Terna — Remuneration Information 2015

May 13, 2015

2015 Annual Remuneration Report Rome, March 26, 2015

Mission

Terna is a leading grid operator for energy transmission. The Company manages electricity transmission in Italy and guarantees its safety, quality and affordability over time. It pursues electricity grid development, ever-increasing operating efficiency and integration with the European grid. It ensures equal access conditions for all grid users. It develops market activities and new business opportunities with the experience and technical expertise it has acquired in managing complex systems. It also creates value for shareholders thanks to continual commitment to professional excellence, and a responsible approach to the community, fully respecting the environment and the areas in which it operates.

2015 Annual Remuneration Report Rome, March 26, 2015

(This is a translation of the original Italian text. For any difference in the meaning between the original Italian text and its translation, the Italian text prevails)

Issuer: «Terna - Rete Elettrica Nazionale Società per Azioni» (in brief Terna S.p.A.) Website: www.terna.it, Investor Relations Section, Corporate Governance Date of approval of the Report by the Board of Directors: March 26, 2015

Letter from the Chairman of the Remuneration Committee

Dear Shareholders,

As Chairman of the Remuneration Committee of Terna, consisting of the Directors Fabio Corsico and Gabriella Porcelli, and myself, I am pleased to present the Remuneration Report which is published for the fourth time by Terna in compliance with applicable legal requirements and regulations for all listed companies, with the aim of ensuring maximum transparency for the Shareholders and all stakeholders regarding the quality of the remuneration systems adopted by the Company.

For the first time since the requirement to produce the Remuneration Report came into force, we have decided to open this document with "an open letter" to the shareholders to explain what has been done in these years and how much we still plan to do in terms of focus and improvements to the Group's Remuneration Policy by providing, through this document, the fullest possible disclosure regarding the systems adopted.

I am honoured to have been appointed as Chairman of the Remuneration Committee by the Board of Directors of Terna on May 27, 2014, taking over from Salvatore Machì who held this important position in the previous three-year period. A Remuneration Committee which is 100% independent, and the majority of which is appointed by the minority shareholders.

Transparency on the quality of the remuneration systems and alignment between management actions and shareholders' interests: these are the pillars of the Remuneration Policy of the Terna Group, which is not only compliant with legal requirements, but is also in line with best practices and with the expectations of the stakeholders, who seek value creation in the long-term.

Based on these solid foundations, our commitment as the Remuneration Committee, in the coming months will be directed towards making proposals to the Board of Directors concerning continued improvements and necessary adjustments to the Terna remuneration system to ensure its constant alignment with international best practices and with the European and national legislation and also to support and encourage the development of the Company in accordance with its business plan. Since the IPO, Terna Group has constantly created value for its shareholders, by achieving solid results and performances better than the market and sector. All that confirms the effectiveness of remuneration policies.

We have worked further to improve the standards of disclosure of the Report, noting the new regulations and acknowledging the points made by the proxy advisors and institutional investors.

In this context, for example, starting from this year, specific clawback clauses have been introduced on the variable part of the remuneration related to performance objectives.

The remuneration system of Terna, as fully described in this Report, is a crucial tool for attracting, retaining and motivating a management team with significant professional qualities, that is capable of successfully managing the company and aligning its activity with the interests of shareholders, promoting value creation in the medium to long term. Enhancing human resources and equal opportunities has always been a part of Terna's organisational culture, and this is the "ethical" base on which our remuneration system has been built.

We believe that our Remuneration Policy, that has been developed and refined over the years, is capable of providing recognition for the responsibilities assigned, the results achieved and the quality of the professional efforts made by the Company's management.

The elements described so far were received by the Board of Directors which, at its meeting on March 26, 2015, approved this Report.

To further enhance the transparency and clarity of the 2015 Report, we have restyled the presentation of the main content also with the introduction of some graphical elements. These actions were accompanied by greater disclosure, with particular reference to the cycle of activities of the Remuneration Committee, the objectives and the maximum payable amounts in connection with the variable remuneration components in the short and long term and with the pay mix of the CEO and General Manager.

The first section of the Remuneration Report, on which you are called to express a non-binding vote, describes and outlines the objectives and general principles which inspired Terna in defining its approach to remuneration of Directors and management, the aspects of governance and the other subjects relevant to the definition and implementation of the Remuneration Policy as well as the guidelines for the Remuneration Policy adopted for 2015.

The second section presents the information on actions taken regarding remuneration in 2014 in line with the policy set out in the Remuneration Report for last year.

Yours sincerely,

Carlo Cerami Chairman of the Remuneration Committee

	2004 (IPO)	2014	Δ 14 vs IPO	Δ 14 vs IPO
Revenues	1,023	1,996	~ 2x	95.1%
EBITDA	683	1,491	>2x	118.3%
EBIT	512	1,011	~ 2x	97.5%
Group Net Income	236	545	>2x	130.9%

Terna Group performance from IPO (June 23rd, 2004) to December 31st, 2014

Total Shareholder Return* from IPO to December 31st, 2014

Source: Bloomberg

* Total remuneration for the shareholder including share price performance as well as the dividends paid.

Table of Contents

EXECUTIVE SUMMARY – Main focuses of the 2015 Remuneration Report 10

Section I - Remuneration Policy	14
Foreword	14
Legislative References	14
1 – Information on the procedures for adopting and implementing the Remuneration Policy	16
1.1 Policy and parties involved	16
1.2 Remuneration Committee	16
1.3 Board of Directors	18
1.4 Shareholders' Meeting	19
1.5 Action of independent experts	19
1.6 Process for defining and approving the Policy	19
2 – Information on the Company's Remuneration Policy	20
2.1 Policy Content and Purposes	20
2.2 Remuneration of members of the Board of Directors	21
2.2.1 Remuneration of Directors without special duties	21
Shareholders' Meeting established remuneration	21
Compensation for participating in Board Committees	21
2.2.2 Remuneration of Directors with special duties	22
Chairman of the Board of Directors	22
CEO and General Manager	22
Fixed elements of remuneration	22
Short-term variable component (MBO)	22
Variable component of the medium-long term (LTI, Long Term Incentive)	24
Comparison with the market ("peer group")	25
Pay mix	26
Clawback clause	26
Benefits	26
Severance indemnity in case of resignation, dismissal or termination of employment	27
Non-competition agreements	27
2.3 Remuneration of senior executives with strategic responsibilities RAL (Fixed Gross Annual Salary)	27 27
Short-term variable component (MBO)	28
Variable component of the medium-long term (LTI, Long Term Incentive)	28
Benefits	28

