Chief Executive Officer's Letter

In years gone by the sector in which Ansaldo STS operates displayed strong growth prospects and offered significant investment opportunities.

Even today it still has prospects and opportunities in spite of the well-known macroeco-nomic difficulties that have emerged recently and which are felt to a greater extent in Europe. The reasons for growth are essentially the same ones that have characterised the sector for years, even if today they focus on urban and mass transport where a greater increase is expected than that expected for conventional and high-speed networks. These reasons are: rapid urbanisation and development of large urban centres; the requirement for greater efficiency in urban transport; but also the growing needs for intermodal features and infrastructures.

All of this means that signalling and transport solutions is a sector in continuous expansion, even though the current market situation appears to differ from that of previous years and is becoming increasingly competitive.
In this context Ansaldo STS not only has the tools to continue to operate at the top of this sector but also has the skill to drive technological innovation to service the increasing requirements of the market.

In a growing business, our objective is to work using sustainable methods, with sustainability being understood as Stable and lasting Growth, Competitiveness, Respect for the Environment and Quality of life.

All of this means being aware that we are not just working with “Human Capital” but with “People”; that it is not just necessary to manage “Investments”, but to develop “Projects”; and that it is not enough just to use “Resources”, but rather clear and lasting “Commitments” to our stakeholders are needed.
These People, Projects and Commitments are blended by Ansaldo STS by means of characteristic values that are well known and shared by all its employees, such as Customer Focus, Innovation and Excellence, People, Team Spirit and Integrity.

These are the basic elements that Ansaldo STS brings to the fore to ensure the
fulfillment of growth objectives in order to face up to competition, develop product innovation and give continuous strength to the profitability generated.
We believe that it is always the people, values and behaviour that make the biggest difference within organisations because they provide the driving force and the incentive to work at one’s best and to answer to all our stakeholders in a matter-of-fact manner that inspires confidence. In previous years, we launched and renewed our commitment to these principles of behaviour, with the understanding that adhering to them means putting them into practice on an ongoing basis and making them an integral part of our daily work. Part of this commitment also consists in analysing and understanding where to improve, in order to follow up and respond to problems and economic trends and find new solutions. To this end, also in 2012, we will continue to promote our internal culture with initiatives to be implemented with an awareness of the importance of putting into practice actions and behaviour established to drive our distinctive company identity.

All of this falls into our concept of Sustainability as cited: to create value for Customers and Shareholders, to improve the quality of life of employees and to guarantee the safety of the users of our products. For this very reason, we must be able to properly assess the present and act to guarantee the best future. Therefore, for the results achieved we have to thank all of our 4,100 employees worldwide, who represent the true wealth of the Group (the “People”), showing that a culture has evolved that is destined to last over time because it is founded on solid principles, has clear objectives and is resolute in the methods chosen to achieve them.
Our strategy and, thus, our daily actions must therefore be aimed at having the effi ciency to operate in the right sector (Selectivity), with the appropriate people and skills (Technology and Skills) and with the ability to guarantee the effectiveness of our decisions and actions (Innovation).
The quest for the efficiency of our work is driven by an awareness of our impact on the economic and financial and social equilibriums in which we operate. Not only because we work in a sustainable sector but still more because we understand that in order to produce positive effects that last over time it is not enough to “know how to do something”, but it is necessary to “do it well”.
Therefore, also in this third edition of the sustainability report we are focusing on People, on Projects and on the efficient use of resources to fulfill our Commitments, confirming what we achieved in 2011 and providing proof of our adaptation to the world around us while making a commitment to adapt that world to comply with our values. Self-improvement is not a question of choice but of necessity, in order to create and leave behind a better situation for future generations and provide them with a solid foundation for a better quality of life in the future.
Being able to gather and present the data from our work is not a trivial matter but it would be wasted if it was interpreted in a superficial manner and was limited only to certain aspects and issues. For this reason we are participating attentively in initiatives such as the Carbon Disclosure Project and we joined the Global
Compact with conscious conviction. Indeed, by comparing ourselves to others who produce and create value like us, we can seize upon new incentives to tackle our mission and support our stakeholders.
In 2011 we set up the Internal Sustainability Committee, in which - not by chance - managers from all areas of the company take part. Our intention is for this corporate body to provide direction and vision with regard to the development of new initiatives that support the effectiveness of our action on economic, social and environmental performance.
We want to create value for each stakeholder and respond efficiently to a demand for mobility that is continuously growing. By doing this, we would like to maintain our position of leadership in the sector, promoting the culture of quality, reliability, safety and responsibility. It may seem easy but it would not be possible if we did not seek, in our daily work, satisfaction and respect for the key values in which we believe.

