Terna — AGM Information 2016

Apr 29, 2016

REPORT OF THE BOARD OF DIRECTORS ON THE ITEMS ON THE AGENDA

AGENDA

• 1. Separate Financial Statements as at December 31, 2015. Reports by the Board of Directors, the Board of Statutory Auditors and the Independent Auditors. Related resolutions. Presentation of the Consolidated Financial Statements as at December 31, 2015;
• 1. Allocation of the profit for the year;
• 1. Annual Remuneration Report: consultation on the Remuneration Policy pursuant to Art. 123 ter, paragraph 6 of Legislative Decree no. 58/1998 (Consolidated Law on Finance);
• 1. 2016-2018 Long-Term Monetary Incentive Plan. Related resolutions.

(This is a translation of the original Italian text.

For any difference in meaning between the original Italian text and its translation, the Italian text will prevail)

REPORT OF THE BOARD OF DIRECTORS ON THE FIRST ITEM ON THE AGENDA

Separate Financial Statements as at December 31, 2015. Reports by the Board of Directors, the Board of Statutory Auditors and the Independent Auditors. Related resolutions. Presentation of the Consolidated Financial Statements as at December 31, 2015

Dear Shareholders,

The dossier titled "2015 Annual Financial Report of Terna S.p.A. and of the Terna Group", made available to you via the methods and terms specified by current law on the subject, includes the illustration of TERNA S.p.A.'s Separate Financial Statements and Consolidated Financial Statements as at December 31, 2015. This report refers to the above-mentioned document.

The above having been stated, we submit for your approval the following

proposal

"TERNA S.p.A.'s Shareholders' Meeting, having examined the illustrative report by the Board of Directors,

resolves

to approve TERNA S.p.A.'s separate financial statements as at December 31, 2015 which closed with a profit of € 527,113,097.76."

REPORT OF THE BOARD OF DIRECTORS ON THE SECOND ITEM ON THE AGENDA

Allocation of profits for the year

Dear Shareholders,

Considering the results obtained, the Board of Directors proposes to allocate a dividend per share for the whole of 2015 of € 0.20, corresponding to a total amount of € 401,998,400.00 million, recalling that TERNA S.p.A. already distributed an interim dividend equal to € 0.07 per share in November 2015 for a total amount of € 140,699,440.00.

The above having been stated, we submit for your approval the following

proposal

"TERNA S.p.A.'s Shareholders' Meeting, having examined the illustrative report by the Board of Directors,

resolves

to allocate TERNA S.p.A.'s profit for 2015, equal to € 527,113,097.76, as follows:

• € 140,699,440.00 to cover the interim dividend paid on November 25, 2015;
• € 261,298,960.00 as a final dividend to be distributed in the amount of € 0.13 for each one of the 2,009,992,000 ordinary shares outstanding to be paid – gross of any statutory deductions – on June 22, 2016, with the record date of coupon no. 24 set for June 20, 2016 (pursuant to Art. 83 terdecies of Legislative Decree no. 58 of February 24, 1998, the "Consolidated Law on Finance": June 21, 2016);
• € 125,114,697.76 as retained earnings."

REPORT OF THE BOARD OF DIRECTORS ON THE THIRD ITEM ON THE AGENDA

Annual Remuneration Report: consultation on the Remuneration Policy pursuant to Art. 123 ter, paragraph 6 of Legislative Decree no. 58/1998 (Consolidated Law on Finance)

Dear Shareholders,

Following the entry into force of the regulatory provisions implementing Art. 123 ter of Legislative Decree no. 58 of February 24, 1998 (Consolidated Law on Finance) issued by Consob (with resolution no. 18049 of December 23, 2011 in the Official Journal no. 303 of December 30, 2011, and in force since December 31, 2011), the Shareholders' Meeting convened annually for approval of the Separate Financial Statements is called to resolve on the policy adopted by the Company with reference to the remuneration of members of the administrative bodies, general managers and executives with strategic responsibilities.

This Policy is illustrated in the first section of a Remuneration Report that is approved by the Board of Directors and published by listed companies, in compliance with Art. 123 ter of the Consolidated Law on Finance, at least twenty-one days prior to the date of the Shareholders' Meeting.

In implementing the above-mentioned provisions, TERNA's Board of Directors, in the meeting held on March 21, 2016, approved the "Annual Remuneration Report" (the "Report") that includes all details regarding the topic contained in this item of the agenda and, therefore, reference should be made to said Report for any additional information.