SUBJECT ANALYTICAL INDEX (CONSOB RESOLUTION NO. 18049, SECTION I) 30

ANALYTICAL INDEX PURSUANT TO APPLICATIVE CRITERIA 6.C.1 OF THE CORPORATE GOVERNANCE CODE 31

Section II – Implementation of the 2014 Remuneration Policies	34
Introduction	34
Part One Fixed compensation Variable compensation Compensation for membership of Board Committees Severance indemnity in case of resignation, dismissal or termination of employment Benefits	34 34 35 35 36 36
Part Two Table 1 - Compensation earned by Directors, statutory auditors, General Directors and other executives with strategic responsibilities Table 3B - Monetary incentive plans for Directors, General Directors and other executives with strategic responsibilities Scheme 7-ter - Table 1 - Shareholdings of members of management and audit bodies, of General Managers and of senior executives with strategic responsibilities	36 38 44 46

Glossary 48

Executive Summary – Main focuses of the 2015 Remuneration Report

1. Compliance with the new provisions regarding a reduction in remuneration for the Directors of listed companies controlled directly or indirectly by public administrations, introduced by Art. 84-ter, paragraph 1 of Law Decree No. 69 of 21 June 2013 ( "Action Decree")

Compared to the amount determined for the previous CEO, the reduction in the overall remuneration of the new CEO (including the remuneration for his employment relationship as General Manager), is 38.5 percent; this reduction is higher than the minimum reduction (25%) required by the new legislation (see p. 15 of this document)

2. Elements of the remuneration of the CEO and General Manager

The break-down is confirmed for the remuneration given to:

Chief Executive Officer:

• Fixed remuneration approved by the Shareholders' Meeting;
• Fixed remuneration determined by the Board of Directors;
• Short-term variable component (MBO), approved by the Board of Directors.

General Manager:

• Fixed Gross Annual Salary (hereinafter, also referred to as "RAL"), approved by the Board of Directors;
• Short-term variable component (MBO), approved by the Board of Directors;
• Medium/long-term variable component (LTI), approved by the Board of Directors;
• Benefits recognised pursuant to the National Collective Employment Contract.

3. Disclosure on KPIs used in MBO and LTI Plans

With reference to the MBO Plan and LTI Plan, both the conditions of access and the performance objectives were clearly detailed (see p. 22-25).

4. Disclosure on the maximum limits ("bonus caps") of the MBO Plan and LTI Plan

The maximum bonus limits are clearly detailed on pages 22 to 25 regarding the achievement of the previously set specific targets (MBO Plan and LTI Plan).

5. Disclosure on the "clawback" and "malus" clauses

Starting from 2015, specific clawback clauses have been introduced on the variable part of the remuneration related to performance objectives (see p. 26).

As for the malus clauses, no variable incentive plans have been adopted in Terna that provide for the deferral of the payment of the incentives with respect to the time of accrual. However, in the short- and medium to long term incentive plans, specific gate conditions are expressly provided for and the failure to reach such conditions denies access to the bonus (see p. 22, 23, 24).

6. Disclosure on the reference peer group in the MBO and LTI Plans

On page 25 there is a list of the companies included in the peer group used by Towers Watson for the remuneration benchmark.

Section I

Section I - Remuneration Policy

Foreword

Remuneration policies and incentive systems fall within the scope of human resources' development and are actively managed to increase the value of human capital. Also by comparison with an internationally certified mapping system of the Company, Terna defines and guarantees uniform consistency and homogeneity in remuneration and development policies. Incentive systems, through different instruments and methods, involve all resources at every level and are aimed at fostering better results with commitment to achieve predefined objectives, both individually and for the company, to which a significant part of the remuneration is tied.

In this regard, Terna has adopted:

• a short-term managerial incentive, based on the annual "Management By Objectives" ("MBO") plans and linked to the achievement of performance objectives at an individual, departmental and corporate level;
• a long-term managerial cash incentive (LTI, Long Term Incentive) aimed at creating value by achieving demanding performance objectives set by the Company, as well as by creating loyalty in the beneficiaries during the planning period. At the moment, Terna does not use stock option plans as a managerial incentive.

This document organically summarises the principles and guidelines Terna uses in determining and monitoring its Remuneration Policy (hereinafter, also referred to as the "Policy") and its implementation, with particular reference to directors, general managers, and senior executives with strategic responsibilities.

Terna S.p.A. (hereinafter, for brevity, "Terna" or the "Company") with the preparation of the "Annual Report on Remuneration" (hereinafter, for brevity, also referred to as "Report") aims to increase the involvement of shareholders in defining remuneration policies and to enhance the transparency of the contents of these policies and their actual implementation. The Company has voluntarily decided to expand the range of information it provides in order to enhance transparency to investors and the market. On March 26, 2015, Terna's Board of Directors, at the proposal of the Remuneration Committee, approved Section I of the 20151 Report that will be submitted for an advisory vote to the Shareholders' Meeting called for the approval of the 2014 Annual Report. For reference purposes only, Section II which provides detailed information on the remuneration paid in 2014 will also be submitted to the same Shareholders' Meeting.

Legislative references

The current Report has been prepared pursuant to law2 and is compliant with CONSOB regulations3 . Furthermore, the Policy takes into account the principles and application criteria identified in Article 6 of the Corporate Governance Code issued by the Italian Stock Exchange (which the Company complies with) as well as legislation on the rationalisation and containment of public expenditure, and also the guidelines and provisions which concern the Company in relation to the remuneration of Directors4 .

The aforementioned legislative provisions established that, at the time of the first renewal of the Boards of Directors after those provisions become effective, a proposal regarding remuneration must be "submitted for the approval of the Shareholders' Meeting", establishing that the remuneration5 of these directors "cannot be determined and paid in excess of 75 percent of the total compensation, however defined, including the remuneration for possible employment relationships with the same company, during the mandate preceding the renewal".