 Code of ethics (Pag 37 Sustainability Report)
management of Ansaldo STS continuously confirms the commitments and ethical responsibilities which must guide the conduct of the business and corporate activities of all of those who have relationships of any kind whatsoever with Ansaldo STS. Ansaldo STS, in order to achieve its successful targets, bases its activity on values which are shared by all of those who operate within its global structure, such as:
• Customer focus;
• Innovation and excellence;
• People;
• Team spirit;
• Integrity.

 Declaration of human rights (p. 52 Sustainability Report)
 Personnel management policy (p. 97 Sustainability Report)
 Equity of pay (p. 105 Sustainability Report)
 Corporate climate and improvement initiatives (p. 119 Sustainability Report)
 Internationalisation and multiculturalism management (p. 115 Sustainability Report)
 Workers’ health and safety policy (p. 50; 179-182 Sustainability Report)
 Product liability (p. 53; 135-136 Sustainability Report)

1)
-Commitments undertaken in 2010
Release of the global organisation of Ansaldo STS and effective entry into force of the organisational positions of the resources of Ansaldo STS USA
-Activities carried out in 2011
All employees of Ansaldo STS USA were integrated into the Global Organisation starting from 1 April 2011 (issue of the corporate organization chart - ORA002 rev5 – and allocation of all internal staff)

2)
-Commitments undertaken in 2010
Consolidation of the Performance Development Project and Global Job System processes.
-Activities carried out in 2011
The new ASTS development processes, which are defined through the HR Integrated Development System, were consolidated at worldwide level. US employees, who were involved in the organizational integration of FFDB in the course of the year, were also trained with respect to the new development processes (PDP, GJS, Talent management). Specifically, information workshops were held with all the managers, in order to inform them of the new guidelines regulating the HR management and development processes. The support of the local HR managers further contributed to the cascading of information to all organizational levels. In each geographical area, HR contact persons were identified who were “expert” in the management of the new processes and who were appointed to guide, through a continuous and structured coaching, all managers and employees who use these processes. Furthermore, central and global coordination ensures the continuous monitoring of the process management and the development of improvement actions.

3)
-Commitments undertaken in 2010
Ensure the diffusion and capitalisation of expertise within the system.
-Activities carried out in 2011
With the implementation of the GJS project, all of the most significant corporate roles were mapped and the necessary expertise to supervise the roles themselves was defined. The dissemination of the results of the project to all the members of the various professional families allowed the level of knowledge to be shared, thus contributing to the capitalization of expertise.

4)
-Commitments undertaken in 2010
Ensure the involvement and the commitment of people, for the purpose of creating team spirit and the ability to work efficiently in group.
-Activities carried out in 2011
The issue of collaboration and team spirit was faced by taking as a starting point the project teams which, due to the very nature of the activities carried out and the inter- and intra-functional relations managed, must represent the first “model” for the active and mutual capacity to work in a group. In this regard, meetings were held with the contact persons of the various project teams, directly involving the top management, to analyse the main causes of a lack of synergies or malfunctions in the management of working groups.
The output of these meetings led to the design of a new initiative: “KEY ROLES EMPOWERMENT”, which is aimed at strengthening the leadership skills of the team members, in order to ensure working procedures in line both with the new corporate processes and with the value of team spirit.

