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FUTUREINNOVATION

DEVELOPMENTSUSTAINABILITY REPORT 2017

IN ACCORDANCE WITH THE GRI4 STANDARDENGLISH VERSION

Passion, responsibilityand professionalism are the factors

that distinguish us.

We continue to growwith a commitment toa future of innovation

and development. Together.Giampaolo Ferrari

PresidentFranco Moro

Chief Executive Officer

1 LETTER TO THE STAKEHOLDERS 7

2 A SUMMARY OF OUR COMMITMENT 11

3 AN OVERVIEW OF OUR CRITICAL FACTORS 15 3.1 Italian by birth, international by vocation 18 Montecchio 22 Termoli 22 Lonigo 23 3.2 The results of our commitment 24

4 THREE PROACTIVE PRINCIPLES 27 4.1 Health and safety of our people 28 4.2 Quality and safety of our active ingredients and and intermediates 31 4.3 Waste and hazardous materials management 32

5 EXCELLENT, IN EVERY MOLECULE 35 5.1 The catalysts of our success 36 5.2 Continuous loop innovators 38

6 A QUESTION OF CHEMISTRY 39 6.1 Our stakeholders 40 6.2 Our people, a strategic resource for our operation 42

7 A SOLUTION THAT WORKS 49 7.1 Our commitment to the environment 50 7.2 A responsible link 54

8 OUR FORMULA 57 8.1 A note on methodology 58 8.2 GRI Content Index 61

INDEX

4 | SUSTAINABILITY REPORT 2017 SUSTAINABILITY REPORT 2017 | 5

1LETTERTO THE

STAKEHOLDERS


On the occasion of our sixtieth anniversary, we

are proud to publish this document, the first

formal “Sustainability Report” by F.I.S. It con-

cretely demonstrates how we have managed

to establish some of our company's core val-

ues, once again confirming that “sustainable

enterprise” from a social and environmental

perspective is the principle that guides our

actions.

Respect for the people inside and outside the

company has guided our commitment to be a

positive reference for our employees and oth-

er stakeholders with whom we interact. Over

the last two years, we have hired almost 400

people, passing from an organisation of 880

employees in 2014 to 1285 people in 2016,

many of whom are of local origin. In addition to

these, there are 312 people working in the Lo-

nigo plant, acquired in 2017 to further incre-

ment quality in the years to come by increas-

ing our production capacity and know-how.

We have worked a lot in recent years to ensure

the utmost safety for those who work in F.I.S.,

identifying all risks associated with our opera-

tions, investing in plant improvement and main-

taining intensive training initiatives to make our

plants increasingly safe places. In these years,

we have also improved the structures for per-

sonnel by adapting them to the number of users

and trying to make the company a more pleas-

ant place, for example by doubling the number

of canteen lines and expanding the company

car park. We intend to continue investing in

company welfare to respond in kind to the moti-

vation and passion of our people.

In parallel, we have continued to collaborate

with our strategic suppliers, to spread a cul-

ture of risk prevention for both the environ-

ment and the people working in production.

The company is also a social entity, which lives

in symbiosis with the local community. This

awareness has pushed us to go ahead with

initiatives that benefit the Montecchio and Ter-

moli areas, certain that our economic growth

is linked to that of the surrounding communi-

ties. For this reason, we immediately started to

identify opportunities to extend this attention

to the Lonigo area.

Respect for the environment has induced us

to make significant investments to modernise

and introduce innovation into our Montecchio

and Termoli plants. In this way, we have man-

aged to reduce environmental impact by in-

troducing new solvent and refluent treatment

systems, which have significantly increased

substance reuse for a circular economy.

Our commitment to sustainability is already ex-

tending to our Lonigo plant, which will also be

subject to modernisation in the coming years

to make it's health, safety and environmental

performance even more solid, demonstrating

that this site is at the focus of our strategic

business decisions.

Finally, in the face of a market that is undergo-

ing increasingly rapid and unexpected chang-

es, the motivation to innovate has helped us

meet our customers' demands. Moreover, we

have strengthened our partnerships with uni-

versities to pursue research that has given rise

to real state-of-the-art laboratories.

Responsible management inspired by our

dearest values has run in parallel with

strengthening our economic performance, so

much so that on reaching our 60th year, we

can state with satisfaction that internationally

we are among the leading active ingredient

companies.

The challenge, however, has just begun. Our

company is growing rapidly, and this positive

trend gives us a new drive: to ensure long-last-

ing development, it is essential to stick stead-

fastly to our commitment to sustainability,

above all at this time of strong development.

The “Sustainability Report” serves to affirm, to

ourselves and our stakeholders, the promise

to continue to be a reference company in our

sector, thanks to our respect for the environ-

ment and for all stakeholders involved in our

whole production chain.

As President and CEO, we are proud of the fact

that F.I.S. takes part in building the well-being

of millions of patients worldwide, development

in our territory and the success of our custom-

ers. We must be grateful for these, because

they drive us to improve, to raise our operating

standards and to develop expertise that cre-

ates value for all stakeholders.

A warm thanks goes to Montecchio Council,

Termoli Council and the other local institutions,

which represent the voice of the territory and

with which we talk openly to implement initi-

atives that are useful to the community that

surrounds us. The same gratitude extends to

the Administration of Lonigo, with which we

immediately started a positive and construc-

tive relationship.

We also thank our suppliers, which we ask

every day to guarantee the efficiency and

quality that supports our development strate-

gy. A special thought goes to the charities that

we are honoured to support in various ways,

and that constitute a precious link to the social

dimensions to which we feel we belong.

Finally, we thank you, who work in F.I.S., and

who constantly surprise us with promptness

with which you react to the needs dictated by

market opportunities, for your commitment,

perseverance and flexibility for which we are

well known internationally. Our thanks go to

each of you individually, but also to the unions

with which F.I.S. is proud to have built a fair,

constructive, respectful and communicative

relationship that benefits all involved.

We look to the future with passion, with the

conviction that it holds further rewards and

opportunities for improvement. In the same

way, we are sure that there will be challeng-

es, but we are confident in saying that we will

deal with them with renewed commitment,

strengthened by increasingly high-profile ex-

pertise, working together with our stakehold-

ers for a sustainable development that bene-

fits F.I.S. and all of its interlocutors.

Enjoy the reading,

Giampaolo Ferrari,President

Franco Moro,

Chief Executive Officer

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2A SUMMARY

OF OURCOMMITMENT


495,000,000OVER 495 MILLION EUROOF TURNOVER AND A NET PROFIT OF 25.3 MILLION

ACQUISITION OF THE LONIGO PLANT, CONSIDERED EXCELLENT AT AN INTERNATIONAL AND ITALIAN LEVEL SINCE THE BEGINNING, INTEGRATING THE PLANT'S 312 EMPLOYEES INTO OUR ORGANISATION

LONIGO

228228 NEW JOBSDURING 2016

4,000,000OVER 4 MILLION EUROINVESTED TO IMPROVESAFETYIN OUR PLANTS

23,000,000OVER 23 MILLION EURO INVESTED IN ENVIRONMENTAL PROTECTION

BESTSUPPLIERWINNING THE“BEST SUPPLIER” PRIZE FROMONE OF OUR MAIN CUSTOMERSFOR THE THIRD YEAR RUNNING

MORE THAN 27,000 HOURSOF TRAINING PROVIDED

27,000

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3AN OVERVIEW

OF OURCRITICAL FACTORS


THE 10 CRITICAL SUCCESS FACTORSPASSION, INNOVATION, DEVELOPMENT"Passion, accountability and professionalism are characteristics that set us apart. We continue to grow with dedication towards a future of innovation, excellence and development. Together.”

THE 10 CRITICAL SUCCESS FACTORSPASSION, INNOVATION, DEVELOPMENT"Passion, accountability and professionalism are characteristics that set us apart. We continue to grow with dedication towards a future of innovation, excellence and development. Together.”

REPUTATION Enhancing the reputation of F.I.S.

with all of its interlocutors through

the professionalism and expertise

of the people and the excellence of

the results obtained.

MINDSET & FOCUSDeveloping an approach

orientated towards know-how

and focus on achieving goals.

GOVERNANCE Growing to guarantee

dissemination of company

values and its approach

based on expertise and

passion in F.I.S. and the

Holding.

TECHNICAL & OPERATIONS KNOW-HOW Developing and enhancing the

ability of F.I.S. to build unique

solutions, based on distinctive

competencies and oriented to

operational excellence.

COMPETITIVENESS Ensuring high design efficiency,

exploiting the organisation's

collective intelligence.

ASSETS + CAPEXWILLINGNESS& KNOW-HOW Taking on investment

challenges by combining

entrepreneurial courage

with the ability to analyse

our potential.

FLEXIBILITY Maintaining agility, speed and

flexibility, despite a growth in

size and complexity.

QUALITY PROD+ SERVICE KNOW-HOWEnsuring quality and

excellence of products

and services to guarantee

competitiveness and

continuous performance.

INNOVATION Developing the company's

ability to generate and

support innovation to create

value. SIZEGrowing by acquiring and

integrating new abilities

and expertise.

Franco Moro

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3.1ITALIANS BY BIRTH,INTERNATIONAL BY VOCATIONF.I.S. - Fabbrica Italiana Sintetici is a

Venetian company specialized in the man-

ufacture of chemical products for the phar-

maceutical industry. Founded in 1957, F.I.S.

is one of the world’s leading companies in

the Custom Synthesis sector, that is, the

exclusive production of intermediates, ad-

vanced intermediates and active ingredients

for pharmaceutical companies, and generic drugs, thanks to the development and sale

of active ingredients such as tranquillizers,

anxiolytics, antibacterials, anticonvulsants,

anti-inflammatory drugs, diuretics, analge-

sics and cardiovascular drugs.

In addition, our company provides a range of

integrated customer services, including re-

search and development activities, chemical

synthesis processes and growth strategies

to ensure a large scale production.

F.I.S. S.p.A. is controlled by a holding - Holding

F.I.S. - which also consists of other companies:

• Delmar, a Canadian company that man-

ufactures intermediates and active ingre-

dients

• F.I.S. - North America, a company that

operates as a commercial agent for F.I.S.

• Areta, an Italian biotechnology company

involved in developing and manufacturing

innovative biological drugs, in which F.I.S.

is a shareholder

• PHF, a Swiss company that develops new

generic drugs and markets some F.I.S.

products in the American market

Our company has a Representative Office

in China, which supports us in building and

maintaining relationships with raw material

suppliers.

Finally, our production takes place in the

three Italian plants in Montecchio Mag-

giore (Veneto), Termoli (Molise) and Lonigo

(Veneto). The latter was recently acquired

from Zach S.p.A.

CUBA

SLOVAKIA

CUBA

SLOVAKIA

PHF

F.I.S.

ARETA

F.I.S.MONTECCHIOMAGGIORE

F.I.S.LONIGO

F.I.S.TERMOLI

DELMAR

F.I.S.NORTH AMERICAsalesoffice purchasing

office

OUR HISTORY1957Giovanni Ferrari, with sons Antonio,

Gianfranco and Ottavio, founds F.I.S. –

Fabbrica Italiana Sintetici S.p.A., based

on many years of experience obtained

in another pharmaceutical company in

Vicenza. Together with other pioneers

and key people in the company,

the Ferrari family decides from the

start to concentrate the business on

manufacturing active ingredients for

the pharmaceutical industry. In the

same year, they start work to build the

company plant in Alte di Montecchio

Maggiore, near Vicenza.

1958The first laboratories and plants

start production in September 1958.

The company's first product is

chloramphenicol, followed shortly by

nitrofurantoin, a product that is still in

the F.I.S. portfolio today and for which

it is the market leader.

THE '60sF.I.S. quickly becomes the leader in

the benzodiazepine and furanicide

families, and other products including

furosemide. Nitrofurantoin is the

first product to be awarded the Drug

Master File (DMF) of the American

Food and Drug Administration (FDA),

the body that regulates the use and

production of drugs in the USA. In

1964, F.I.S. receives the first FDA

inspection and starts to supply

nitrofurantoin to the US Army.