¹ Pursuant to Art. 123-ter of the Consolidated Law on Finance, implemented by Italian Legislative Decree no. 259/2010.

² Art. 123-ter of Italian Legislative Decree no. 58 of February 24, 1998 (the Consolidated Law on Finance) which states that "at least twenty-one days before the date of the [...] Shareholders' Meeting, listed companies must provide the public with a remuneration report, available at the registered offices, on their websites and via other methods established by CONSOB Regulations". The same Article 123-ter (6) of the Consolidated Law on Finance, states that "the [...] Shareholders' Meeting shall pass a resolution in favour or against the section of the remuneration report provided for in paragraph 3" (i.e. Section I of this document). This resolution "is not binding" but "the outcome of the vote is made available to the public".

³ Resolution no. 18049 of December 23, 2011 which amended Article 84-quater of the Issuer Regulations issued by CONSOB in implementation of the aforementioned Consolidated Law on Finance.

⁴ These are the provisions applicable to listed companies controlled directly or indirectly by State Agencies referred to in Article 1 (2) of Italian Legislative Decree No. 165 of March 30, 2001 – included in paragraph 5-quinquies, of Article 23-bis of Italian Law Decree No. 201 of December 6, 2011 ("Urgent provisions for the growth, equity and consolidation of public accounts", the "Save Italy Decree", converted with modifications into Law by Art. 1, paragraph 1 of Law No. 214 of December 22, 2012), introduced by Art. 84 ter, paragraph 1 of Law Decree No. 69 of June 21, 2013 ( "Action Decree", converted with modifications by Law No. 98 of August 9, 2013) and which became effective on August 21, 2013.

⁵ As established by Article 2389, third paragraph of the Italian Civil Code.

05/27/2014	The Shareholders' Meeting appointed the new Board of Directors and approved the adoption of Article 23- bis of Law Decree no. 201/2011 ( "Action Decree"), relating to the remuneration of Directors with delegated powers
05/27/2014	The Board of Directors appointed the new CEO, the only Director with delegated powers
06/25/2014	The Board of Directors, at the proposal of the Remuneration Committee, approved a resolution on the remuneration for the new CEO, also with reference to his employment as General Manager

The following is a summary of the process for defining and approving the remuneration:

The overall remuneration for the new CEO (including that for his employment as General Manager), in line with the aforesaid legislative provisions, is established at an amount equal to 61.5 percent of the same overall remuneration of the previous CEO (also including the employment relationship as General Manager).

1 – Information on the procedures for adopting and implementing the Remuneration Policy

1.1 Policy and parties involved

The Policy has been defined in coherence with the legislative and statutory requirements and following a formalised process (par.1.6) in which the main players are the Remuneration Committee, the Company's Board of Directors and the Human Resources and Organization Department ("RUO"). In particular, the following table highlights the responsibilities and any support provided for the various individuals involved in the Policy.

Individual requiring remuneration	Decision-making body	Proposal-making body	Any independent expert consultants
Chairman	• Shareholders' Meeting • Board of Directors	• Shareholders • Remuneration Committee • Division Corporate Affairs/Human Resource and Organisation Department
Chief Executive Officer	• Board of Directors1	• Remuneration Committee • Division Corporate Affairs/Human Resource and Organisation Department	Towers Watson
Directors	• Shareholders' Meeting2	• Shareholders
General Manager	• Board of Directors	• Remuneration Committee • Division Corporate Affairs/Human Resource and Organisation Department	Towers Watson
Senior executives with strategic responsibilities	• Chief Executive Officer	• Remuneration Committee • Division Corporate Affairs/Human Resource and Organisation Department	Towers Watson

¹ In addition to the decision taken by the Shareholders' Meeting.

² For the remuneration of Non Executive Directors composing the committees, see 2.2.1

1.2 Remuneration Committee

Composition of the Committee

In compliance with the provisions of the Corporate Governance Code, since 2004, Terna's Board of Directors established an internal Remuneration Committee (the "Committee"), composed of non-executive Directors, the majority of which are independent, as per the requirements indicated in the Corporate Governance Code. Currently in Terna, the Committee is made up entirely of independent Directors, two of which were elected from minorities and a third, given the role of Chairman of the Committee, who was elected from the majority list. Moreover, at least one member of the Committee possesses adequate knowledge and experience in financial matters, which was assessed by the Board at the time of the appointment.

As of the date of this Report, the members of the Remuneration Committee, appointed by the Board of Directors on May 27, 2014, are:

• Carlo Cerami (Chairman, independent)
• Fabio Corsico (independent)
• Gabriella Porcelli (independent)

Purposes of the Committee

It is the Committee's duty to ensure that the Directors' remuneration policies are developed with no conflicts of interest and in compliance with the provisions of the Corporate Governance Code. To this purpose, the Committee has advisory and proactive functions; he power to determine the remuneration of Directors with special duties remains, in any case, with the Board of Directors, after consultation with the Board of Statutory Auditors (in compliance with Article 2389, paragraph 3 of the Civil Code) which verifies the consistency of the proposals with the Remuneration Policy adopted by the Company.

Functions of the Committee

By invitation of the Chairman, the members of the Internal Audit and Risk Committee and/or other members of the Board of Directors, or the Chairman of the Board of Statutory Auditors (who may designate another Auditor to participate in his place), or other Auditors, or other corporate bodies' members may participate; as may others whose presence may be helpful for the smooth running of the Committee's functions. With the establishment of this Committee, broad transparency and information on remuneration and the respective methods for determining it are guaranteed.

No Director takes part in Committee meetings in which proposals intended for the Board are formulated on matters concerning its own remuneration, unless the proposals regard general Committee members as established within the Board.