5)
-Commitments undertaken in 2010
Extension of the implementation of global processes to Ansaldo STS USA
-Activities carried out in 2011
All global processes were implemented in the USA through specific workshops

Referring also to our Sustainability Report 2011

+ Sustainability programme
The analysis conducted by the Ansaldo STS Group as regards the relations with the different categories of stakeholders, and the environmental, health and safety aspects which characterise its activities, has enabled the company to defi ne, in 2010, a Sustainability Programme including improvement targets. The Sustainability Report of this year reports the actions implemented by the company in 2011 in consideration of the commitments undertaken and the set of new targets defi ned for the future operations.

+ Reporting methodology (p. 184 Sustainability Report)
The 2011 Sustainability Report of the Ansaldo STS Group reports, for the third consecutive year, the economic, social and environmental impact of management operations. The methodology adopted refers directly to the "Sustainability Reporting Guidelines of the GRI (Global Reporting Initiative) version 3.0." Materiality - In order to ensure a balanced and fair reporting of its performance, the Internal Sustainability
Committee of Ansaldo STS, which was established in 2010, has studied the various topics being reported to secure the quality of the report; the Committee has carried out an analysis of the materiality in order to detect how the different issues affect the economic, environmental and social performance of the company, and how they can affect the stakeholders’ assessments and decisions. The determination of the relevant aspects reported refl ects a
combination of internal and external factors with respect to the organization.
• Internal Factors: mission, values, strategies, policies and management systems aimed at designing and delivering solutions for cutting-edge, safe and environmentally-friendly railway and metro transport and signalling;
risk assessment activities carried out according to the Enterprise Risk Management methods of the Committee of Sponsoring Organizations of the Treadway Commission (COSO report); quality, environmental and health and safety management systems; corporate strategy on the issue of Climate Change; distinctive competences of the company specifi cally focused on the search for solutions that ensure safety in transportation and eco-effi ciency.
• External Factors: directions resulting from the GRI guidelines; risks linked to climate change (Carbon Management System): interests and expectations of the stakeholders involved in the success of the enterprise (listening to, and dialogue with, stakeholders); issues highlighted by the ESG criteria being analysed by fi nancial
analysts.

Referring also to our Sustainability Report 2011: Assessment, Policy and Goals

 Code of Ethics and training activities (p.37,144 Sustainability Report)
 Declaration on labour policies (p. 52 Sustainability Report)
 Remuneration and incentive schemes (p. 103,104 Sustainability Report)
 Equity of pay (p. 105 Sustainability Report)
 Employee benefits (p. 107,110 Sustainability Report)
 People Care (p.111 Sustainability Report)
 Personnel management, recruitment and selection policy (p.111 Sustainability Report)
 Training and development (p. 112,113 Sustainability Report)
 Industrial relations (p.116,118 Sustainability Report)
 Corporate climate and improvement initiatives (p.119 Sustainability Report)
 Litigation management (p.119 Sustainability Report)

1)

-Commitments undertaken in 2010Support the process for the global
integration of Ansaldo STS, through the promotion and diffusion of the new corporate values.

-Activities carried out in 2011
In order to ensure widespread adoption and internalization of the 5 corporate values, a new Values Campaign has been designed which is based on the importance of the behaviours to be adopted at Ansaldo STS.
This campaign is aimed at stressing the importance of moving from enunciation
to action: affi rming the existence of values does not suffi ce, rather it is essential to ensure that they are put into practice and that they constitute the driving behaviours actually adopted by each worker of ASTS. The concept
chosen uses the metaphor of cinema: the "Action" image is a reference to the construction of a scene in a fi lm, which has well-defi ned characters who are called upon to be the main actors of that scene. To this end, each value represents an action with specifi c protagonists; these protagonists are the behaviours selected as representative of the values themselves and the campaign will impact upon these behaviours.
The campaign will be implemented through various initiatives:
-The “Values in Action: MOVIE WITH US” competition will be launched, which will reward the nicest picture and the best movie featuring the distinctive behaviours that have been associated with the values of ASTS. A special judging panel will select the best entries and the winner will be used for publicity and will appear on the corporate intranet and company screens as the behaviour sponsor.
-Focus groups will be managed to gather ideas and suggestions for improving the communication of corporate values. The most interesting proposals will be implemented with special programmes. Initiatives will always be accompanied by the image campaign.