THE '70sThese years see the growth of the

generic drugs segment. In 1977, for

example, F.I.S. starts to independently

manufacture trimethoxybenzaldehyde,

starting from a Peruvian plant called

Tara. F.I.S. quickly becomes a market

leader for this generic product.

1978However, in 1978, a law is issued to

sanction the patentability of drugs in

Italy, guaranteeing patent protection

for 20 years from the release date.

F.I.S. is forced to suddenly change its

market strategy and decides to enter

the Custom Synthesis market. In these

years, the Montecchio plant grows and

a liquid incinerator furnace and fume

washing columns are built.

THE '80sThe first rewards in the Custom

Synthesis market start to arrive.

Specifically, in 1985, F.I.S. accepts

the challenge of developing a very

demanding synthesis for a prestigious

European pharmaceutical company.

The results are so brilliant that a long-

term partnership is confirmed between

the two players, accompanied by an

exclusive research and production

agreement.

From 1980, the company starts its own

exportation directly to the American

market, thanks to a partnership with a

local distributor.

The Montecchio plant is further

extended: in 1985, a biological plant is

built to treat the process water and in

1988 solid waste incinerator furnace

is installed.

THE '90sThe Custom Synthesis business

consolidates thanks to a wide range of

products and customers. In fact, during

these years, new exclusive agreements

are made with European and Japanese

companies, and the Termoli plant,

specialised in the development

and manufacture of advanced

intermediates, starts operating.

The company also starts to think about

measures to reduce its environmental

impact. In 1997, evaporation towers

are installed at the Montecchio and

Termoli sites. They have an air-cooled

water recycling circuit to reduce

groundwater consumption.

FROM 2000 TO TODAYThese are years of strong investment.

A period of renewed growth follows,

ending with the acquisition of a third

plant at Lonigo in December 2016.

Meanwhile, the commitment of F.I.S.

to environmental protection continues.

In 2001, the company attains the

UNI EN ISO 14001 Environmental

Management System certification for

the Montecchio and Termoli plants,

while in 2009, the Montecchio plant

receives the OHSAS 18001 Health

and Safety System certification. In the

same year, procedures are started for

the issue of Integrated Environmental

Authorisation (AIA) and Environmental

Impact Assessment (VIA) procedure

for the incinerator furnace revamping

project at the Montecchio plant.

SUSTAINABILITY REPORT 2017 | 19

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18 | SUSTAINABILITY REPORT 2017

The organisational management structure

allows our company to maintain its family

business status, while ensuring effective

managerial control. However, for sustain-

ability aspects, we rely on a Sustainability

Advisor who reports directly to the CEO. The

management of the three plants is instead

entrusted to the respective Directors. These

Directors share with the CEO the responsi-

bility for proper management of the plant

and ensure compliance of establishments

with rules, standards and quality, health,

hygiene and safety regulations.

In December 2011, the Board of Directors

took the decision to supplement the compa-

ny Code of Ethics by adopting a Corporate

Code on Organisation, Management and

Control, in compliance with the require-

ments of Legislative Decree 231/2001 and

its subsequent amendments and additions.

This Decree introduced to the Italian legal

system the administrative responsibility of

entities, companies, associations and legal

persons in relation to a series of offences,

including some environmental offences

and, for health and safety, offences com-

mitted by individuals whose actions harm

the community for their own benefit or in-

terests.

As we fall under the category of entities

that can incur administrative responsibility,

we have progressively integrated the mod-

el, extending it to other offences covered by

the Decree and have completed it with an

internal sanction system. An external inde-

pendent surveillance body monitors the ap-

plication and operation of the model. It was

established collectively and appointed by

the Board of Directors to conduct periodic

inspections to identify possible inconsisten-

cies and shortcomings.

Our Code of Ethics is the other instrument

that we use to internally express and dis-

seminate the basic principles on which

we intend to base our relationship with all

stakeholders in the company business. This

document is specifically aimed at ensuring

that the entire company organisation con-

stantly behaves with respect for legality,

honesty, integrity, fairness, transparency

and good faith, the trademark features of

F.I.S. All employees and those acting in the

name and on behalf of F.I.S. are required to

know the provisions of the Code and to be-

have accordingly. Anyone can contact the

Guarantor of the Code of Ethics, who is ap-

pointed by the Board of Directors, to report

situations or behaviour that goes against its

content.

The Code of Ethics also explains why pas-

sion, responsibility and professionalism are

our core values.

Passion, in fact, is one of the forces that

moves all of our employees to operate

with excellent quality work, with the desire

to contribute to the company's innova-

tion and economic growth. To encourage

this, we have chosen to direct our efforts

at selecting people who are aligned with

our business values, improving our ability

to collaborate and making communication

more effective at all levels.

Responsibility for us means, first and

foremost, respect for people working in

the company and for the community as a

whole. Therefore, we encourage our em-

ployees to behave in an attentive manner

and to listen to the needs of others.

Professionalism, in turn, lies in the relia-

bility and flexibility that make us worthy

of trust and esteem from our customers.

Quality that we constantly cultivate within

our corporate community to ensure that our

products reach an ever increasing quality

and are always in line with the specific re-

quirements of each customer.

In September 2016, we also signed the

Charter of Principles for Environmental

Sustainability of Confindustria (associa-

tion of Italian industries), of which we are

members. In fact, our company actively

takes part in the activities of Confindustria

Vicenza and Confindustria Molise, and is a

member of other trade associations such

as the Active Pharmaceutical Ingredients

Committee (APIC-CEFIC), the Chemical

Pharmaceutical Generic Association (CPA),

the European Fine Chemicals Group (EF-

CG-CEFIC), the Society of Chemical Man-

ufacturers and Affiliates (SOCMA) and the

Drug, Chemical and Associated Technolo-

gies Association (DCAT).

Our mission is to continue to be an interna-

tional benchmark company in the produc-

tion of active pharmaceutical ingredients

and advanced intermediates for pharma-

ceutical chemistry and fine chemicals.

To do this, we know that we have to con-

tinue to work to earn the trust of our cus-

tomers every day, offering products that are

perfectly in line with their needs. The end

user of our active ingredients is the patient

suffering from a pathology and it is crucial

to always be able to guarantee quality and

safety of use aimed at the therapeutic effi-

cacy and improvement of the quality of life

of the patient and the people around them.

To achieve this ambitious goal, we have a

capillary governance structure that can

meet the company's daily needs by provid-

ing a high degree of flexibility to allow us

to promptly meet our customers' require-

ments.

COMPANY GOVERNANCE

CHAIRMAN OF THE BOARDOF DIRECTORS

Giampaolo Ferrari

CHIEFEXECUTIVE OFFICERS

Giampaolo FerrariAlberto Ferrari

Alessandro Ferrari-

Franco Moro

MONTECCHIOQUALITY

UNIT

MONTECCHIO PLANTDIRECTOR

TERMOLI PLANTDIRECTOR

LONIGO PLANTDIRECTOR

TERMOLIQUALITY

UNIT

LONIGOQUALITY

UNIT

ADMINISTRATIONFINANCE AND

CONTROL DIRECTOR

QUALITY ANDCOMPLIANCE

DIRECTOR

HUMANRESOURCESDIRECTOR

R & DDIRECTOR

COMMERCIALDIRECTOR

HEALTH,SAFETY AND

ENVIRONMENT DIRECTOR

ENGINEERINGDIRECTOR

MANUFACTURINGDIRECTOR

PURCHASINGDIRECTOR

LEAN ENGINEER SUSTAINABILITY ADVISOR

INDUSTRIAL RELATIONS DIRECTOR CEO ASSISTANT

CEO

REGULATORYAFFAIRS

DIRECTOR

QUALITY ASSURANCE DIRECTOR

Departmental reporting levels

Hierarchical reporting levels

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MONTECCHIO PLANTThe Montecchio Plant, which has been

active for more than 50 years, is the first

operational centre of the Group and has

a long history of quality and international

certification.

It has one of the most advanced Research

and Development laboratories in the coun-

try and makes the production process

flexible one of its own trademark features.

In fact, the plant offers every customer a

fully integrated and customised service

and is equipped with a high-technology

pilot plant that ensures high performance

for use in both Custom Synthesis

and Generic drugs. Recently, the plant has

completed the construction of new Spry

Drying and Sterile Production Plants.

Over the last few years, we have tried to

make it an even more comfortable place,

doubling the canteen lines, expanding

parking and starting additional invest-

ments to adapt the plant to the growing

population of the company.

The numbers of theMontecchio Plant

Unit ofmeasurement 2014 2015 2016

Total area m2 95,000

Employees No. 755 919 1,099

Reactor capacity m3 1,675

Certifications: ISO 9001; ISO 14001; OHSAS 18001

The numbersfor the Lonigo plant


Total area m2 118,000*

Employees No. 258 264 312

Reactor capacity m3 656

Certifications: ISO 14001; OHSAS 18001

LONIGO PLANTThe Lonigo plant, acquired at the be-

ginning of 2017, was founded between

1975 and 1976, and has been enlarged

in terms of plant and equipment. It has

always been regarded as a point of ex-

cellence in terms of quality, and occupies

312 people, most of whom live in the

neighbouring municipalities of Lonigo,

Montebello and San Bonifacio or in the

province of Verona.

Expansion work is also expected at Lonigo

between 2017 and 2018. It consists of

introducing a new warehouse for raw

materials, intermediates and finished

products, a new distillery for solvent re-

covery and technological restructuring of

Department 3B.

It joined F.I.S. S.p.A. from 1 January 2017

TERMOLI PLANTTermoli has been operating since 1990,

initially only for intermediate production;

In 2009 it became a Pharmaceutical

Workshop, which was then authorised for

the production of Active Ingredients and

in 2012 approved by the US Department

of Health (FDA). In 2016, it obtained per-

mission to build a new plant that, once

completed, should double its production

capacity. The works will be completed

by the end of 2017, and we expect good

returns in terms of employment growth,

given that the plant should employ at least

250 people once the expansion has been

completed, 64 more than today.

This intervention will also generate eco-

nomic incentives for local companies

involved in construction work, which

will employ an average daily workforce

of 30 people, half of which is from the

Termolese area. Lastly, in 2017, 40 m2 of

photovoltaic panels will be installed on the

roof of the plant.

The numbersfor the Termoli plant


Total area m2 91,000

Employees No. 125 163 186

Reactor capacity m3 415

Certifications: ISO 9001; ISO 14001; OHSAS 18001

*the total area reaches 260,000 m2 also considering the related areas

Production Laboratories Shipping

Warehouse Offices and Services Waste treatment

Maintenance Local Services

Lonigo Montecchio Termoli

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3.2THE RESULTS OF OUR COMMITMENT

Over the past three years, we have seen

strong economic growth, which has led

to a substantial increase in our economic

value and operating profit.

The economic value generated, which rep-

resents the sum of the value of production

and the financial and extraordinary income,

grew by 79.17% over the three-year peri-

od, from about 277 million euros in 2014

to over 496 million euros in 2016 .

However, the economic value we dis-

tributed to our stakeholders increased

by 75.25% over the same period, from

261.89 to 458.96 million euros. Of this

amount, net of operating costs, in 2016

we distributed 75.32 million euros to

our employees in the form of salaries

and benefits and approximately 189,000

euros were distributed to the community

in the form of gratuities and associative

contributions.

In particular, net income net of dividends

distributed increased by more than 39

times, demonstrating the increased sus-

tainability of our business and our ability

to be market leaders.