For this purpose, please note that the Report is divided into two section and includes:

• in the first section, the description of the Policy adopted by the Company on the specific matter and the procedures used for adopting and implementing this Policy;
• in the second section, all the information established by paragraph 4 of the above-mentioned article of the Consolidated Law on Finance, regarding the assigned remuneration and additional information established by Art. 84 quater of the "Regulation implementing Legislative Decree no. 58 of February 24, 1998, concerning the regulation of issuers" adopted by Consob (Issuers' Regulation) regarding shares held directly or indirectly in the Company by directors, auditors, general managers and executives with strategic responsibilities.

With respect to said Report, the Shareholders' Meeting is called to resolve, pursuant to paragraph 6 of Art. 123 ter, of the Consolidated Law on Finance, in favour of or against the first section of the Report. The resolution is not binding.

The above having been stated, we submit for your approval the following

proposal

"TERNA S.p.A.'s Shareholders' Meeting, having examined TERNA's "Annual Remuneration Report" approved by the Board of Directors

resolves

pursuant to and in compliance with the provisions of Art. 123 ter, paragraph 6, of Legislative Decree no. 58 of February 24, 1998, favourably the first section of the Report that illustrates the Remuneration Policy adopted by TERNA S.p.A. and the procedures used for adopting and implementing said Policy."

REPORT OF THE BOARD OF DIRECTORS ON THE FOURTH ITEM ON THE AGENDA

2016-2018 Long-Term Monetary Incentive Plan. Related resolutions

Dear Shareholders,

with reference to the present item on the agenda, you are convened – in accordance with the provisions of Art. 114 bis of Italian Legislative Decree No. 58 of February 24, 1998 ("Consolidated Law on Finance") - to resolve upon the proposal to adopt a Long-Term Monetary Incentive Plan for the period 2016-2018 ("LTI Plan") reserved for the General Manager, and for the managers of TERNA S.p.A. and of its subsidiaries under the terms of Art. 2359 of the Italian Civil Code identified on the occasion of implementation of the said LTI Plan.

The LTI Plan, the scheme of which was defined by the Board of Directors on the proposal of the Remuneration Committee, recognises in the context of the remuneration structure of the beneficiaries a monetary incentive, related to the achievement of predetermined performance and value creation for shareholders targets, which is subject to continuation of the employment relationship with the Terna Group.

Although it does not provide for assignment of TERNA S.p.A. shares to the beneficiaries, the LTI Plan entails the possibility to make to the latter a cash payment which varies, for 40%, according to the positioning of the "Total Shareholder Return" (TSR) generated by the TERNA stock in the period of reference (2016-2018) compared to a peer group made up of the main European listed companies of the utilities sector which have a business model equivalent to that of TERNA (Snam, Red Electrica, Enagas, National Grid, Severn Trent, United Utilities). For this reason, the LTI Plan qualifies as a "remuneration plan based on financial instruments" under the terms of Art. 114 bis, paragraph 1, of the Consolidated Law on Finance.

On the basis of the provisions of Art. 84 bis, paragraph 1, of Consob Resolution No. 11971 of May 14, 1999, (Issuers' Regulation) the characteristics of the LTI Plan are described in detail in the information memorandum prepared in accordance with the provisions of Scheme No. 7 of Annex 3 A of the Issuers' Regulation, made available at the same time as the present report and to which you are expressly referred.

The above having been stated, we submit for your approval the following

proposal

"The Shareholders' Meeting of TERNA S.p.A., after examining the illustrative report by the Board of Directors prepared under the terms of Art. 114 bis of the Consolidated Law on Finance, and of Art. 84 ter of the Issuers' Regulation and the information memorandum on the 2016-2018 Incentive Plan published under the terms of Art. 84 bis of the said Issuers' Regulation

resolves

1. to approve the Long-Term Monetary Incentive Plan for the period 2016-2018 ("LTI Plan") for the General Manager, as well as the managers of TERNA S.p.A. and of its subsidiaries under the terms of Art. 2359 of the Italian Civil Code, the characteristics of which are described in the information memorandum prepared for the purpose;

2. to attribute to the Board of Directors, with the option to subdelegate, each and every ample power necessary or opportune for implementation of the LTI Plan, to be exercised in observance of what is indicated in the related information memorandum, and in particular, merely by way of example and not exhaustively, to act - where provided for after consulting the Remuneration Committee - (i) to approve and/ or modify and/or supplement the Regulation of the LTI Plan; (ii) to identify the Beneficiaries by name; (iii) to determine the amount of the Incentive to be attributed to each Beneficiary; (iv) to carry out all actions, duties, formalities, communications that are necessary or opportune for the purposes of managing and/or implementing the LTI Plan".