1 and Scope 2 GHG emissions. Actual records will be used to review amounts of tons CO2 equivalent per year that will be emitted from the Project once it becomes operational.

PS 4: COMMUNITY HEALTH, SAFETY AND SECURITY

All the Sponsor's and company's facilities are in agricultural or industrial areas, away from nearby residential communities. Also, poultry farms are developed far away from residential settlements for biosecurity reasons. As such, the risks and impact of New Hope's operations for the health, safety and security of nearby communities are limited.Traffic impacts on the nearby communities due to the company's operations are also limited, considering that a maximum of about 30-40 trucks will ply daily to and from the facilities; which are well connected with a good road infrastructure.No armed security guards are deployed at any of the farms.

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/