Economic valueDistributed in 2016

€ 332,163,000Value distributedTo suppliersof raw materialsand services

€ 75,327,000Value distributedto employees

€ 2,433,000Value distributed to capital providers

€ 26,000,000Dividends distributed

€ 189,000Value distributed to the community

€ 22,853,000 Value distributed to the Public Authorities

*The economic value generated includes investments made during the year

Items Unit of measurement 2014 2015 2016

Generated economic value

Production value K€ 276,420 353,645 495,232

Income from investments K€ - - -

Other financial income K€ 97 47 1,377

Extraordinary income K€ 662 515 -

Total F.I.S. K€ 277,179 354,207 496,609

Distributed economic value

Operating costs

Raw material costs K€ 123,815 186,360 260,009

Service costs K€ 41,651 47,049 60,456

Costs for leased assets K€ 632 860 1,463

Changes in the stock of raw materials K€ 1,838 14,001 9,452

Other management costs (net of taxes) K€ 805 863 783

Extraordinary charges k€ 49 398 -

Value distributed to employees

Personnel costs K€ 56,163 62,808 75,327

Value distributed to capital providers

Interest and other financial charges K€ 1,485 1,782 2,433

Value distributed to the Public Authorities

Current and deferred tax on income K€ 12,000 13,076 22,347

Other management costs (tax value only) K€ 587 527 506

Value available to the holding

Value available to the holding K€ 23,000 26,000 26,000

Value distributed to the community

Donations K€ 16 281 7

Sponsorships K€ - - -

Membership fees K€ 177 209 182

Total F.I.S. K€ 261,893 354,214 458,965

Economic value held

Profit (or loss) for the year (excluding dividends) K€ 644 3,710 25,300

Depreciation / Provisions / Writedowns / Revaluations K€ 20,601 23,743 31,646

Deferred taxes K€ 118 176 81

Total F.I.S. K€ 21,363 27,629 57,027

2014

€ 277,179,000

€ 261,893,000

€ 21,363,000

€ 354,207,000

€ 354,214,000

€ 27,629,000

€ 496,609,000

€ 458,965,000

€ 57,027,000

2015 2016

Generatedeconomic value*

Distributedeconomic value

Withheldeconomic value

*The economic value generated includes investments made during the year

+79%

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GOALS FOR THE NEXT FEW YEARS

To make the company even more

competitive and increase our future

turnover, we are expanding business

in the generic drugs market through

reorganisation of the Marketing Sector,

in both Italy and the USA.

We also believe that improving internal

processes, through the gradual intro-

duction of automation in the manage-

ment of the most consolidated chem-

ical processes, will further strengthen

our competitiveness and profitability.

In this direction, important investments

are made for the acquisition of new

planning management software, for

the control and allocation of costs for

new synthesis processes, for manag-

ing supplier relations, for the manage-

ment of training and skills of our staff.

As people in F.I.S. are considered a

strategic success factor, we are reor-

ganising our personnel development

processes to further enhance the skills

required by their role in the company.

Technological innovation is a success

factor that F.I.S. has always consist-

ently pursued: the creation of the new

Production Department B in Termoli

and the new Quality Control Labora-

tories in Montecchio will lead to inno-

vative solutions and more efficiency

in the management of business pro-

cesses. We plan further investments in

powder loading and unloading systems

(both raw materials and finished prod-

ucts), process parameter control sys-

tems, including online residue solvent

analysis systems, mass analysers and

laser systems for monitoring the size

of dust particles on the finishing lines.

4THREE PROACTIVE

PRINCIPLES


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4.1HEALTH AND SAFETYOF OUR PEOPLEBetween 2009 and 2010, the Montecchio

and Termoli sites were awarded the OHSAS

18001 certification for the health and safe-

ty management system.

Starting with this objective, with the aware-

ness that every employee is the protagonist

in health and safety management, we have

implemented cutting-edge initiatives, such

as the “Operational Excellence” program,

designed to train our staff on safety-re-

lated issues and also to transmit a series

of best practices for suppliers and third

parties. Launched in 2016, the program is

conducted in partnership with the American

company DuPont.

After an initial evaluation phase, full inte-

gration into business processes on the

different production sites of the Group will

go ahead in 2017, involving the employees

in training and coaching activities that will

cover all of the production staff and aim

to spread virtuous behaviour in terms of

Health and Safety while at the same time

increasing the efficiency and flexibility of

staff.

To provide a continuous exchange of infor-

mation on Health, Safety and Environment

issues among all our employees, we have

also set up Health, Safety and Environment

Committees.

These committees do not influence the re-

sponsibilities, roles and objectives of each

department, but provide a platform for the

continuous exchange of ideas, suggestions

and opinions about corporate SSA issues,

open to all employees of the company.

In this way, we ensure that our people has

been informed about the main issues of

sustainability and can have their say to give

the management their ideas and impres-

sions.

At F.I.S., we believe that we should not limit ourselves to a passive approach of respect for our foundation values. As a result, going beyond regulatory obligations, we commit ourselves to proactively seeking new solutions to maximise the health and safety of our employees and protect the environment, ensure compliance with our quality and safety standards and carefully manage hazardous waste and materials resulting from our production in line with the law.

The actions of the Health, Safety and En-

vironment Committees are inspired by the

Health, Safety and Environmental Policies

of F.I.S., which are published by the compa-

ny to guarantee business development that

is, as far as possible, sustainable and com-

patible with the needs of citizens, employ-

ees and the environment that surrounds the

company's operational sites. The policy in-

cludes the company's commitments to pro-

tect these stakeholders, underlining how

health, safety and environmental aspects

are an integral part of each employee's job,

and therefore must be considered when as-

sessing their individual performances.

Our plants also operate with hazardous

substances in quantities that can cause

HSE

COMMITTEE

Staff and

Support Committees

Internal

audit team

Committees

of 2nd level

Committees

of 3rd level

Organisational structure of the Health, Safety and Environment Committees.

We can see a similar trend in the ratio of accident frequency and severity indices, which respectively measure the number of accidents with

respect to the total number of hours worked by all of the employees and the number of days lost due to temporary inability, permanent inability

or death. Both indicators have dropped with respect to 2015, and the number of deaths has remained fixed at 0.

LA-6

Accidents at the Montecchio and Termoli plants (no.)*

2014 2015 2016

Men Women Men Women Men Women

Montecchio 17 0 22 0 18 0

Termoli 4 0 6 0 3 0

Total F.I.S. 21 0 28 0 21 0

*Only accidents that result in a prognosis of greater than 3 days have been counted

Training is accompanied by significant investments in renewing and expanding plant safety systems and devices to reduce impact on the

health and safety of our people and surrounding inhabitants, and to protect the environment from potential harmful effects. In the last year

alone, we have invested approximately 3.7 million Euro in Montecchio and 423,000 Euro in Termoli for this work.

LA-6

Health, Safety and Environmental training time for employees (hours)

2014 2015 2016

Montecchio 12.56 9.40 9.90

Termoli 14.23 14.60 16.35

Total F.I.S. 12.79 10.19 10.87

significant accidents (as defined by the reg-

ulations in force) and are therefore subject

to specific controls by the Competent Au-

thorities. As a result, we identified all pos-

sible risks that could be linked to our op-

erations and adopted preventive measures

to minimise the likelihood of accidents, as

well as periodic checks and a plan to tackle

possible emergencies. In addition, we have

maintained intense training activities for

our employees, including newly recruited

employees: in 2016, the average number

of hours of Health, Safety and Environment

training per employee was 9.90 at Montec-

chio and 16.35 at Termoli.

LA-6

Health, Safety and Environmental investments (Euro)

2014 2015 2016

Montecchio 1,816,900 4,621,600 3,704,900

Termoli 506,147 485,300 423,000

Total F.I.S. 2,323,047 5,106,900 4,127,900

20164,127,900

20142,323,047

20155,106,900

H S E

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The number of days lost due to illness is also substantially low throughout 2016,

with a level of absenteeism of 3.2% in Montecchio and 2.8% in Termoli.


By 2018, we have the intention of

reaching a first phase of completion of

the new department B in Termoli.

This expansion will accompany a

series of technical interventions to

further improve our SSA performance:

specifically, we have planned the in-

stallation of new containment systems

for raw material loads.

This will be complemented by the

completion of horizontal safety mark-

ings in each plant, installation of

smoke sensors inside the electrical

substation and the implementation of a

series of preventive inspections of the

electrical panels using thermal imag-

ing to prevent the risk of fire.

Moreover, by implementing the "Op-

erational Excellence" program, we

intend to gradually reduce the number

of accidents within our plants. The

activities that will be carried out in

2017 include a redefinition of shifts,

roles and tasks within the plants, so as

to obtain a clear and shared outlook of

the responsibilities of all of the people

working for us. This redefinition will be

followed by a training course for staff

at all levels, in which our partner Du-

Pont will be involved. Following this, a

process for analysing the causes of ac-

cidents will be reviewed and improved

to prevent recurrence by implementing

specific improvement measures.


Over the next few years, we aim to implement a series of preventive measures on our equipment to minimise the risk of con-

taminating our products with foreign materials from plants or equipment.

For our customers, the most important aspect is the quality of the active ingredients and intermediates offered by the company, along with supply continuity and punctuality. For this reasons, we take the utmost care in avoiding deviations from the quality standards and the specific requirements of each customer, constantly monitoring the quality of raw materials and implementing preventive measures designed to avoid future problems.

Equal attention is also given to maintain-

ing the utmost product safety, and to the

strict controls on our active ingredients and

intermediate products, to guarantee full

protection of the final users. This is aided

by rigorous compliance with the highest in-

ternational industry standards, which keeps

customer satisfaction high. In 2010, F.I.S.

obtained UNI EN ISO 9001 quality system

certification for the Montecchio and Termoli

plants, with the aim of ensuring maximum

efficiency and effectiveness in making prod-

ucts and delivering the services offered by

the company.

We have also specified these principles in

the Quality Policy and Code of Ethics on

which our Company Mission is based. the

R&D department defines the main critical

quality and safety attributes of the products,

and designs product quality at the process

identification and development level.

Each process is then consolidated to guar-

antee reproducibility during scale-up and

industrialisation. Specifically, the quality pa-

rameters are controlled by Quality Control,

while the process parameters are checked

by the existent automation systems and

recorded in the Process Sheets. The same

applies to process standardisation, which

serves to guarantee the maximum repro-

ducibility of the product quality parameters

monitored through one of the most detailed

and complete distributed control systems

(DCS), developed to meet the highest inter-

national standards.

Each company employee contributes to en-

suring the quality of that part of the product

for which they are responsible, thanks also

to the training received on quality and good

production standards. The role of Quality As-

surance is to guarantee that there are also

the procedural tools to make sure that the

process gives the expected results. More-

over, given the quality commitments and

process requirements imposed by the health

authorities in the destination countries of

our products, there are periodic audits at

our plants to assess compliance with these

requirements.

Over the past three years, thanks to the cap-

illary interventions with which we have im-

proved our internal control and assessment

mechanisms, there have been no cases of

punishable non-compliance and any minor

non-compliance in relation to the Good Man-

ufacturing Standards set out by the National

and Foreign Health Authorities have always

been quickly resolved.

4.2QUALITY AND SAFETY OF OUR ACTIVEINGREDIENTS AND INTERMEDIATES

**The level of absenteeism is calculated as the number of days lost due to illness/planned working days

Days lost due to illness and level of absenteeism (no.)*

2014 2015 2016

Total days lost due to illness

Level ofabsenteeism


Level ofabsenteeism


Level ofabsenteeism

Montecchio 6,858 4.21% 8,210 4.44% 8,831 3.19%

Termoli 1,093 4.12% 1,293 4.08% 1,293 2.76%

Total F.I.S. 7,951 4.20% 9,503 4.38% 10,124 3.13%

LA-6

*The frequency index is calculated as the number of accidents/hours worked * 1,000,000**The severity Index is calculated as the number of days lost due to accidents/hours worked * 1000

LA-6

Frequency index* and severity index** of the accidents (no.)