In particular, the Committee:

• periodically assesses the adequacy, the overall consistency and the concrete application of the general policy adopted for the remuneration of the Directors and of senior executives with strategic responsibilities;
• submits proposals and delivers opinions to the Board of Directors concerning the remuneration of the executive Directors and of the other Directors with special duties, as well as concerning the setting of performance objectives linked to the variable component of said remuneration by monitoring the application of decisions adopted by the Board, and verifying, in particular, the actual achievement of the performance objectives;
• develops, submits to the Board of Directors and monitors the application of incentive systems (including any shareholders' plans) directed to the senior executives. These systems are intended as tools for attracting, retaining, and motivating human resources possessing adequate experience, developing the corporate identity and ensuring the constant focus on value creation over time;
• uses independent external consultants, of primary importance at an international level.

The information on the activities carried out annually by the Committee are included in the Report on Corporate Governance and Ownership Structure, published by the Company together with the Annual Financial Report pursuant to Article 154-ter of the Consolidated Law on Finance and available on the Company's website (www.terna.it, Investor Relations Section, Corporate Governance).

One should note that the activities of the Committee were developed within a complex and ongoing process, aimed at defining the new Policy and the related compensation tools as well as the preparation of the Report.

Cycle of activities of the Remuneration Committee

1.3 Board of Directors

The Board of Directors of Terna S.p.A. currently in office consists of nine Directors: Catia Bastioli (Chairwoman), Matteo Del Fante (CEO and General Manager), Cesare Calari, Carlo Cerami, Fabio Corsico, Luca Dal Fabbro, Yunpeng He, Gabriella Porcelli, Stefano Saglia.

For a detailed description of the functions of the Board of Directors, one should refer to the contents in the Report on Corporate Governance and Ownership Structure.

The roles of the Board under the By-laws - solely with regard to the topics of interest of this report - are:

• determining the remuneration of Directors vested with special duties, after consultation with the Board of Statutory Auditors. This remuneration is defined in line with the decisions of the Shareholders' Meeting that can determine an overall amount for the remuneration of all Directors, including those vested with special duties;

• defining the objectives and the approval of the Company's performance plan results to which the calculation of the Directors' variable remuneration is linked;

• approving the general criteria for the remuneration of senior executives with strategic responsibilities;

• assessing the vote on the subject of the Remuneration Report;
• delegating its powers to an Executive Committee composed of some of its members or to one or more of its members, including the Chairman, determining the content, limits and procedures for fulfilling the delegated powers in accordance with Article 2381 of the Italian Civil Code and fixing their remuneration.

1.4 Shareholders' Meeting

The roles of the Shareholders' Meeting under the By-laws - solely with regard to the topics of interest of this report - are:

• appointing and dismissing the Directors, appointing the Statutory Auditors and the Chairman of the Board of Statutory Auditors;
• determining the remuneration of the Directors and Statutory Auditors;
• expressing its opinion on the Remuneration Report itself.

1.5 Action of independent experts

Terna decided to make use of support from the consultancy firm Towers Watson Italia based on a contribution regarding the analyses performed on remuneration, as well as the third-party and independent evaluation for the definition of incentive plans and the compensation policy.

1.6 Process for defining and approving the Policy

• 1) The Policy is submitted for approval by the Committee to the Board of Directors. The Committee may access company information and functions necessary for carrying out its duties, involve the Human Resources and Organisation Department, and may also use independent experts in the field within the limits approved by the Board of Directors and set out in the Corporate Governance Code.
• 2) The Board of Directors develops and adopts the Policy in its forms and internal regulatory sources. In detail, the Board adopts the content concerning the Remuneration Policy of directors and the long-term incentive plans. Moreover, with regard to determining the remuneration of Directors with special duties, the Board takes into consideration the opinion of the Board of Statutory Auditors.
• 3) The Board of Directors, having examined and approved the Policy, submits it to the Shareholders' Meeting for an advisory vote6 .

⁶ It is worth remembering that the Procedure for Related-Party Transactions, adopted by the Board of Directors on November 12, 2010, does not include the application of the new procedure to shareholders' resolutions pursuant to Article 2389, paragraph 1 of the Civil Code, regarding the compensation due to members of the Board of Directors and of the Executive Committee, to resolutions on the remuneration for Directors with special duties falling within the total amount previously determined by the Shareholders' Meeting pursuant to Article 2389, paragraph 3 of the Civil Code and to resolutions pursuant to Article 2402 of the Civil Code regarding compensation due to members of the Board of Statutory Auditors. Furthermore, the following resolutions are excluded from the same Procedure for Related-Party Transactions:

¹⁾ those concerning compensation plans based on financial instruments approved by the Terna Shareholders' Meeting pursuant to Article 114-bis of the Consolidated Law on Finance, and related executive operations;

²⁾ those concerning the remuneration for Directors with special duties and for senior executives with strategic responsibilities in the case a Remuneration Policy is adopted based on CONSOB regulations governing such matters.

2 – Information on the Company's Remuneration Policy

2.1 Policy Content and Purposes

The Policy aims at:

• attracting, retaining and motivating persons endowed with strong professional skills required to successfully manage the Company;
• facilitating the alignment of the interests of its staff in the pursuit of the primary objective of value creation for the shareholders and achievement of pre-established economic results, through the use of variable short and medium/ long-term components.

The Policy described in this Report focuses exclusively on the remuneration of members of the boards of directors and the General Manager, in his capacity as a senior executive with strategic responsibilities, and on the remuneration of other senior executives with strategic responsibilities.

Policy guidelines

In developing the Policy, the Board took into consideration the following principles and criteria:

• a) fixed and variable components are adequately balanced according to Terna's strategic objectives and risk management policy, also taking into account the business sector in which it operates and the nature of business it actually performs;
• b) maximum limits for the variable components shall be established;
• c) the fixed component shall be adequate to remunerate the service of the Director if the variable component is not paid in case of not achievement of the performance objectives specified by the Board of Directors;
• d) the performance objectives i.e. the economic results and any other specific objectives linked to the payment of variable components (including the objectives defined for the share-based compensation plans) – are predetermined, measurable and linked to the value creation for the shareholders in the medium to long term;
• e) the payment of a significant portion of the variable component of the remuneration shall be deferred for an appropriate period of time with respect to the moment of its maturity (Applicative Criteria 6 C.1 letter e) of the Corporate Governance Code); the amount of that portion and the period of deferral shall be consistent with the characteristics of the business carried out and the associated risk profiles;
• f) contractual agreements are provided for that allow the company to request the return, in whole or in part, of the variable components of remuneration paid (the "clawback"), or to withhold sums that have been deferred, that were calculated on the basis of data that later turned out to be manifestly wrong;
• g) any eventual indemnity, provided for the termination of the office of Director or for the non-renewal of it, is defined in such a way that its total amount does not exceed a certain amount or a certain number of years of remuneration. Such indemnity is not paid if the termination of the office is attributable to the achievement of clearly inadequate results.

