The project Sponsor is Midland Resources Holdings (Midland). Midland acquired 51.3% of Carnex a.d. by buying stock from individual shareholders in a public auction at the Belgrade stock exchange in August 2003. The other major shareholders of the company are the Share Fund (31.1%) and PIO Fund (9.76%). Several small shareholders own the remaining 7.8%. Midland, a Guernsey based company, is a privately owned trading and investment holding company, with interests in a broad range of industries including steel, shipping, construction and real estate, energy distribution and agriculture. The Group operates in Eastern Europe, CIS, Turkey, China and the Far East.

Total project cost is estimated to be Euro 25 million. The proposed IFC investment is Euro 16 million A Loan for IFC’s own account.

Carnex’s operations are located in and around Vrbas, near Novisad in Serbia. In addition to the processing plant in Vrbas, Carnex has a feedmill, pig farms, cropping farms and silos.

Carnex a.d. (Carnex or the company) is the leading meat producer in Serbia & Montenegro (SaM) and was founded in 1958 as an integrated meat operation, which developed over 250 products with a strong market share in former Yugoslavia and exported products to Great Britain, USA, the former Soviet Union, Germany, Spain, Australia, Bulgaria and Jordan. With the disintegration of Yugoslavia during the nineties, Carnex lost parts of its operations and a large part of its market. The project is for Carnex to increase: - meat production from 18,000 tpa to 25,000 tpa within existing plants; - Feed production capacity from 36,000 tpa to 72,000 tpa; - swine production capacity from 70,000 pigs p.a. to 140,000 pigs p.a.; - grain drying and storage from 50,000 tpa to 70,000 tpa; and - irrigation equipment to improve crop production.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical, environmental, health and safety, and social/community information submitted by the project sponsor as well as site visits to Carnex operations in and around Vrbas. The following potential environment, health and safety, and social/community impacts of the projects were analyzed. - Compliance with international quality standards including Hazard Analysis and Critical - Control Point (HACCP) certification; - Improvement in worker health and safety (OHS) management and performance; - Compliance with Serbian, EU and IFC environmental requirements; - Employment issues including retrenchment; and - Social and community issues and involvement.

Mr. Eitan Hatzor General Manager Carnex Address: 21460 Vrbas. Serbia Phone: 021-79-53-630 / 705-475 Fax: 021-705-963 E-mail: hatzor.eitan@carnex.co.yu