2014 2015 2016

Frequencyindex

Severityindex

Frequencyindex

Severityindex

Frequencyindex

Severityindex

Montecchio 14.1 0.32 16.4 0.3 10.9 0.31

Termoli 19.8 0.2 29 0.5 10.7 0.24

2014

2016

2015

MontecchioFrequency index

Severity index

14.10.32

16.40.3

10.90.31

2016

2014

TermoliFrequency index

Severity index

19.80.2

290.5

10.70.24

2015

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In 2001 we obtained the UNI EN ISO 14001 environmental management system certification for the two Termoli and Montecchio plants. This certification attests that our structures and products comply with existing regulations, but above all, it guarantees that there is a management system which can constantly improve performance in this field and, along with the OHSAS 18001 certification, anticipate new Health, Safety and Environmental needs.

Regarding the management of hazardous

waste and materials related to our produc-

tion, our aim is to pursue all recycling op-

portunities, particularly of solvents, that are

compatible with the quality concepts from

the Good Manufacturing Standards. We have

internal plants for the recovery of solvents

from the mother liquor that comes from the

production process.

The main type of waste produced at our

Montecchio and Termoli sites is “mother

reaction liquor”, which is the waste liquid

(water of organic solvent based) that forms

the “liquid bed” in which the chemical reac-

tion takes place due to the addition of suit-

able reagents. This waste is removed while

isolating the finished product (the active

ingredient in solid form) and can be treat-

ed using various methods, depending on its

characteristics.

Therefore, there are a number of waste

management methods, which include sol-

vent recovery by distillation and rectification,

although for both plants, a significant portion

of this waste is typically sent by road trans-

port for external disposal. For the Montec-

chio in particular, mother liquor with suitable

physical characteristics is sent internally for

incineration in the furnace for liquids, recov-

ering the heat generated to produce energy.

Recovery is usually refined with distillation

and/or evaporation columns and, whenev-

er possible, we re-use solvents within the

same production cycle.

Solvents and mother liquor that contain high

percentages of “noble solvents”, such as

aromatics, cannot be reused internally due

to contractual and regulatory restrictions or

due to a lack of structures in which they can

be stored separately. In this case, they are

classified as waste. Regarding their treat-

ment, we prefer to send them to authorised

third-party companies that operate in the

“regenerated solvents” market. We always

assess them according to their ability to

ensure that the material is recovered in full

compliance with the applicable regulations.

By the end of 2017, we will install a second

stripping1 system at the Montecchio plant to

reduce the flow of water to be incinerated

in favour of biological treatment. The Loni-

go plant is also assessing the possibility of

increasing solvent recovery and installing a

new column, work that could be carried out

during 2018.

In general, the volume of waste produced

has gradually increased over the past three

years in both of our plants due to the in-

crease in our production activity, which went

from a total volume of 54,145 tonnes in

2014 to 88,873 tonnes in 2016 (an increase

of 64.14%).

Over the same period, we ave also seen a

very significant increase in the volumes

of non-hazardous waste produced by the

Termoli plant, from 942 tonnes to 17,803

tonnes, which can be attributed to “excavat-

ed soil and rock” from the building site for

production plant B.

Despite the gradual increase, efforts have

been made in recent years to reduce the en-

vironmental impact linked to disposal. Spe-

cifically, bulk waste, which is currently man-

aged through direct discharge, has been

progressively eliminated. This is improving

the collection systems and further reducing

potential environmental impact by making

waste handling and transport more efficient.

In 2016, we also completed the installation

of a thermal dryer for the sludge produced

by the company’s internal wastewater treat-

ment plant. This significantly reduces the

sludge volume and allows it to be stabilised,

making it more efficient and sustainable to

transport this waste externally for energy

recovery.

4.3MANAGEMENT OF HAZARDOUSWASTE AND MATERIALS

1 In chemistry, stripping consists of transferring a gas dissolved in a liquid from the liquid phase to the gaseous phase.

Hazardous and non-hazardous waste produced (tonnes)

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

2014 2015 2016

Hazardous 48,619 36,528 12,091 49,185 38,781 10,404 69,250 58,953 10,297

Non-hazardous 5,526 4,584 942 5,735 4,504 1,230 19,623 1,820 17,803

Volume of waste produced 54,145 41,112 13,033 54,920 43,285 11,635 88,873 60,773 28,100

EN-23

Hazardous waste by disposal type (tonnes)

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

2014 2015 2016

External disposal 14,293 4,550 9,742 16,358 8,067 8,291 44,327 36,036 7,267

Internal incineration 22,598 22,598 - 21,973 21,973 - 13,598 13,598 -

External recovery 11,729 9,380 2,349 10,854 8,741 2,113 11,432 9,319 3,030

EN-23

Non-hazardous waste by disposal type (tonnes)

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

Tota

l F.I.

S.

Mon

tecc

hio

Term

oli

2014 2015 2016

External disposal 1,284 556 728 1,158 206 952 12,702 535 12,167

Internal incineration 3,323 3,323 - 2,857 2,857 - - - -

External recovery 919 706 214 1,720 1,442 278 6,921 1,285 5,636

EN-23

Tonnes of hazardous waste transported by F.I.S. to foreign destinations not owned by the company. The waste is mostly transported to a specialisedGerman company that treats it by thermal recovery, and a small part goes to an Austrian company

Hazardous waste transported abroad (tonnes)

2014 2015 2016

Hazardous wastetransported per year (F.I.S. total)

1,508 1,510 4,378

EN-25

*The high amount of waste produced in Termoli in 2016 can mainly be attributed to the operations of the new Department B,which generated significant volumes of excavated soil and rocks.

20162014 2015Solvents recoveredand reusedinternally (m3)MontecchioPlant

m3

9,227m3

10,084m3

12,823 SOLVENTSRECOVERED

Montecchio

36,528 - 4,584Termoli

12,091 - 942Volume of wasteproduced by F.I.S.

48,619 - 5,526

Montecchio

38,781 - 4,504Termoli

10,404 -1,230Volume of wasteproduced by F.I.S.

49,185 - 5,735

Montecchio

58,953 -1,820Termoli

10,297 -17,803*Volume of wasteproduced by F.I.S.

69,250 -19,623

Hazardous andnon-hazardous wastesProduced (ton)

HAZARDOUSWASTE

NON-HAZ-ARDOUSWASTE

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Main recycled solvents (% per tonne)

2014 2015 2016

HEPTANE

Purchased raw materials 599 643 843

Recycled raw materials 2,827 3,143 5,140

Percentage recycled solvent out of the total used* 82.52% 83.02% 85.92%

ISOPROPANOL

Purchased raw materials 2,525 1,594 2,991



ACETONE


Recycled raw materials 182 626 767


TOLUENE




TETRAHYDROFURAN

Purchased raw materials 393 1,310 1,683

Recycled raw materials 585 1,148 1,038


METHANOL




TOTAL




EN-2

In 2016, Montecchio Council increased fees

by 10,000 Euro because, on two separate

occasions, we exceed the “aluminium” pa-

rameter in the wastewater discharged into

the sewers from our internal wastewater

system plant that the water is further treat-

ed in the consortium purifier, these entirely

occasional events did not cause any type of

environmental pollution.

Moreover, in September 2016, as a caution-

ary measure, Gestore Acque del Chiampo

S.p.A. (Chiampo water management) tempo-

rarily suspended the discharging our waste-

water into the consortium sewers due to the

presence of PFAS2 over the limits established

for potable water. Specifically, as these sub-

stances are not present in the production cy-

cle of F.I.S., in-depth analysis found the pres-

ence in the foaming agents used in the fire

prevention system. This particular episode

has further strengthened the environmental

commitment of F.I.S., pushing us to find a

PFAS-free foaming agent and implement an

additional activated carbon filtration system

to ensure that we comply with the limits in

force.

2 Polyfluoroalkyl substances (or PFAS) are potential pollutants that have considerable resistance in the environment, together with a significant diffusion capacity and very long per-sistence, which make them widespread in the water environment and in organisms, including man, where they tend to accumulate over time.

5EXCELLENT,IN EVERY

MOLECULE* “Total used” solvent means the sum of the virgin solvent purchased and the solvent recovered after the distillation and rectification processes.


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For our company, reliability in customer requests is a key condition for continuing to operate in a market, such as the active ingredients market, characterised by high levels of product customisation and an extremely complex supply chain. Therefore, we believe that the flexibility and the ability to operate that constantly increase our reliability are the main catalysts of our success, the leverage that helps us to maintain a good reputation and the confidence of our business partners, whether they are our suppliers or our customers.

In total, we have about 1500 suppliers,

divided into chemical raw materials (approx-

imately 65% of the overall purchased vol-

ume), technical goods and services (approx-

imately 30%), utilities, logistics and disposal

suppliers. They are spread over 40 countries,

although the main purchasing sources are It-

aly for services and the far east for the raw

materials needed to manufacture the mole-

cules used in generating the active ingredi-

ents that we offer.

About 15 of our raw material suppliers are

considered key suppliers due to the large vol-

ume of goods that we purchase or the special

nature of the products they offer. Relation-

ships with these strategic vendors are mainly

handled by our Chinese office in Shanghai,

where there are people specialized in assess-

ing and selecting business partners. They pe-

riodically assess the key suppliers according

to their expertise and the production capacity

of their plants. They conduct periodic inspec-

tions to identify potential environmental or

safety risks that could negatively affect the

ability of these suppliers to supply the prod-

ucts we need in a timely manner.

Thanks to a continuous exchange of infor-

mation and data with key suppliers, we are

able to keep a constant eye on their business

and gradually pass on our best practices in

terms of plant modernisation, environmental

and social risk coverage and customer data

protection. In fact, our main goal is to have

a stronger relationship with these suppliers,

helping them to innovate and maintain a high

production capacity, while at the same time

encouraging them to adopt sustainability

practices.

In addition, supply chain management is

designed to monitor and predict purchasing

scenarios and verify product sales aspects

by forecasting the evolution of market con-

sumption and trends in the competitive con-

text in which we operate. In the light of this,

while meeting our customers' needs, we are

processing new risk diversification strategies

with the aim of improving new supplier se-

lection.

To this end, we have adopted the SRM soft-ware platform as part of a strategy to in-

troduce business intelligence software that

transversely affects business operating pro-

cesses. This instrument will become fully op-

erational in the first half of 2017, and serves

to systematise collection and monitoring of

supplier data. This will improve assessment

of suppliers based on their economic and en-

vironmental performance, offering better risk

assessment and management. In that way,

the SRM software will facilitate and simplify

new and existent supplier assessment pro-

cedures.

The Manufacturing and R&D departments, on

the other hand, collaborate in supplier selec-

tion specifically for generic products. Finally,

the Quality department supports the supplier

qualification process and continuous moni-

toring of supplied material quality.

Moreover, to ensure prompt deliver to the

customer, we have adopted a diversification

strategy at our plants to make best use of

their production capacity to satisfy all re-

quests, even unexpected ones. Specifically,

to guarantee greater efficiency and adequate

production speed parameters, over the past

year we have focussed on assessing the best

balance between availability, occupation lev-

el and operational flexibility of the plants.

PROTECTION.OF CUSTOMER DATA

Another of the best practices that set us apart

as a reliable company is our experience in

managing and protecting customer data. In

fact, customers often give us confidential

information about their products, so it is vi-

tal for our company's reputation and for our

business success to be able to guarantee the

utmost confidentiality always, avoid distribut-

ing this data and prevent it from getting into

the hands of unauthorised parties.

Currently, all business relationships with cus-

tomers are covered by secrecy agreements

and the intellectual property rights of the

products are protected by patents. Moreover,

as a further demonstration of our data pro-

tection capability, we have not received any

complaints over the past three years, and

there have been no cases of infringements,

illegal transfer by employees, theft or loss of

customer data.

However, with a view to continuous improve-

ment, to strengthen the current control, we

plan to introduce an internal process man-

agement model using SharePoint3 software

and transition progressively to a single data

collection and monitoring system through the

use of dedicated Business Intelligence soft-

ware.

In March 2017 we completed analysis to

verify the company's level of maturity with

respect to the European Union Privacy Policy,

which will be followed by defining an action

plan aimed at achieving full compliance.