In developing the Policy, the Board also took into consideration that the CEO is the recipient of a Policy in which a significant part of the remuneration is linked to the achievement of specific performance objectives, also of a non-economic nature, e.g. indicators of Corporate Social Responsibility.

Implementation of Policy guidelines

In implementation of the aforementioned principles, it is highlighted that:

• the compensation for the Directors without special duties is commensurate with participation in the Board Committees, with differentiation of the compensation of the Chairman compared to the members of each Committee;
• the remuneration of the Chairman consists of fixed compensation congruent with the role held;
• the remuneration of the Chief Executive Officer and, if the position exists, of the General Manager, is adequately balanced between:
• a fixed component, congruent with the delegated powers and/or responsibilities attributed and sufficient to remunerate the services should the variable component not be disbursed because of failure to achieve the performance objectives specified by the Board of Directors;
• a variable component tied to achieving pre-established, measurable and defined objectives in order to provide the remuneration of the performance both in the short and medium-long term in line with the economic-financial targets of the Company's Strategic Plan;
• possible indemnities for the termination of office as Director, as well as an indemnity for termination of employment for the General Manager position, if applicable.

Lastly, the Policy takes into account the nature and risk level compatible with Terna's aforementioned strategic objectives, as defined by the Board of Directors in its Meeting on March 26, 2015.

The current Policy is substantially in line with the Policy of last year and is in line with the instructions provided by the Corporate Governance Code7 .

As of the date of this Report, Terna does not have any stock option plan.

2.2 Remuneration of members of the Board of Directors

In this section the main characteristics of the Remuneration Policy are indicated for the following groups of individuals identified by the internal codes:

• Directors without special duties;
• Directors with special duties.

As of the date of this Report:

• the following are Directors without special duties8
• Cesare Calari (Chairman of the Audit and Risk Committee);
• Carlo Cerami (Chairman of the Remuneration Committee);
• Fabio Corsico;
• Luca Dal Fabbro (Chairman of the Appointments Committee);
• Yunpeng He;
• Gabriella Porcelli;
• Stefano Saglia (Chairman of the Related-Party Transactions Committee);
• the following are Directors with special duties:
• Catia Bastioli (Chairwoman of the Board of Directors);
• Matteo Del Fante (Chief Executive Officer and General Manager).

2.2.1 Remuneration of Directors without special duties

Shareholders' Meeting established remuneration

The annual remuneration of the Directors without special duties is composed solely by the fixed component, considered sufficient to attract, retain and motivate directors endowed with the professional qualities required to successfully manage the Company. This component is commensurate with the commitment required of each of them.

For the 2014-2016 term, this remuneration was fixed at € 35,000 by the Shareholders' Meeting on May 27, 2014, on the basis of proposals made by the shareholders. No variable component tied to the economic results achieved by the Company and the Group is contemplated. The Directors without special duties do not participate in the incentive plan and there is no distinction in terms of remuneration between independent and non-independent Directors.

Moreover, these Directors are entitled to the reimbursement of the expenses incurred to carry out the assignment, in addition to an insurance policy which covers third party liability; finally, they are entitled to an insurance policy provided for occupational accidents relative to the position.

Compensation for participating in Board Committees

The additional compensation for the members of the Committees established within the Board of Directors are, however, deliberated, by the Board of Directors, after consultation with the Board of Statutory Auditors.

For the 2014-2016 term, the annual compensation of the Directors for participating in the Board Committees was determined by the Board of Directors, after consultation with the Board of Statutory Auditors, which was elected by the Shareholders' Meeting on May 27, 2014 and is composed as follows:

For the current mandate, and therefore until expiry, the compensation of the Directors for participating in Board Committees is as follows:

• Chairman of the Audit, Risk and Corporate Governance Committee: € 60,000 per year;
• Chairmen of the Remuneration Committee, Appointments Committee and the Related Party Transaction Committee: € 50,000 per year;
• members of the Committees: € 40,000 per year.

⁷ For further details, please refer to the Analytical index pursuant to applicative criteria 6.C.1 of the Corporate Governance Code".

⁸ The evaluation regarding the existence of the independence requirements of each of the non-executive members is performed by the Board of Directors, taking into account the information provided by the individuals involved, during the appointment and at least annually according to what is represented in the Annual Report on Corporate Governance and Ownership Structure approved by the Board of Directors and published on the Company's website.

2.2.2 Remuneration of Directors with special duties

Chairman of the Board of Directors

For the 2014-2016 mandate, the overall remuneration for the position of Chairman of the Board of Directors is composed exclusively by the fixed component, broken down as follows:

• a fixed annual remuneration approved by the Shareholders' Meeting on May 27, 2014 equal to € 50,0009 ;

• a fixed annual remuneration approved by the Board of Directors on June 25, 2014, at the proposal of the Remuneration Committee after consultation with the Board of Statutory Auditors, equal to € 188,000.

CEO and General Manager

Fixed elements of remuneration

Chief Executive Officer

For the 2014-2016 mandate, the overall fixed remuneration for the position of Chief Executive Officer consists of:

• annual remuneration, established by the Shareholders' Meeting on May 27, 2014, equal to € 35,000;
• annual remuneration, approved by the Board of Directors on June 25, 2014, at the proposal of the Remuneration Committee after consultation with the Board of Statutory Auditors, equal to € 200,000.

General Manager

The total fixed remuneration provided for the General Manager includes:

• the RAL (Fixed Gross Annual Salary);
• benefits recognized by the National Collective Bargaining Agreement (CCNL)10 and company practices.

For the current term, the RAL approved by the Board of Directors at its meeting on June 25, 2014 amounted to € 850,000.