2)

- Commitments undertaken in 2010
Manage diversity of multiculturalism and internationality.

-Activities carried out in 2011
In 2011 multiculturalism and diversity remained strategic activities, which were highlighted by the managerial training focusing on team management experience at worldwide level and which signifi cantly increased in the course of 2011.

See Human Rights Principles section

Referring also to our Sustainability Report 2011: Assessment, Policy and Goals

 Environmental policy and management system (p. 8,49,163,164 Sustainability Report)
 Certifications and registrations obtained (p. 165 Sustainability Report)
 HSE training (p. 166,167,180 Sustainability Report)
 Application of a prudential approach (p. 8,168 Sustainability Report)
 Carbon Management System (measurement of emissions of Scope 1, 2 and 3) (p. 175,176 Sustainability Report)
 Participation in the Carbon Disclosure Project (p. 8, 177 Sustainability Report)
 Measurement and control of environmental impact (energy consumption, emissions into the atmosphere, water resources, waste) (p. 168,173 Sustainability Report)
 Commitments to improve performances (p. 69,71,73 Sustainability Report)
 Product innovation for the reduction of direct and indirect environmental impact (p. 53 Sustainability Report)
 National and EU research projects for safety and reduction of environmental impact of railway transport (p. 150,155 Sustainability Report)

AS FOR ENVIRONMENTAL

- Commitments undertaken in 2010
Integration of the requirements of the Environmental, Health and Safety management systems
-Activities carried out in 2011
The company has implemented an Integrated Management System (IMS) for Environment, Safety and Quality
The company has implemented an Integrated Management System (IMS) for Environment, Safety and Quality, establishing, at Corporate level, global policies and procedures to ensure the controlled management of processes and activities relating to quality, safety at work and the protection of the environment.

+GENOA, NAPLES, PIOSSASCO – Commitments undertaken in 2010
Increase of 20%/40% in the number of training hours dedicated to the environment, through training meetings with external entities
-Activities carried out in 2011
Activity in progress.
A project is being studied concerning environmental training as a result of the Global Job Systems implemented in 2011.
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ELECTRICITY

+GENOA – Commitments undertaken in 2010
Reduction in electricity consumption of 2% by increasing employee awareness.
-Activities carried out in 2011
The objective was achieved (reduction of 8.03%)

+TITO SCALO – Commitments undertaken in 2010
Reduction in electricity consumption of 2% through the construction of a photovoltaic system.
-Activities carried out in 2011
Activity in progress.
The implementation of the photovoltaic system is being studied.

+PIOSSASCO – Commitments undertaken in 2010
Reduction in electricity consumption of approximately 100kwh and disposal of 134 kg of R22 gas, through the replacement of n. 2 Refrigeration Units
Reduction in electricity consumption of approximately 9,000 kwh through the replacement of open space ceiling fittings.
-Activities carried out in 2011
The replacement of the 2 refrigeration units is expected in 2012.
The objective was achieved (reduction in electricity consumption of 13.75%, equal to 165 Kwh)

+BATESBURG – Commitments undertaken in 2010
Reduction in electricity consumption through the replacement of 50 HP air compressors with one variable-speed 50 HP air compressor
-Activities carried out in 2011
The objective was achieved (reduction in electricity consumption of 2.96%)

+BRISBANE, PERTH, SYDNEY, BANGALORE, KOLKATA, KL OFFICE and FACTORY, NOIDA, NEWCASTLE, KARRATHA, PITTSBURGH, LES ULIS, RIOM, SOLNA, BRAVINGTON AND KERRY– Commitments undertaken in 2010
Reduction in electricity consumption:
through the replacement of the existing lamps with low-energy consumption ones, through the provision of information material and training courses for employees focused on the careful management of the activities which impact on energy consumption.
-Activities carried out in 2011
Activity in progress.
A pilot project is being studied for energy efficiency which provides for the replacement of the lighting system with the LED and DALI systems.