5.1THE CATALYSTS OF OUR SUCCESS

These efforts are accompanied by those to

reorganise work shifts to allows a continu-

ous operational cycle as well as substantial

investments in machinery and technology to

meet the specific needs of customers.

Qualitative and organisational improvement of

its structure is another important factor that

the company is supporting. Specifically, the

Operational Excellence programme, imple-

mented in partnership with DuPont, serves

precisely to improve safety and quality perfor-

mance and to generally increase awareness

and commitment in workers regarding the

need for regulatory compliance.

Thanks to all of these efforts, we have re-

ceived the Best Supplier Award from our main

customer in 2014 and 2015, due to our pro-

duction flexibility and compliance with deliv-

ery times, even in the face of sudden changes

or increases in production requests .

We also intend to institutionalise the mechanisms for assessing and selecting new suppliers, using the capabilities of the SRM

platform and conducting dedicated training activities for employees at our Chinese office. At the same time, we aim to dissem-

inate good practices in terms of sustainability and respect for human rights throughout the supply chain, following the findings

obtained through SRM.

THE GOALS FOR 2020:

3Microsoft SharePoint is a software platform developed by Microsoft, a program that can create and distribute special websites primarily for company use (Intranet).

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Investments to ensure proper technological development in an highly advanced industry based on scientific research, such as chemistry and pharmaceuticals, are an indispensable condition for ensuring our company's economic sustainability. In fact, our customers are constantly asking us to implement new solutions to optimise synthesis processes and allow the development of the intermediate faster using a lower volume of raw materials, resulting in a lower impact in terms of costs.

For us, innovation means developing process-

es for the production of safe intermediates

and active ingredients for the pharmaceuti-

cal industry and with potential economies of

scale that allow it to be widely commercially

implemented, thus providing a competi-

tive advantage to our customers. With this

goal, we consistently carry out research in

the fields of physics, organic chemistry and

mechanics, often taking advantage of pat-

ent-protected technologies provided directly

by customers, which ask us to make best use

of them in customised processes.

To increase our expertise in this field and be

ready to respond to our customers' needs

right from the technology transfer for new

intermediate development, in recent years

we have hired new researchers, which has

brought our organisation to over 130 peo-

ple working in Research and Development.

Moreover, in 2016, we had a team of 12 people devoted to improving existing pro-

cesses and making them more sustainable,

both from an economic and environmental

point of view. The Company has invested

about 1.5 million Euro in this project.

In addition, there are currently 5 active col-laborations with universities (Venice, Pad-

ua, Bologna, Florence, Barcelona) that arise

from our need to find specialised know-how

on a number of innovative experimental

subjects, including peptides (Florence),

organic synthesis (Bologna, Venice, Bar-

celona) and enzymatic synthesis (Padua).

These collaborations involve the creation of

permanent laboratories within the university

departments and the development of new

skills, thus generating a very positive impact

on the universities and helping to build sol-

id relationships with our company. Over the

last few years, we have taken on 8 chemists

directly from university laboratories.

The research into peptides is especially

promising as it is part of one of the most

important branches of pharmacological re-

search, which aims to find new substances

that are more effective and targeted for in-

novative therapies.

An example of innovation that we have de-

veloped to meet the needs of customers is

the introduction of a production process for

sterile active ingredients through filtration in

apsepsis, and another is the investment in

implementing systems for HAPI (high potent

molecules, which are especially effective

even in very small doses). In this way, we try

to anticipate the needs of customers that in-

tend to provide patients with drugs that are

increasingly innovative and selective against

pathologies.

We have ventured into the world of pharma-

ceutical formulae, with the introduction of

Spray Drying technology, which can achieve

an intimate combination of active ingredient

and excipient for an improved drug formu-

lation.

Every time a new technology is introduced,

it is accompanied by training, often provided

directly by the customer, to ensure that our

employees develop new expertise.

5.2CONTINUOUS LOOP INNOVATORS

THE GOALS FOR 2020

Given the tremendous market potential and our privileged position in this segment, we intend to pursue research activities re-

lated to enzymatic chemistry. Similarly, we intend to expand the peptide projects.

6A QUESTION

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5EX

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The unusual nature of our business means

that we must continuously interface with a

wide range of stakeholders, from our em-

ployees to the control bodies, with whom we

aim to create long-lasting relationships with

transparent communication and mutual ben-

efits.

With the goal of completely systematising

sustainability governance, we have defined

a mapping of the stakeholders that are most

important to F.I.S. This will help us to collect

significant instances in an organic way, so

that they can be presented to the top man-

agement in appropriate decision-making

situations.

The following table shows a cross-section of

our main stakeholders and defines the com-

munication channels and monitoring instru-

ments that we use to understand their needs

and communicate our actions. Moreover,

the table shows the main issues that have

emerged from these exchanges in 2016.

Regarding our business, we consistently

report to the most important international

health authorities, such as the Italian Minis-

try of Health, the American Food and Drugs

Administration, European Medical Commis-

sion, etc.

We have an internal Company Watchdog, a

body that includes F.I.S. and union repre-

sentatives, which aims to collect and an-

alyse their ideas and those of employees.

Specifically, this body promotes initiatives

that support the local community and dis-

cusses ways of involving the company, such

as man-hours of voluntary work offered by

the company.

In January 2017, we also created a Com-munication Manager position, the main

role of which is to strengthen and harmonise

the various internal and external commu-

nication initiatives, and render them more

consistent.

6.1OUR STAKEHOLDERS

STAKEHOLDERCATEGORY

COMMUNICATION CHANNELSAND MONITORING INSTRUMENTS ISSUES EMERGED

SUPPLIERSOF GOODS AND SERVICES

- Constant communication via email and web channels

- Periodic on-site visits 4 times per year, every 3 months

- Formal communications in which we recom-mend what operations the key suppliers should implement to adapt to the regulations and reduce risks

- Regulatory compliance- Process and product quality- Process risks- Product risks- Regulatory compliance and improvement in

Health, Safety and Environment and Concentra-tion Risk Threshold performance

SUPPLIERS(WASTE DISPOSAL)

- Periodic visits and audits- Audits at the waste disposal sites (2/3 per year)

- Continuous performance improvement of the suppliers

CUSTOMERS

- One-to-one meetings- Constant communication via email and web

channels- Annual audits by main customers

- Product development speed- Product quality and safety- Production capacity- Technological innovation- Data protection- Regulatory compliance- Accident and injury reduction- Continuous improvement in Health, Safety and

Environment control- Regulatory compliance and improvement in

Concentration Risk Threshold performance

EMPLOYEES

- Monthly committee meetings- Company communications- Quarterly meetings with management and

directors- Monitoring body

- Issues linked to Health, Safety and Environment and Quality aspects

- Information and updates on various issues- Company results, situations in progress,

company strategies and goals

STAKEHOLDERCATEGORY

COMMUNICATION CHANNELSAND MONITORING INSTRUMENTS ISSUES EMERGED

UNION REPRESENTATIVES(INCLUDING RLSA - workers' safety and environmental representative)

- Company watchdog

- Continuous health and safety improvement in the workplace

- Work-related stress (focus on Termoli)- Training to increases job-related expertise

(focus on Termoli)- Mobility: public transport for the home/work

route (focus on Termoli) and logistics problems linked to parking and company spaces (focus on Montecchio)

INTERNATIONAL INSTITUTIONS(E.G. FDA, ANVISA)

- Periodic inspections - Compliance with quality regulations

NATIONAL INSTITUTIONS(E.G. AIFA, MINISTRY OF HEALTH, MINISTRY OF THE ENVIRONMENT)

- Informal/formal communications via email and telephone

- Periodic inspections

- Regulatory compliance and improvement in Health, Safety and Environment performance

LOCAL INSTITUTIONS(E.G. ARPA, PA, CIVIL DEFENCE, CTR, ASL,LOCAL SCHOOLS AND UNIVERSITIES)

- One-to-one meetings- Periodic inspections of ARPAV (Venetian region-

al agency for environmental protection) and/or four-monthly transmission of technical reports

- Regulatory Health, Safety and Environment compliance

- Expectations of bordering municipalities regarding employment (focus on Termoli)

- Requirement for availability to offer work experience to secondary school pupils, alternating between school and work

- Requirement to collaborate with university students doing work experience or doctorates

- Contributions/donations for work done by the Civil Defence or local schools

LOCAL COMMUNITIESAND ASSOCIATIONS

- “Open Factory” - Website

- Understanding of F.I.S. operations and its impact on Health, Safety and Environment and Concentration Risk Threshold

- Contributions/donations for local social work

OWNERSHIP - One-to-one meetings during periodic plant vis-

its and board meetings

- Company trend- Governance and improvement in Health, Safety

and Environment performance

UNIONS, VERIFICATION BODIES, INDEPENDENT AUDITORS

- Quarterly verification

- Civil and fiscal compliance, company governance, risk management

- Compliance with preventive procedures and protocols (related to Form 231)

- Regulatory compliance and risk management

CREDIT INSTITUTES - Periodic meetings- Understanding of company business and trend- Analysis of financial needs

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6.2OUR PEOPLE, A STRATEGICRESOURCE FOR OUR OPERATIONOur three critical success factors – passion, responsibility and professionalism – make our people the most important strategic resource for our company. It is only thanks to their commitment, motivation and expertise that F.I.S. is able to maintain its market leadership in a context characterised by ever more rapid and unpredictable changes and increasingly high expectations of our customers.

THE PROFILE OF OUR EMPLOYEESOver the past three years, the number of our

employees has grown steadily, reflecting

the company's positive economic results. In

fact, we have gone from 880 employees in

2014 to 1285 at the end of 2016, an in-

crease of 46.02%. Thanks to the recent ac-

quisition of the Lonigo plant, the 328 people

employed at that site will also be integrated

into our business structure, and we hope to

continue increasing the organisation over

the coming years.

84.28% of our personnel are men, which is

due to the prevalence of plant operators, al-

though a lot of female personnel has joined

in recent years, even in areas that have

historically been prevalently dominated

by men, such as laboratories and mainte-

nance, as well as engineering and automa-

tion services. In recent years, we have also

seen strong growth in the number of young employees under 30. There were

108 in 2014 and 356 in 2016, an increase

of 229%. This extremely positive figure also

attests to our willingness to give growing

space to people who can bring fresh skills

and innovative points of view.

In contract terms, 96% of our people have an indefinite contract, of which 97% are

full time and the remaining 3% work part

time. Typically, personnel enter our plants

on a long-term contract with steady profes-

sional growth in order to develop the com-

plex technical and personal skills required

by our business.

All employees are covered by National Col-

lective Employment Contracts (for manag-

ers and chemists), and 2nd level Collective

Contracts applicable to company sites.

Employees divided by gender and contract type (no.)*

2014 2015 2016

Permanent contractMen 767 927 1031

Women 106 146 198

Fixed-term contractMen 3 6 52

Women 4 3 4

Total F.I.S.Men 770 933 1,083

Women 110 149 202

G4-10

G4-10

*The table does not include temporary workers and students doing work experience.

110

149

202770

9331,083

20152014 2016

+41%

+84%

Employees divided by professional area (no.)

2014 2015 2016

Tot. (males + females) Tot. (males + females) Tot. (males + females)

Directors 22 (19+3) 23 (19+4) 26 (20+6)

Management 109 (80+29) 121 (88+33) 134 (96+38)

Employees 263 (196+67) 283 (203+80) 360 (251+109)

Workers 486 (475+11) 655 (623+32) 765 (726+39)

G4-10

Directors

26 / 2016

Management

134 / 2016

Employees

360 / 2016

Workers

765 / 2016

Employees divided by gender and age group (no.)*

2014 2015 2016

Age

grou

p

Man

Wom

an

Tota

l F.I.

S.

Man

Wom

an

Tota

l F.I.

S.

Man

Wom

an

Tota

l F.I.

S.