Short-term variable component (MBO)

The MBO Plan allows for a yearly evaluation of Terna's and the Beneficiary's performance, and directs management action towards strategic objectives which are in line with business priorities.

The Board of Directors, at the proposal of the Committee, determines the MBO objectives for Directors with special duties; these objectives are linked to the annual performance of the Group.

Chief Executive Officer

The variable short-term remuneration provided for the Chief Executive Officer, for the powers conferred to him, is determined by the Board of Directors, at the proposal of the Remuneration Committee and following consultation with the Board of Statutory Auditors.

Access to the incentive is subject to the achievement of:

• a gate condition expressed by an overall score of the Group Balanced Score Card (hereinafter, also referred to as "BSC") greater than 100, without which nothing will be paid;
• pre-defined corporate objectives of particular significance for the Company, proposed ex-ante by the Committee, approved by the Board of Directors and measured ex-post by the same Committee according to an on/off dichotomous scale.

MBO OBJECTIVES 2014 VS 2015

* Work in progress

9 Pursuant to Article 24.1 of the By-laws

¹⁰ Supplemental social security and medical insurance (pursuant to the National Collective Employment Contract for senior executives of companies producing goods and services of 12.30.2014).

The annual incentive payment, approved by the Board of Directors, amounts to € 200,000 and is of the on/off kind (the associated "bonus curve" consists, therefore, of only two values: the amount indicated above, in the event of achieving the objectives, and the non payment of the incentive, in the event of failure to achieve the objectives).

General Manager

The payment of the MBO in favour of the General Manager is subject to:

• the achievement of a gate condition, expressed by the annual target of the Group EBITDA, without which, nothing will be paid. In order to match the MBO plan with the interests of the minority shareholders, the EBITDA gate is established annually in coherence with the Strategic Plan communicated by the Company to the financial community;
• the verified achievement of 7 KPI (Key Performance Indicators or specific annual targets) that make up the Group BSC.

BSC OF THE TERNA GROUP 2014 VS 2015

The evaluation of the BSC (whose overall score is determined by the weighted average of the scores recorded by the individual KPIs) is made by the Board of Directors, with the assistance of the Remuneration Committee, according to the following bonus curve:

BSC Score	Incentive Payment
< 110	No payment
≥ 110 and < 120	100% of the incentive (equal to 35% of RAL)
≥ 120 and < 130	130% of the incentive (equal to 46% of RAL)
≥ 130	150% of the incentive (equal to 53% of RAL)

The maximum amount of the annual incentive ("bonus cap"), corresponding to 150% of the target, is equal to € 450,000.

Variable component of the medium-long term (LTI, Long Term Incentive)

General Manager

In order to contribute to the achievement of the medium/long-term interests, the Company also adopts a medium/longterm incentive system linked to the achievement of the objectives set out in the Strategic Plan, whose beneficiaries, as of the date of the Report, are 49 senior executives and the General Manager, who also holds the office of CEO.

In particular, a monetary plan is expected (already in place as of the date of the approval of this Policy), aimed at:

• ensuring the alignment between value creation for shareholders and management, by introducing an economic incentive into the compensation structure of the Beneficiaries linked to the achievement, in the 2014-2015 two-year period, of a level of company performance, which is above the expected performance for that period, within the 2014- 2018 Strategic Plan;
• creating loyalty among the Beneficiaries during the Plan period by conditioning the economic incentive set out in the Plan conditional to the continuation of the work relationship with the Group for at least two years.

The two-year duration of the Plan is linked to the revision of the regulated tariff by the Italian Regulatory Authority for Electricity, Gas and Water expected to start in 2016, which will inevitably be influenced by the significant changes in the context scenarios that would make the objectives of the Plan difficult to measure.

For the General Manager, the variable component in the medium/long term ("LTI"), on the achievement of the specified maximum target in each year of the period considered, is € 550,000 and has a weight equal to 46% of the overall variable component (in the event of MBOs11 and LTIs with maximum targets).

At the date of this Report, the Company has a monetary medium/long-term incentive plan.

Conditions for access to the incentive

With reference to the existing LTI plan, access to the incentive is subject to:

• the achievement of the gate condition represented by the cumulated Group EBITDA for the years 2014-2015, without which nothing will be paid. In order to align the LTI Plan with the interests of the minority shareholders, the cumulated EBITDA target is established in line with the 2014-2018 Strategic Plan communicated by the Company to the financial community;
• the verification of the achievement of the specific KPIs, coherent with the Group Strategy. These KPIs are represented by the Group cumulated Gross Profit achieved in the two-year period 2014-2015 and by the Incentivised Investments performed in the same period.

KPIs of the LTI Plan

2014 - 2015

Cumulative gross profit	50%
Incentivized Investments	50%

• the financial sustainability of the LTI Plan. This means that if the overall percentage of achievement of KPIs is higher than the target level (100%), the part of the incentive corresponding to the "extra performance" will be financed through the EBITDA share cumulated in the years 2014-2015 in excess of the corresponding budgeted value in the 2014-2018 Business Plan; if this quota should not in the end be enough to fund the entire cost of the incentive part associated with the "extra-performance", that part of the incentive will be proportionately reduced. Therefore, any extra performance can lead to the recognition of a bonus only if the EBITDA level can finance that bonus;
• the maintaining of the work relationship with the Group until the bonus has been paid. This deferred payment mechanism with a retention function, therefore, allows the strengthening of the coherent link between the interests of the Beneficiaries and the long term interests of the Company.

¹¹ Total MBO, as GM and CEO.

Determination and payment of the bonus provided by the LTI Plan

The variable remuneration of the General Director linked to the LTI Plan is determined with reference to:

• a target incentive level, equal to € 375,000 (corresponding to 44% of RAL);

• a maximum incentive level, equal to € 550,000 (corresponding to 65% of RAL).

Such levels are linked respectively to the target level and maximum level of the overall performance, measured as weighted average of the scores of the two objectives of the LTI Plan.

The right of the Beneficiaries to receive the bonus on the date of payment is linked to maintaining a work relationship within the Group. In the event that the work relationship has been terminated, the only cases in which a right to the payment of the bonus, when due, still exists, are the following: retirement, permanent disability, or death.

