Somboled DOO

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The proposed project consists of financing the long-term modernisation and development of Somboled a.d. (the Company) mainly compromising (i) capital investments and (ii) product portfolio restructuring including marketing and brand development of locally produced Serbian dairy products. The Company is a subsidiary of Lura d.d. Croatia (96,91% share as of December 31st, 2005). The Company's strategy is to become a market leader in niche segments of the dairy sector with nationwide presence. As part of the turnaround process, the Company plans to focus on improving its operating efficiency and shifting its production towards higher value added products. Transition impact derives from supporting a cross border investment and turnaround of the Serbian dairy company. In addition, backward linkages will be created and strengthened by increased relationship with the local farming community; The Company’s aim is to lift the average milk production per cow as well as the quality of the milk, facilitate an increase in the size of farms within its network and increase the number of large suppliers. Somboled, a.d. Sombor, a joint stock company incorporated in Serbia and Montenegro. The company is active in the production of milk, specialised cheese and yoghurt drinks. Corporate loan up to EUR 10.0 million to Somboled. EUR 23 million. The project is categorised as B/1. In the process of acquiring Somboled the Sponsor undertook an environmental audit and an environmental action plan has been agreed. As with all Bank investments, Somboled will be required to comply with national and applicable EU standards for environment, health and safety and with national labour laws. None. Branko Popovic, Somboled, A.D Sombor Tel: +381 25 467 300 Email: Branko.popovic@somboled.co.yu