Montecchio Maggiore

< 30 years 76 16 92 172 42 214 234 70 304

30 ≤ x ≤ 50 450 69 519 459 79 538 514 103 617

> 50 years 122 22 144 146 21 167 159 19 178

Termoli

< 30 years 16 0 16 45 2 47 49 3 52

30 ≤ x ≤ 50 83 3 86 78 5 83 85 6 91

> 50 years 23 0 23 33 0 33 42 1 43

Total F.I.S. 770 110 933 149 1,083 202

total permanentcontract 873

20141073

20151229

2016

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Hiring and termination at our plants (no.)

2014 2015 2016

Man Woman Man Woman Man Woman

Montecchio

Recruitments

< 30 years 32 8 105 27 84 35

30 ≤ x ≤ 50 49 5 30 11 61 21

> 50 years 3 1 4 1 2 0

Departures

< 30 years 0 0 5 1 10 1

30 ≤ x ≤ 50 5 1 4 2 3 4

> 50 years 6 3 8 3 5 0

Termoli

Recruitments

< 30 years 8 0 31 2 11 2

30 ≤ x ≤ 50 10 1 7 2 9 0

> 50 years 0 0 0 0 2 1

Departures

< 30 years 0 0 0 0 0 0

30 ≤ x ≤ 50 2 0 1 0 2 1

> 50 years 1 0 1 0 1 0

Total F.I.S.

Recruitments

< 30 years 40 8 136 29 95 37

30 ≤ x ≤ 50 59 6 37 13 70 21

> 50 years 3 1 4 1 4 1

Departures

< 30 years 0 0 5 1 10 1

30 ≤ x ≤ 50 7 1 5 2 5 5

> 50 years 7 3 9 3 6 0

117

18 25 27

220228

20152014 2016

Departures

Recruitments

Total F.I.S.

LA-1

EMPLOYEE LOYALTYTRAINING ANDCOMPANY WELFAREQuality and safety aspects cannot be ig-

nored in our business. For this reason, the

combination of our employees' expertise,

technical know-how, knowledge, behav-

iour and motivation makes the difference

that allows the company to stand out from

its competitors and to achieve individual

and collective performance for continual

growth.

Keeping employees with the company is

a key priority for us. To pursue this goal,

we are focusing on offering concrete op-

portunities for growth and development,

a performance evaluation system orient-

ed towards continuous improvement and

a rewarding system linked to achieving

goals. In addition, there is coaching based

on dialogue and continuous exchange be-

tween the superiors and employees and on

constant accompaniment by the Human

Resources department to ensure that each

employee has access to a custom channel

through which they can receive feedback

and express their own needs and motiva-

tion for improvement.

Regarding turnover, the data shows a pos-

itive trend, with 479 hired at Montecchio

in the past three years and 86 at Termoli,

in comparison to 61 and 9 terminations

respectively. An encouraging trend, which

demonstrates how our company is seen

as being attractive and how our employees

choose to grow with us, remaining within

the company for years. In fact, at the end of

2016, the turnover rate was 2.1%, slightly

less than the rate of 2.31% in 2015. Over

the past three years, this indicator has

been very low for employees of all types,

genders and age groups, except for wom-

en over 50 at Montecchio in 2014 and

2015, and those from 30 to 50 in 2016 at

Termoli, who have a higher rate due to their

being a very small portion of the organisa-

tion in these age groups.

Turnovertotal 2014

2.05%Turnover

total 2015

2.31%Turnover

total 2016

2.10%

Rate of turnover (%)

2014 2015 2016

Man Woman Man Woman Man Woman

Montecchio

< 30 years 0.00% 0.00% 2.91% 2.38% 4.27% 1.43%

30 ≤ x ≤ 50 1.11% 1.45% 0.87% 2.53% 0.58% 3.88%

> 50 years 4.92% 13.64% 5.48% 14.29% 3.14% 0.00%

Termoli

< 30 years 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

30 ≤ x ≤ 50 2.41% 0.00% 1.28% 0.00% 2.35% 16.67%

> 50 years 4.35% 0.00% 3.03% 0.00% 2.38% 0.00%

Overall turnover rate 2.05% 2.31% 2.10%

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It is equally important for us to ensure the

well-being of our employees through the

implementation of company welfare initia-

tives that make our plants tailored to the

needs of our people. In 2016, for example,

in Montecchio, work was carried out to ex-

tend the car park, and a full private bus ser-

vice with a timetable that coincides with the

shift patterns was set up at the full expense

of the company. In 2016, we also com-

pleted the works to double the company’s

canteen and further initiatives are planned

for 2017, when the second-level integra-

tive contracts will be renewed, and further

welfare issues will be developed. Training

is a third key element in increasing skills

and homogenising them to inform and raise

awareness of approaches that are increas-

ingly mindful of quality and security or to

improve relationship and management as-

pects of the operations and employees. Our

attention to the training and growth of our

employees can be seen in an increase in

the hours of training provided over the past

three years, totalling 20,461 hours in 2014

and 27,426 hours in 2016, an increase of

34.04% .

However, due also to a large increase in the

number of employees, the number of hours

of training per head dropped in the past

three years for all our employee categories,

especially for directors and management.

A similar trend can be seen when dividing

employees by gender, with a substantially

proportional drop in the number of hours of

training provided to women and men. This

trend could continue in the future, as the

teaching and training process is currently

being radically overhauled and optimised

to make it more efficient and effective, to

allow us to further improve the expertise

growth path of all our personnel.

Finally, the current difference in pay be-

tween women and men across all em-

ployee categories in the company are

consistent with a significant increase in

the number of young women at the start

of their careers. These inevitably have a

pay level that is lower than for men in the

same roles, who were the large majority of

the workforce until recently, and whose pay

level has increased in the meantime due

to the length of time for which they have

worked for the company.

Hours of training provided to the employees (no.)

2014 2015 2016

Directors 919 1,453 667

Management 5,585 6,603 5,814

Employees 6,003 5,924 7,939

Workers 7,954 12,163 12,547

Project/stage-based contracts n.a. 121 459

Hours of training provided 20,461 26,264 27,426

LA-9

Hours of training provided per employee (no.)

2014 2015 2016

Training provided to women 31.15 28.81 24.62

Training provided to men 24.78 25.91 22.11

Hours of training provided 25.58 26.31 22.50

LA-9

Over the next few years, the organisation will evolve further in the face of an increasing number of employees, establishing new

internal communication channels and upgrading existing ones, starting from the site and "social" channels.

We will also review the training and welfare needs of our people by conducting specific analyses and introducing skills updat-

ing systems that will result in structured learning paths, with the help of specialised trainers.

THE GOALS FOR 2020

LA-13

Pay difference between women and men (%)

Mon

tecc

hio

Term

oli

Mon

tecc

hio

Term

oli

Mon

tecc

hio

Term

oli

2014 2015 2016

Directors 83.14% 81.15% 78.42%

Management 103.04% 85.29% 98.09% 86.02% 97.19% 101.58%

Employees 97.68% 82.58% 94.01% 85.73% 93.47% 86.65%

Workers 89.27% 88.42% 88.72% 88.54% 89.58% 88.70%

Average pay differencebetween women and men

90.60% 85.20% 87.89% 86.51% 86.21% 94.25%

*The empty cells show that there are no women directors at Termoli.**The percentages are calculated as the total basic salaries for women/total basic salaries for men.***The total percentage for the Termoli plant does not include the directors' pay.

20,461 h 26,264 h 27,426 h

COLLECTIVE RELATIONSF.I.S. also takes care of its people through a

consolidated system of industrial relations,

developed together with the workers' un-

ion representatives. A relational model has

been progressively structured through the

2nd level collective contract. It is based

on continuous exchange, dialogue and

participation and aims to make the most

of the human and professional resources

employed by the company. Specifically, the

system of relations adopted has allowed us

to jointly identify and define the solutions,

measures and instruments to improve in

the collective working conditions, the reg-

ulatory and economic conditions of the

personnel and the levels of knowledge and

involvement of the partners.

Aware of the role that union relations play

as a factor and lever to support develop-

ment and growth, of both the company and

the people, together with the amalgamated

union body, F.I.S. intends to look for anoth-

er three plants. It also intends to implement

innovative contractual changes that can

raise the level of social responsibility and

to implement a company welfare system,

with the qualitative aim of creating a work-

ing environment, and especially, a worker

protection network that increasingly meets

the people's need and expectations.

The negotiations started to agree new

collective contracts for the three company

sites for the 2018-2020 period are also an

opportunity to introduce and try institutes

that can help the work to personal life bal-

ance, to reinforce worker support meas-

ures and to help people access goods and

services.

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7A SOLUTIONTHAT WORKS


At F.I.S., we consider protecting the environment and protecting the territory to be two fundamental aspects of our business and we aim to ensure that we continue to constant focus on our impact with the same care that we take in maximising our product quality and business productivity.

This is why we constantly monitor the main

environmental impacts associated with plant

operations through our ISO 14001 environ-

mental management system, with the aim

of progressively reducing emissions from our

production operations, increasing energy ef-

ficiency and protecting the water resources

that we use as much as possible.

The company also devotes considerable fi-

nancial resources to improving its environ-

mental performance, implementing a wide

range of modernisation initiatives to reduce

the environmental impact of the plants, while

strictly complying with the applicable Italian

and European regulations and standards. In

fact, over the last three years, our investment

in environmental protection has increased

from 15.94 to 23.05 million Euro, an increase

of 44.59%.

Responsibility for managing environmental

impact correctly is divided among the Energy

Manager, the Ecology department, the Health,

Safety and Environment section and the di-

rectors of the three plants. We are currently

working in many areas.

Regarding our energy consumption, for ex-

ample, in May 2016, a new integrated meth-ane-fuelled trigeneration system4 was

completed at the Montecchio site, which will

give significant savings in the electrical power

purchased from the national grid, while mak-

ing generation of calories and frigories for pro-

duction more efficient.

In just the last eight months of 2016, we estimate

that this change has saved us approximately

1,764.9 TOE (tonne of equivalent oil) of electrical

and thermal energy, equivalent to 11.39% of the

energy consumption of the Montecchio plant in

2015. Based on these measurements, starting

from 2017, we expect an annual saving of ap-

proximately 15-16% with respect to 2015.

Over the last year, our total energy consump-

tion increased by 51.29% from 501,088 GJ to

758,098 GJ, mainly as a result of the installa-

tion of the new methane-fuelled cogeneration

plant and the company’s growth in production

volumes. Regarding our energy mix, F.I.S.

gives priority to purchasing energy sources

with low environmental impact. such as nat-

ural gas, which accounts for 52.12% of our

energy consumption.

There is a rising consumption trend because

of the increase in production capacity at the

Montecchio site, which has caused the H and

I Departments to expand in the past three

years, including all of their services. Intro-

ducing new molecules with high added value

into the production cycle has increased the

consumption of both raw materials and en-

ergy, which has slightly improved the overall

energy balance of the plant.

In addition to the increased energy con-

sumption, greenhouse gas emissions have

also risen from 56,092 to 64,669 tonnes of

CO2 equivalent from 2014 to 2016, a rise

of 15.29%. However, this is not a matter of

“fugitive” emissions, i.e those due to phys-

iological and non-accidental losses that

characterise certain chemical plants, as all of

our plants are closed-loop and are equipped

with systems for conveying vent and emis-

sions to systems of internal heat combustion

and reduction systems. In addition, in order

to further ward off the risk of leakage, these

tools are subject to preventive and periodic

maintenance by our technical staff.

7.1OUR COMMITMENT TO THE ENVIRONMENT

Investments in environmental protection (millions of euros)

2014 2015 2016

Incinerator management, water treatment, and waste disposal 13.37 13.27 19.73

Other investments 2.58 2.95 3.32

Total investments 15.94 16.22 23.05

EN-31

Overall energy consumption (GJ) /

2014 2015 2016

Diesel and gas oil 401 261 221

Natural Gas 288,745 307,337 423,298

Electricity supplied by the grid 205,840 232,343 237,647

Electrical energy from other sources* 6,102 2,322 96,932

Total energy consumption 501,088 542,263 758,098

Energy consumption / tonne of product (GJ/tonne) 496.84 593.72 806.12

EN-3EN-5

*The heading “Electrical energy from other sources” refers to the trigeneration plant installed in May 2016.