The CEO, with the technical and operational support of the HR Director, shall determine at his indisputable judgement and absolute discretion, the system applicable to the Beneficiaries. The Chairman, with the technical and operational support of the HR Director, shall determine at his indisputable judgement and absolute discretion, the applicable system in favour of the CEO.

Comparison with the market ("peer group")

The Committee made use of the consultancy firm Towers Watson, which carried out a comparative assessment on the bonus schemes within a panel of companies comparable with Terna according to: Italian Stock Market segment (only for listed companies), enterprise size (turnover, number of employees, market capitalization), ownership structure and the complexity of the business model.

Eni Snam Enel Prysmian Enel Green Power Saipem ERG Telecom Italia Brembo Falck Renewables CNH Industrial Fincantieri Coesia Group Maire Tecnimont

The study showed that, for the Terna Group, the total remuneration of the CEO and General Manager (fixed component + MBO + LTI) is aligned with the first quartile of the sample identified.

Peer Group

Pay mix

For the office of Chief Executive Officer and General Manager the pay-mix was calculated by assessing the incentives for the short and medium-long terms that would accrue in the event of the maximum target being reached:

• Fixed compensation 47.5%;
• Short-term bonus (MBO) 28.5%;
• Medium/long-term bonus (LTI) 24%.

From this representation, one can see the compliance with the "pay for performance" principle that is an intentional characteristic of the Terna Policy in line with best practices in the market.

Clawback clause

The application of clawback clauses, providing for the repayment of sums already paid, is envisaged on the variable portion of the remuneration paid in the event that it is proved that the achievement of the objectives was attributable to fraudulent conduct or gross negligence by personnel, i.e. performed in violation of the applicable rules (at company level, legal and regulatory) and without which the relevant results would not have been achieved. The application of these mechanisms is nevertheless without prejudice to any other action permitted by law to protect the interests of the company.

Benefits

Similarly to what happens with the senior executives in the Group and in line with the Policy implemented in 2014 and in compliance with the national bargaining provisions, the package of benefits for the General Manager is defined in accordance with the provisions in the reference national collective employment contract as well as with the provisions in company policies applicable to all senior executives (e.g. allocation of cars for company/private use, supplementary health insurance, etc.).

Severance indemnity in case of resignation, dismissal or termination of employment

The CEO, consistent with reference market practices, and in order to protect the interests of the Company by preventing possible disputes, is entitled to an indemnity in the event of an early end of office or termination of employment.

With reference to the position as General Manager, in the event of early termination of the employment, also in connection with the non-renewal of the mandate on expiry, is foreseen the payment of a total amount equivalent to two years of annual fixed remuneration, integrated with the paid annual monetary bonuses, in line with the provisions of the European Commission's Recommendation No. 385 of April 30, 2009 and without prejudice to the application of the National Collective Employment Contract for senior executives of companies producing goods and services, as stated in Article 4 of the aforementioned Recommendation.

In relation to the sums due, one should note that the significant containment of the remuneration package of the Chief Executive Officer, acting as General Manager, involves a reduction in the value of the indemnity of about 50% compared to the provisions for the previous CEO.

The indemnity, however, is not payable if the termination of the employment relationship occurs for just cause. It should also be noted that, prudentially, since the appropriate requirements were satisfied, these sums were set aside in the 2014 Annual Report.

The Company does not pay other Directors with special duties, who have been given specific assignments and without an executive position, an indemnity or any extraordinary compensation linked to termination of the term, with the exception of the Chairman, who is entitled to the allowance "trattamento di fine mandato".

Non-competition agreements

Currently Terna does not have non-competition agreements in place that provide Directors and senior executives with strategic responsibilities a compensation of a fixed amount or an amount referable to the Gross Annual Salary in relation to the duration and scope of the obligation deriving from the agreement itself. However, Terna reserves the right to assess, at the appropriate time, the need to provide for specific provisions in this regard.

2.3 Remuneration of senior executives with strategic responsibilities

During 2015, following a significant process of reorganisation of business support processes, as a result of the definition of the 2015-2019 Business Plan, Terna envisages to identify other senior executives with strategic responsibilities, in addition to the General Manager. In this section, the main features of the remuneration policy for this category of personnel are highlighted in terms of the items in the remuneration package comprising of:

• RAL;
• short-term variable component (MBO);
• medium/long-term variable component (LTI);
• benefits recognised pursuant to the National Collective Employment Contract.

RAL (Fixed Gross Annual Salary)

The fixed remuneration for senior executives with strategic responsibilities shall be determined by the CEO (see paragraph 1.1) based on the assigned role and responsibilities, considering the average salary levels found in the market of large national companies for positions with similar levels of responsibility and management complexity.

Short-term variable component (MBO)

Senior executives with strategic responsibilities, consistent with the provisions for the General Manager, also take part in the Company's short-term Incentive Plan.

The amount of the incentive at target, varies between 30% and 40% of the RAL, based on the assigned role and responsibilities.

The set-up logic (access conditions and predetermined performance targets) of the annual incentive system for Senior Executives with strategic responsibilities is identical to that specified for the General Manager (see Section 2.2.2) and therefore the payment of the incentive is subject to:

• the achievement of a gate condition, expressed by the annual target of the Group EBITDA, without which, nothing will be paid. In order to match the MBO plan with the interests of the minority shareholders, the EBITDA gate is established annually in coherence with the Strategic Plan communicated by the Company to the financial community;
• the verified achievement of 7 KPI that make up the Group BSC.

The evaluation of the BSC (whose overall score is determined by the weighted average of the scores recorded by the individual KPIs) is made by the Board of Directors, with the assistance of the Remuneration Committee, according to the following bonus curve:

BSC Score12	Incentive Payment
< 100	No payment
≥ 100 and < 110	80% of the incentive
≥ 110 and < 120	100% of the incentive (target level)
≥ 120 and <130	130% of the incentive
≥ 130	150% of the incentive (bonus cap)

Variable component of the medium-long term (LTI, Long Term Incentive)

Senior executives with strategic responsibilities, consistent with the provisions for the General Manager, also take part in the Company's medium/long-term Incentive Plan (LTI).