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GAS

+TITO SCALO – Commitments undertaken in 2010
Reduction in gas consumption of approximately 14,000 cubic meters through the replacement of 6 sequential boilers with condensing boilers
-Activities carried out in 2011
The objective was achieved (reduction in gas consumption of 14.85%, equal to 49,588 m3)

+BATESBURG – Commitments undertaken in 2010
Reduction in CO2 emissions through the replacement of 5 HVAC cooling units containing 29 tonnes of R22 with units containing R410A
-Activities carried out in 2011
Activity in progress.

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WASTE

– Commitments undertaken in 2010
Reduction of 2% in the production of hazardous wastes, through:
- training and informing staff about correct waste sorting;
- gradual replacement of hazardous substances.

-Activities carried out in 2011
The objective was achieved for Naples, Tito Scalo, Genoa and Les Ulis. The production of hazardous waste was on the rise in Batesburg, Riom, Piossasco

+TITO SCALO – Commitments undertaken in 2010
Reduction of the production of hazardous wastes of approximately 1 ton, thanks to the conclusion of the divestment of equipment containing hazardous substances CER 160213.
-Activities carried out in 2011
The objective was achieved (reduction of production of hazardous waste of 73%, equal to 4.7 tonnes)

+ BRISBANE, PERTH, SYDNEY, NEWCASTLE, BANGALORE, KOLKATA, KL OFFICE AND FACTORY, NOIDA, KARRATHA, PITTSBURGH, LES ULIS, RIOM, SOLNA, KERRY AND BRAVINGTON – Commitments undertaken in 2010
Reduction of waste production through the provision of information material and training courses for employees focused on the careful management of the activities which impact on waste production.
-Activities carried out in 2011
The objective was achieved for Pittsburgh (from 165 to 106 tonnes), Les Ulis (from 96 to 50 tonnes), Riom (from 104 to 34.1 tonnes), Bangalore (from 5.1 to 3.6 tonnes), Kolkata (from 0.5 to 0.3 tonnes), and Sydney (from 5 to 4.2 tonnes). The production of waste was stable for the Noida and KL Office (1 ton). It was on the rise in Perth (from 12.4 to 14.2 t) and London (from 145 to 185 tonnes)
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WOOD PACKAGING

+TITO SCALO, PIOSSASCO AND GENOA – Commitments undertaken in 2010
Full recycling of wood packaging through an agreement entered into with the waste disposal company for the recycling of wood.
-Activities carried out in 2011
The objective was achieved

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TRANSPORT

+GENOA, TITO SCALO, NAPLES AND PIOSSASCO – Commitments undertaken in 2010
Reduction of CO2 emissions through Travel Policies which provide for Long travel lease agreements only for LPG- and methane-fuelled cars. Reduction in the number of employee journeys between the locations of Ansaldo STS through the arrangement of video-conference rooms and the implementation of PC workstations with cameras.
-Activities carried out in 2011
Activity in progress.

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EMERGENCIES

+GENOA, NAPLES AND TITO – Commitments undertaken in 2010
Reduction in the number of environmental accidents at sites and yards through the training and information of staff.
-Activities carried out in 2011
The objective was achieved.
A module was implemented for recording environmental near misses in order to implement all preventive actions in order to reduce the number of environmental accidents.