4Trigeneration is a special category of cogeneration systems that, in addition to producing electrical energy, can use the heat energy recovered from thermodynamic transformation to generate cooling energy, which is chilled water for conditioning or for industrial processes.

2016 €23,050,000

2015 €16,200,000

2014€15,940,000

Direct and indirect greenhouse gas emissions over the three-year period (tonnes CO2eq)

2014 2015 2016

CO2 emissions (scope 1) 42,441 44,009 48,960

CO2 emissions (scope 2) 13,651 15,581 15,709

Total 56,092 59,590 64,669

CO2 emissions (scope 1 and scope 2) / tonnes of product (tonnes CO2 e/tonnes) 55.62 65.24 68.77

EN-15EN-16EN-18

The CO2 produced is counted, the contribution of other greenhouse gasses is not counted as they are completely negligible in F.I.S. production cycles.

In recent years, we have completed a series of technical changes that have allowed us reduce green house gas emissions from

our plants and thereby increase our overall environmental performance.

- In 2016, we rebuilt the combustion chamber of the Montecchio plant and invested in replacing a boiler, which will be com-

pleted during 2017.

Knowing that further improvements can be made, we have also planned a series of actions that we will put in place to increase

the efficiency of the plants, starting from 2017:

- In 2017, we will install a new more efficient burner at Termoli to increase energy savings and thereby reduce greenhouse

gas emissions.

OUR CHANGES TO REDUCE GREENHOUSE GAS EMISSIONS

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In addition to greenhouse gas emissions, our plants also emit other substances, such as nitrogen oxides (NOx), sulpher oxides (SOx), volatile

organic compounds (VOC), particulate matter (PM) and carbon monoxide (CO). Their emission levels have remained largely unchanged over the

past three years, with oscillations due to contingent operations of the individual plants.

Another category of potential environmental impacts associated with

production activity concerns water consumption and the treatment of

waste water following production processes. Specifically, F.I.S. only

uses groundwater to meet its water needs, with an increase in total

consumption from 1,205,400 m3 in 2014 to 1,406,345 m3 in 2016

(+ 16.67%), also in this case due to an increase in production levels.

Our internal processes allow us to minimise the water consumption

of the plant since most of the water used in production processes

(for cooling purposes) is continuously recycled and reused. Our evap-

oration towers provide an estimated saving of about 3,200,000 m3 of

water per year, which is 228% of the 2016 consumption.

The water discharged from the Montecchio

and Termoli sites is mainly the wastewater

from the chemical, physical and biological

processes of the treatment plants, which

serve to reduce the pollution load leaving the

plants. Only water that can be treated using

bacteria and biological processes is sent to

the treatment plants, while other industrial

water is sent for external treatment. In both

cases, the quality and chemical composition

of the discharged water is monitored daily.

In line with the increase in water consump-

tion, the volume of discharged water has also

increased by 15.76% at the Montecchio site,

passing from 1,189,888 m3 to 1,377,468 m3

in the past three years. Also in this case, we

have started a series of changes to improve

the quality of the discharged water and to in-

crease the volumes that are treated. During

2016, the system that regulates the water to the treatment plant was improved at

Montecchio, and a continuous TOC5 analys-

er was installed on the drain that flows into

the consortium sewer system. Moreover, a

tertiary active carbon filter was installed

to serve the biological system. Finally, after

the PFAS levels in the surface water rose – a

problem of regional interest – at the begin-

ning of 2017, F.I.S.started a process that led

to replacing the foaming agent used in the fire-fighting systems used in the company

up to that time as they contained traces of

PFAS.

Emissions of the main pollutant substances at the Montecchio plant (kg)

2014 2015 2016

NOx 13,592 13,062 14,010

SOx 49 47 187

VOC 5,180 2,862 1,958

PM 330 224 329

CO 1,972 1,657 1,856

EN-21

Water withdrawal at MONTECCHIO (m3)

2014 2015 2016

Surface water (e.g. rivers, lakes) 0 0 0

Groundwater 1,205,400 1,298,082 1,406,345

Total water withdrawal 1,205,400 1,298,082 1,406,345

Water withdrawal / tonnes of product (m3 / tonnes) 1195.19 1421.26 1495.43

EN-8

Overall emissions of the main pollutant substances (kg)

2014 2015 2016

NOx 19,551 18,051 16,930

SOx 55 48 189

VOC 5,212 2,922 2,028

PM 330 224 329

CO 2,377 2,528 3,452

EN-21

Emissions of the main pollutant substances at the Termoli plant (kg)

2014* 2015 2016

NOx 5,959 4,989 2,920

SOx 6 1 2

VOC 32 60 70

CO 405 871 1,596

EN-21

* The 2014 data for the Termoli plant is partial as the measuring system for fine particulate matter emissions only started operating in June of this year. In other terms, the real emission for 2014 are higher than those shown on the graph.

Water withdrawal at TERMOLI (m3)

2014 2015 2016

Total water withdrawal 403,228 418,421 442,245EN-8

Composed of: industrial, potable and fire-fighting water

Recycled wastewater at MONTECCHIO (m3)*

2014 2015 2016

Recycled or reused water 3,200,000 3,200,000 3,200,000

Percentage of consumption 265% 247% 228%

EN-10

*The value shown refers to the estimated water saving with the plant running before and after implementing the evaporation towers.

Water discharge at MONTECCHIO by destination (m3)

2014 2015 2016

Water discharged into the sewers 510,560 515,229 562,554

Water discharged into surface water 679,328 675,400 814,914

Total 1,189,888 1,190,629 1,377,468

Water discharged / tonnes of product (m3 / tonnes) 1,179.81 1,303.61 1,464.72

EN-22

In recent years we have seen increased discharge into surface water – from 679,328 m3 to 814,914 m3. However, the water discharged in this

way is meteoric in origin, and is not involved in production operations. Therefore, it does not need to be purified and does not affect the surface

water into which it flows.

5Total Organic Carbon, often abbreviated to TOC, is a measure of the amount of carbon bound in an organic compound and is often used as a non-specific indicator of water quality or in the analysis of fumes resulting from combustion processes.

Water discharge by treatment type (m3)

2014 2015 2016

Chemical, physical and biological treatment to consortium sewers 510,560 515,229 562,554

Meteoric water to surface water 679,328 675,400 814,914

Total 1,189,888 1,190,629 1,377,468

EN-22

The last category of impact that can be linked to our plants is related to noise pollution produced by our production plants and transportation of

raw materials. In recent years, we have attempted to reduce the noise level by soundproofing the evaporation towers at the Montecchio plant

and ducting into silencers.

Over the next few years, we will be making further efforts to reduce environmental impact, such as the installation of new

burners for gas emissions at Termoli and Lonigo, and a new boiler for steam production at Montecchio Maggiore, to reduce NOx

emissions and improve energy consumption.

THE GOALS FOR 20207A

SOLU

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7A

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Employees employed in Montecchio from the territory

measurementunit 2014 2015 2016

Employees resident in Montecchio % 9.70% 9.30% 8.30%

Employees residing less than 20 km away % 75.90% 75.20% 75.10%

Employees residing more than 20 km away % 14.40% 15.50% 16.60%

Employees employed in Termoli from the territory

measurementunit 2014 2015 2016

Employees residing less than 20 km away % 71.20% 77.60% 76.30%

Employees residing more than 20 km away % 28.80% 22.40% 23.70%

After more than half a century of production at Montecchio and almost 25 years in Termoli, we are proud of our report of profitable integration

with the territory in which we operate: in the face of steady growth in safety and development planned in agreement with local governments,

the company has been an important driver of employment development, as seen in the growing number of employees – of which an increasing

number are young people – and their high professional qualifications.

But that's not enough. Aware of our potential

to provide additional social development op-

portunities to the communities we work with

each year, we carry out school initiatives and

projects and sponsor events, public spaces

and youth sports teams for the benefit of the

entire community, demonstrating the deep

attachment that binds us to the territory of

Termoli and Montecchio.

For the last two years, for example, we have

sponsored the School Diary of Compre-hensive Institute 2 in Montecchio, which

has over 800 primary and secondary school

pupils. Moreover, in 2016 we contributed to

the purchase of musical equipment for the

Marco Polo di Alte School, which has un-

dertaken a project using music as a cultur-

ally aggregating element, in an area that has

strong element of foreign immigration. Our

proactive commitment to communities is also

demonstrated by the number of sponsorships

and donations that we have confirmed in

2016, such as sponsoring the Vicenza rug-by team and adopting a green area within

the city. Moreover, in 2016, we donated an

outpatient container to the Gagliole Munici-pality, which was hit hard by the earthquake

that affected the Marche Region.

Our direct relationship with schools in the

territory of Montecchio and the surrounding

areas, with particular attention to the insti-

tutes offering chemistry courses, has always

been a business priority, further confirmed

and enhanced in recent years with numer-

ous visits to the company by 4th and 5th

year pupils, who have been included in work

experience programs that alternate school

and work. In 2016 alone, we have hosted 26 pupils and we expect to host 30 in 2017.

We are also assessing the possibility of up-

grading the school-work alternation program

at Termoli. Moreover, in the past three years,

our relations with the academic world of

universities has allowed us to host a dozen

thesis projects or academic apprenticeships

as a part of the degree courses of the var-

ious universities with which we collaborate.

Finally, in 2016 we organised a dozen visits to

the Montecchio plant with secondary school

pupils and university students.

The idea of organising regular visits to the

plants is also seen in the “Open Factory” initiative, which will be replicated at the end of 2017, and which aims to give all local

citizens a look at our business operations. In

the last edition of the event, we welcomed

almost 3,000 visitors to the Montecchio plant,

accompanying them on a visit to production

facilities, laboratories and services. The inter-

est shown is a sign of the strong attention

that the company and its products attract, as

well as the possible employment opportuni-

ties.

7.2A RESPONSIBLE LINK

We intend to replicate the “Open Factory” initiative to increase collective knowledge of the operations carried out at our plants.

THE GOALS FOR 2020

7A

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7A

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This document is the first Sustainability Report of F.I.S.It is based on the principles of the guidelines in the Global Reporting Initiative (GRI), version G4, according to the “Core” approach. The Report is the main instrument for reporting company sustainability performance and assessing its commitment, initiatives and continuous dialogue and monitoring process with reference stakeholders, the most important of which are our employees.

The Report considers the operations per-formed by F.I.S. S.p.A. during 2016. Therefore, it does not cover the facts, data and informa-tion related to other companies of Holding F.I.S. Moreover, given that the Lonigo plant was acquired recently, it has not been includ-ed in the report, which therefore is limited to reporting information for the Montecchio Maggiore and Termoli sites. Regarding the temporal limits, the data, initiatives, projects and actions reported refer to the period from 1 January 2016 to 31 December 2016. How-ever, the report sometimes mentions notable facts that took place before or after this period of time if they had a significant impact on the company's operations.

In accordance with the GRI, this edition of the Report is based on a material analysis to define the reporting issues that are most im-portant for the company and its stakeholders.

Starting from a mapping of the company's stakeholders, we identified the most impor-tant sustainability issues to help understand the operational and strategic context in which F.I.S. operates and describe the company's main environmental, economic and social impact. To identify the issues, we started by reflecting internally on the business of F.I.S. and considering the requirements of the GRI guidelines. Subsequently, the selection of the issues was enriched by a benchmark analy-sis and comparison with the issues that the

Sustainability Accounting Standards Board (SASB) – a non-profit organisation that aims to develop and distribute sustainability report-ing standards – identified as being important of the Health Care sector. Finally, a series of interviews with members of the company's top management were held to prioritise the material issues. They provided their visions on the level of relevance that the carious categories of stakeholders associate with the various issues.

