Sustainability Report 2014 Lek d.d.

Company Profile Sustainability Report 2014 – Lek d.d. 20 17 GRI Disclosures G4-22, G4-23, G4-28, G4-29, G4-30 18 GRI Disclosure GRI G4-17 19 GRI Disclosure G4-13 20 GRI Disclosures G4-22, G4-23 21 GRI Disclosure G4-DMA, GRI Disclosure G4-34 1.4.1 2014 reporting characteristics 17 • All the indicators and disclosures in the present report refer to the calendar year 2014. • Employee data, key data on financial operations, and economic impacts of business operations were acquired in the financial reporting process for the purpose of the company’s annual report compilation in accordance with International Accounting Standards and the Slovenian legislation. • The objective of Lek’s HSE reporting is compliant with Novartis’ and Sandoz’ objectives to provide a fair and well-balanced picture in the field of health, safety and environmental impacts (HSE). The system of monitoring HSE achievements and the reporting methodology are described on pages 51 and 52. • Sustainable development reports are compiled annually and also include the Environmental Statement (EMAS) amended and upgraded at every major change. Reports contain key data for all sites of Lek, a Sandoz company, in Slovenia. • We expect the report will be used by the company’s associates and management team, local communities within which the company operates, professional organi- zations assessing the compliance with the RC Initiative and EMAS Scheme, and members of the pharmaceutical associations. • The report covers the major economic, environmental and social impacts of the organization. • Reporting refers to the company Lek d.d. and to all of its manufacturing sites in Slovenia. 18 • The company Lek d.d. holds a 100% ownership stake in the following subsidiaries (as of 31 December 2014): Sandoz d.d., Hotel Lek d.o.o., and Lek Ljubljana Holding GmbH, Austria and 74.5% ownership stake in the âistilna naprava Lendava d.o.o. Until 31. 12. 2014, Lek d.d. also held a 100% ownership stake in Novartis Animal Health d.o.o., in accordance with a contract on business share transfer, however, its new owner became Elanco – Eli Lilly company – on 1. 1. 2015. • In 2014, there were no changes in the size, structure and ownership of Lek d.d. There were no merger activities or joint ventures. 19 • To improve reporting accuracy, the following adjust- ments in the data collection were made for 2014, also impacting the comparability of previous years’ data: 20 - On the basis of additional information, we improved the method of collecting data on the realization of the production plan for finished sterile products at the Ljubljana site. Following corrections to the production plan realization/use of starting materials, the calcu- lations of resource use efficiency changed as well. - When reporting on wastes, we followed Novartis’ request that reporting from and including 2011 should only cover wastes leaving the site. Consequently, the waste thermally treated at the site was no longer re- ported in 2011. We reported however on the ashes and slags resulting from such thermal treatment. In 2012, mycelium waste generated by the fermenta- tion process at the Lendava site was redirected from the site incinerator to a contracting biogas plant for processing. As a result, the total volume of mycelium waste is now reported as waste treated outside the site. - As recommended by Novartis auditors, we added data on sewage sludge from the Lendava Waste- water Treatment Plant to other Lendava site waste also for all the previous years. 1.5.1 Governance and management 21 At the end of 2014, the Lek d.d. Board of Management was composed of the following members: Vojmir Urlep, President of the Board of Management, Zvonko Bogdanovski, Member of the Board of Management, Commercial Operations Ksenija Butenko âerne, Member of the Board of Management, Legal Affairs Patrick Bernard Donnelly IV, Member of the Board of Management, Finance (until 31. 10. 2014), Ale‰ Rokavec, Member of the Board of Management, Technical Operations, Samo Ro‰, Member of the Board of Management, Human Resources Bojan Dolenc, Member of the Board of Management, Workers’ Director (until 28. 2. 2014), Marjan Novak, Member of the Board of Management, Workers’ Director (from 7. 5. 2014). Lek d.d. Supervisory Board: Francesco Balestrieri, Chairman, Jeffrey Pilgram George, Deputy Chairman (until 29. 5. 2014), Richard Francis, Deputy Chairman (from 30. 5. 2014), Martin Jeffrey Rope, Member, Knut Mager, Member, Peter Svete, Member – Workers’ Representative, Vesna Premoviã, Member – Workers’ Representative. 1.5 Governance, commitments, inclusion Lek’s reporting has been based on the RCI for several years now, the present report being an upgrade of the previous reporting model. The report meets the requirements of Annex IV to Regulation No. 1221/2009 (EMAS) and prescribed indicators disclosing them also at the site level. Lek’s reporting in compliance with the GRI Guidelines uses the basic version of reporting G4 guidelines. Reporting in accordance with RCI requirements Reporting in accordance with EMAS Eco-Management Scheme requirements Reporting in accordance with GRI Guidelines