+PIOSSASCO – Commitments undertaken in 2010
Control of the number of environmental accidents at sites and yards through the training and information of staff
-Activities carried out in 2011
The objective was achieved.
A module was implemented for recording environmental near misses in order to implement all preventive actions in order to reduce the number of environmental accidents.
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OHSAS 18001

+ NAPLES, GENOA, TITO SCALO AND PIOSSASCO – Commitments undertaken in 2010
To get a positive outcome from the certification entity, by using consultancy firms as regards the necessary assistance during the maintenance, extension and new certification of the system. Maintain the focus on the management system through actions aimed at training personnel and suppliers. To use internal audits also to increase employee awareness.
-Activities carried out in 2011
The objective was achieved.
In 2011 LRQA carried out the check of Environment and Safety requirements applied by Ansaldo STS. The check was successfully concluded confirming the system certification according to the UNI EN ISO 14001:2004 and BS OHSAS 18001:2007 standards.
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ACCIDENTS

+ NAPLES, GENOA, TITO SCALO AND PIOSSASCO – Commitments undertaken in 2010
Reduction of 20% in the accident severity index through the improvement of the Health and Safety Management System, through seminars and training courses and by the use of share points to increase awareness on this issue.
Increase of 20% in reports of near misses per year through the regular use of the near miss report form, through inspections to verify the applicability and through training and information on how to use the forms attached to the accident management procedure.
-Activities carried out in 2011
The objective was achieved.
In Genoa the accident severity fell to zero (from 0.014 in 2010); it also fell to zero in Tito Scalo (from 0.072 in 2010). In Naples it reduced by 5.3%, passing from 0.015 to 0.014.

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TRAINING ON SAFETY

+NAPLES, GENOA, TITO SCALO AND PIOSSASCO – Commitments undertaken in 2010
Increase of 10% in training hours on safety
-Activities carried out in 2011
The objective was achieved, as the total training hours more than doubled as a whole

See Human Rights Principles section

Assessment, Policy and Goals

 Code of Ethics and training activities (p. 37,144 Sustainability Report)
 Organisation, Management and Control Model pursuant to Legislative Decree no. 231/20011 (p. 35,37 Sustainability Report)
 Procedural system applied to all Group companies (p.52,64 Sustainability Report)

Since the start of its operations in 2006, Ansaldo STS has adopted the Organisation, Management and Control Model pursuant to Legislative Decree no. 231/2001, which deals, inter alia, with bribery offences.
The Organisation, Management and Control Model has been adopted by the preexisting Italian Group companies (merged into the Parent Company in 2009) since the enactment of Legislative Decree no. 231/2001. The employees of Ansaldo STS S.p.A. are required to comply with the Organization, Management and Control Model and the corporate procedures that specify the operational procedures of the various corporate processes. Among these procedures is a procedure, which is applicable to all Group companies, which regulates the procedures for selecting and managing agents and providers of services to support business activities in order to ensure transparency and traceability in relation to these subjects.
In case of corruption events (which have never occurred so far in the Group), the reaction would be the disciplinary sanction as required by the Model, which also provides for dismissal without notice. The main risk areas, which include both those exposed to direct risks and those which support the commission of bribery offences, and which are subject to the formalities required by the Organisation, Management and Control Model are: sales, management of orders, sites, administration, finance and control, HR and soft loans. All the employees are given an information notice whenever the Model is subsequently updated. Certain employees who have been identified as operating within the areas subject to the risk of crime, or executives and middle managers of the company, received a specific e-learning training on the occasion of updates of the Organisation, Management and Control Model and of the regulations under Legislative Decree no. 231/2001. The same persons also sign periodical statements to attest to the compliance with the Organisation, Management and Control Model and, where applicable, the statement also specifies the most significant relationships maintained with representatives of public administrations.

Commitments undertaken in 2010

1) Implementation of the Code of Ethics in the main companies of the Group and definition of the relevant application procedures

2) Integration of the local quality management systems into the single documentary system

Activities carried out in 2011

1) The necessary procedures were defined for the implementation of the Group’s Code of Ethics as updated in July 2010 in the various countries. The Code of Ethics was resolved upon by the Board of Directors of Ansaldo STS USA, Ansaldo STS Australia and Ansaldo STS Transportation Systems India. The first half of 2012 will see the completion of the process in the other group companies.

2) All corporate management systems have been integrated into a single documentary system as described in the corporate handbook - MNL001 – issued on 4 July 2011. The integration, and then the implementation of the system was subject to the ISO 9001 audit of certification which was successfully completed in December 2011.

See Human Rights Principles section