In this way, we obtained a materiality matrix that measures the relevance of a specific issue attributed by the stakeholders on the x-axis, and the relevance of each issue in re-lation to company operations on the y-axis. We then divided the matrix in to 4 quadrants and completed the analysis by identifying the 9 material issues, found in the top right quad-rant, the corresponded to a high relevance for both the stakeholders and the company, divided into 5 topical areas, which will be cov-ered in detail within this Report.

8.1A NOTE ON METHODOLOGY

Fight against corruption

Respect of human rights

Quality of relations with the institutions

Creating and maintainingemployment

Stock management

RELEVANCE FOR F.I.S.

MATERIAL ISSUES

RELE

VANC

E FO

R TH

E ST

AKEH

OLDE

RS

Enzymatic chemistry andsustainable raw material use

Professionalism, expertiseand know-how

Conformity of purchased raw materials

Passion and senseof belonging

Attention topeople

Businesscontinuity

Creating value for the territory

Ethicsand governance

Environ-mentalprotection

0

0

1

2

3

4

5

1 2 3 4 5

Initiatives to supportthe community

Investment in innovation and technological development

Sustainability of the supply chain

Environmentalimpact management

Professional development, growthand well-being

Proactivity beyond compliance

Data and intellectual propertyrights protection

Communication qualityand transparency

Production capacity anddelivery punctuality

F.I.S. MATERIALITY MATRIXMethods used to calculate the indicators. To calculate the EN-10 indicator, we estimated a conversion factor from kg to m3 of 1000 kg/ m3.

Material issue Description Associated GRI indicators Impact scope

Proactivity beyond compliance

One of our priorities is the need to ensure full compliance with the requirements of our main stakeholders. We continuously take new steps to maximise the health and safety of our employees and protect the environment, ensure compliance with our quality and safety standards and manage hazardous waste and materials from our production, carefully and in accordance with the law.

G4-LA6 - Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender

G4-PR2 - Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle, by type of outcomes

G4-EN2 - Percentage of materials used that are recycled input materials

G4-EN23 - Total weight of waste by type and disposal method

G4-EN25 - Weight of transported, imported, exported, or treated waste deemed hazardous and percentage of transported waste shipped internationally

G4-EN29 - Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

Direct impact, internal scope

Data and intellectual property rights protection

For a company like ours, credibility and customer loyalty are the basis for all commercial relationships. This is why we pay special attention to customer data protection and property protection throughout the whole supply chain.

G4-PR8 - Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

Direct and indirect impact, external scope (customers)

Production capacity and delivery punctuality

In a sector that is characterised by a high level of product innovation by the customer, we must provide a production capacity that is linked to the technology and the work force, is highly flexible and that can be adjusted according to the customer's needs. Moreover, we must guarantee prompt and high-quality delivery to the customer.

/Indirect impact, external scope (suppliers and customers)

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Communication quality and transparency

As a company that operates in a sensitive sector such as the chemical one, we must always be able to report our operations and performance though transparent, high-quality communication to all categories of stakeholders, starting from the institutions, verification bodies, local communities and customers.

G4-27 - Stakeholder Engagement

Indirect impact, external scope (various categories of stakeholder)

Professional development, growth and well-being

We believe that our employees are the company's most important asset. In response to increasingly sudden market changes and higher customer expectations, is it essential that we can count on highly motivated and skilled people.

G4-LA9 - Average hours of training per year per employee by gender, and by employee category


Environmental impact management

Proper environmental impact management is essential to make the company's operations progressively more efficient and to minimise any negative impact on the territory. This issue covers all of the initiatives intended to ensure control over greenhouse gas emissions, water resource protection and efficient energy management, as well as management of noise pollution.

G4-EN3 - Energy consumption within the organisation

G4-EN6 - Reduction of energy consumption

G4-EN8 - Total water withdrawal by source

G4-EN10 - Percentage and total volume of water recycled and reused

G4-EN15 - Direct greenhouse gas emissions (scope 1)

G4-EN16 - Energy indirect greenhouse gas emissions (scope 2)

G4-EN21 - NOX, SOX and other significant air emissions

G4-EN22 - Total water discharge by quality and destination

Direct impact, external scope (environment and local communities)

Investment in innovation and technological development

Investments to ensure proper technological development in a research-intensive and very advanced sector, such as chemistry and pharmaceuticals, are an indispensable condition for ensuring our economic sustainability and to meet the customer's need for an increases in process efficiency and consequent cost reductions. In parallel, process optimisation, to which we allocate a significant portion of our budget each year, is an excellence in the Italian active ingredients market.

G4-EC1 - Direct economic value generated and distributed



Sustainability of the supply chain

It is essential for us to prove that we are a reliable counterpart for our customers, able to manage, monitor and minimise the risks associated with the supply chain of our products and ensure business continuity.

/Direct impact, external scope (suppliers)

Initiatives to support society

The communities with which we work are an essential interlocutor for the real success of our operations. That is why every year we decide to invest in initiatives to support society, contributing to the development of the territory in which we operate.

G4-SO1 - Percentage of operations with implemented local community engagement, impact assessments, and development programs

Direct impact, external scope (local communities, public administration)

8.2GRI CONTENT INDEXGRI Content Index - Core Option

Indicator code GRI-G4 Indicator description References Omissions

1. ORGANISATION PROFILE/GENERAL STANDARD DISCLOSURES

Strategy and analysis

G4-1Statement of the most senior decision-maker on the importance of sustainability for the organisation and its strategy

Letter to the stakeholders NA

G4-2Description of the main impacts, risks and opportunities

Three proactive principles NA

Organisational profile

G4-3 Organisation name Letter to the stakeholders NA

G4-4 Main brands, products and servicesItalian by birth, international by vocation

NA

G4-5 Location of organisation headquartersItalian by birth, international by vocation

NA

G4-6

The number of countries in which the organisation operates, the names of the countries where the organisation carries out its main operations or countries particularly important for sustainability issues

Italian by birth, international by vocation

NA

G4-7 Ownership structure and legal formItalian by birth, international by vocation

NA

G4-8Markets served (including geographic breakdown, sectors served, customer types and beneficiaries)


NA

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GRI Content Index - Core Option


G4-9Organisation size (including number of employees, number of operations, sales, income, quantity of products or services provided)

The results of our commitment / Our people, a strategic resource for our operation

NA

G4-10Total number of employees, broken down by type of contract, professional area, geographical distribution and gender

Our people, a strategic resource for our operation

G4-11Percentage of employees covered by collective bargaining agreements


NA

G4-12Description of the supply chain (no. of suppliers, supply volumes and markets)

The catalysts of our success

NA

G4-13Significant changes during the reporting period regarding the organisation's size, structure, ownership structure and supply chain


NA

G4-14Explanation of how any precautionary principle or approach is implemented

In accordance with the precautionary principle or approach required by the Rio Declaration on Environment and Development of 1992, F.I.S. has implemented a series of precautionary measures to reduce its environmental impact, even though there is no proven scientific evidence of the above impact. Prevention of significant accidents is an integral part of the Health, Safety and Environment Policy described in the "Italian by birth, international by vocation" paragraph.

NA

G4-15

Subscription or adoption of principles, initiatives or charters developed by external bodies for economic, environmental and social performance


NA

G4-16Participation in national and/or international trade associations


NA

Scope of the Sustainability Report

G4-17Lost of bodies included in the consolidated report of equivalent documents


NA

G4-18

Explanation of the process used to define the Sustainability Report contents and method used by the organisation to implement the related Reporting Principles

A note on methodology NA

G4-19 List of identified material aspects A note on methodology NA

G4-20 Material aspects within the organisation A note on methodology NA

G4-21 Material aspects outside the organisation A note on methodology NA



G4-22Explanation of the effects of any changes to previous reports and the reasons for those changes

NA

G4-23Explanation of the most significant goal and scope changes

NA

Stakeholder engagement

G4-24 List of stakeholders Our stakeholders NA

G4-25 Basis for stakeholder identification and selection Our stakeholders NA

G4-26The organisation's approach to stakeholder involvement

Our stakeholders NA

G4-27List of key issues that emerged from stakeholder engagement and description of how the organisation responded

Our stakeholders NA

Report Profile

G4-28 Reporting period A note on methodology NA

G4-29Publication date of the most recent sustainability report

NA

G4-30 Reporting frequency NA

G4-31Useful contacts for requesting information about the report and its contents

Back cover NA

G4-32 Conformity with the GRI guidelinesConformity with the GRI-G4 standard

NA

G4-33Policies and practices for external verification of the social sustainability report

This document is not subject to external verification

Governance

G4-34Governance structure of the organisation, including committees under the highest governing body


Ethics and integrity

G4-56Description of the mission, principles, values and behavioural standards of the organisation


NA

2. ECONOMIC PERFORMANCE INDICATORS

Economic performance

G4-DMA Disclosures on management approachThe results of our commitment

G4-EC1Economic value generated, distributed and retained

The results of our commitment

Indirect economic impact

G4-DMA Disclosures on management approach A responsible link NA

G4-EC7Development and impact of investment in infrastructure and supported services

A responsible link NA

3. ENVIRONMENTAL PERFORMANCE INDICATORS

Raw materials

G4-DMA Disclosures on management approachWaste and hazardous materials management

G4-EN2Percentage of recycled raw materials with respect to the raw materials used

Waste and hazardous materials management

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Energy

G4-DMA Disclosures on management approachOur commitment to the environment

G4-EN3 Energy consumption within the organisationOur commitment to the environment

G4-EN5 Energy intensityOur commitment to the environment

G4-EN6 Reduction in energy consumptionOur commitment to the environment

Water


G4-EN8 Total water withdrawal by sourceOur commitment to the environment

G4-EN10Percentage and total volume of water recycled and reused

Our commitment to the environment

Emissions


G4-EN15 Direct greenhouse gas emissions (scope 1)Our commitment to the environment

G4-EN16 Indirect greenhouse gas emissions (scope 2)Our commitment to the environment

G4-EN18Intensity of greenhouse gas emissions (scope 1 and scope 2)


G4-EN21 NOX, SOX and other air emissionsOur commitment to the environment

Waste

G4-DMA Disclosures on management approach

Waste and hazardous materials management/Our commitment to the environment

G4-EN22 Total water discharge by quality and destinationOur commitment to the environment

G4-EN23Total weight of waste by type and disposal method


G4-EN25

Weight of transported, imported, exported, or treated waste deemed hazardous and percentage of transported waste shipped internationally


Compliance

G4-DMA Disclosures on management approachWaste and hazardous materials management

G4-EN29

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations


Overall


G4-EN31Total environmental protection expenditures and investments by type




4. SOCIAL PERFORMANCE INDICATORS

Work practices

G4-DMA Disclosures on management approachOur people, a strategic resource for our operation

G4-LA1Total number and rates of new employee hires and employee turnover by age group and gender


Health and safety at work

G4-DMA Disclosures on management approachThe health and safety of our people

G4-LA6

Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender

The health and safety of our people

Currently, there is no available data on occupational diseases.Over the next few years, F.I.S. is committed to collecting the data needed to cover this indicator.

Training and education


G4-LA9Average hours of training per year per employee by gender, and by employee category


Pay equity between women and men


G4-LA13Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation

Our people, a strategic asset for our operation

Local communities

G4-DMA Disclosures on management approach A responsible link

G4-SO1Percentage of operations with implemented local community engagement, impact assessments, and development programs

A responsible link

5. PRODUCT RESPONSIBILITY

Consumer health and safety

G4-DMA Disclosures on management approachQuality and safety of our active ingredients and intermediates

G4-PR2

Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle, by type of outcomes

The catalysts of our success

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Lendaro Gabriele - CSR Contact Person - [email protected]

Rasia Umberto Maria - Communications Manager - [email protected]

All of this document is property of F.I.S. - Fabbrica Italiana Sintetici S.p.A.It is forbidden to copy, appropriate, redistribute, reproduce any phrase, content or image contained in this document.

F.I.S. - Fabbrica Italiana Sintetici SpA all rights reserved.

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