The set-up logic of the LTI Plan (access conditions and predetermined performance targets) defined for senior executives with strategic responsibilities is identical to that specified for the General Manager (see. Section 2.2.2).

For the payment of the incentive, the following bonus curve is applied.

• The variable compensation linked to the LTI Plan is determined with reference:
• to a target incentive level (performance equal to 100%), which varies from 30 to 60% of the RAL depending on the assigned role and responsibilities,
• to a maximum level of incentives (performance equal to 150%), corresponding to 150% of the target incentive.

The right of the Beneficiaries to receive the bonus on the date of payment is linked to maintaining a work relationship within the Group. In the event that the work relationship has been terminated, the only cases in which a right to the payment of the bonus, when due, still exists, are the following: retirement, permanent disability, or death.

Benefits

Similarly to what happens with all the senior executives in the Group, the package of benefits for the senior executives with strategic responsibilities is defined in accordance with the provisions in the reference national collective employment contract as well as with the provisions in company policies (e.g. allocation of cars for company/private use, supplementary health insurance, etc.).

¹² For each Senior Executive with strategic responsibilities, the reference BSC is the BSC of the company to which he/she belongs within the Group

SUBJECT ANALYTICAL INDEX (CONSOB RESOLUTION NO. 18049, SECTION I)

In order to facilitate the reading of this report, a subject analytical index is presented below, indicating references to the paragraphs that contain information on individual items of content of CONSOB Resolution no. 18049, Section I.

CONSOB Resolution	Required information	References
A	Bodies or persons involved in the preparation and approval of the remuneration policy, specifying their respective roles, as well as the bodies or individuals responsible for the proper implementation of this policy;	Para. "Legislative references" (page 15); Para. 1.1, 1.2, 1.3, 1.4, 1.5, 1.6
B	Possible action by a remuneration committee or other competent committee, describing its composition (with distinction between non-executive and independent directors), its competences and operating methods;	1.2
C	The names of any independent experts that contributed to the formulation of the remuneration policy;	1.1/1.5
D	The objectives pursued through the remuneration policy, its underlying principles, and any changes to the remuneration policy with respect to the previous financial year;	2.1
E	Description of the policies regarding fixed and variable components of remuneration, particularly with regard to the relative weightings within the overall remuneration, with distinction between short and medium-to-long term variable components;	2.2.1, 2.2.2
F	The policy adopted with respect to non-monetary benefits;	2.2.2
G	A description of performance objectives in relation to the variable components, according to which they are assigned, distinguishing between short and medium-to-long term variable components, and information on the connection between changes in results and changes in remuneration;	2.2.2
H	The criteria used to evaluate performance objectives forming the basis of the allocation of shares, options, other financial instruments or other variable components of remuneration;	2.2.2
I	Information intended to demonstrate that the remuneration policy is consistent with pursuing the company's long-term interests and with the risk management policy, where formalised;	2.2.2
J	The vesting period, any deferred payment systems, with indications of the periods of deferment and the criteria used to determine these periods and ex-post correction mechanisms, if applicable;	2.2.2
K	Information on the provision of clauses for the maintenance of financial instruments in the portfolio after acquisition, with an indication of the maintenance period and the criteria used to determine these periods;	The Company does not adopt incentive plans based on financial instruments
L	Policy on the treatment envisaged in the event of termination of office or termination of the employment relationship, specifying the circumstances determining the right and any link between these procedures and the company's performance;	2.2.2
N	Information on any insurance, social security or pension plans, other than the obligatory schemes;	2.2.2
N (i)	The remuneration policy possibly implemented with reference to the independent directors;	The Company does not provide for specific remuneration policies for independent Directors
N (ii)	The remuneration policy possibly implemented with reference to participation in committees;	2.2.1
N (iii)	The remuneration policy possibly implemented with reference to the performance of particular tasks (chairman, vice chairman, etc.);	2.2.2
O	Information regarding the use of remuneration policies of other companies as a reference and, if so, the criteria used for the selection of these companies.	In defining the Policy, the company did not take the remuneration policies of other companies as a reference point. However, a benchmark on remuneration for a peer group has been developed (see Para. 2.2.2 - "Comparison with the market").

ANALYTICAL INDEX PURSUANT TO APPLICATIVE CRITERIA 6.C.1 OF THE CORPORATE GOVERNANCE CODE (JULY 2014 EDITION)

In order to make the reading of this Report easier, the following is an analytical index that lists the references to the sections containing information with respect to the individual points in the Applicative Criteria 6.C.1

	Applicative Criterion 6.C.1		References
a)	fixed and variable components are adequately balanced depending on the Issuer's strategic objectives and risk management policy, also taking into account the business sector in which it operates and the nature of business it actually performs;	- - -	Para. 2.1 ("Policy guidelines"); Para. 2.2.2 ("CEO and General Manager"); Para. 2.2.2 ("Pay mix")
b)	maximum limits for the variable components shall be established;	-	Para. 2.2.2 ("CEO and General Manager", both MBO and LTI)
c)	the fixed component shall be adequate to remunerate the services of the Director, should the variable component not be paid because of failure to achieve the performance objectives specified by the Board of Directors;	- - -	Para. 2.1 ("Policy guidelines") ; Para. 2.2.2 ("Chairman of the Board of Director" and "CEO and General Manager" for "Fixed elements of remuneration"); Para. 2.2.2 ("Pay mix")
d)	the performance objectives - i.e. the economic results and any other specific objectives linked to the payment of variable components (including the objectives defined for the share-based compensation plans) - are predetermined, measurable and linked to the creation of value for the shareholders in the medium to long term;	- -	Para. 2.1 ("Policy guidelines") Para. 2.2.2 ("CEO and General Manager", with reference to short-term and medium-long term incentives)
e)	the payment of a significant portion of the variable component of remuneration shall be deferred for an appropriate period of time with respect to the moment of its accrual; the amount of that portion and the period of deferral shall be consistent with the characteristics of the business carried out and the associated risk profiles;	-	Having viewed as a whole the main risks that the Company faces, especially those of an operative nature, it was felt that Terna's risk profile did not require the application of deferment procedures for portions of the variable component.
f)	contractual arrangements are provided for that allow the company to request the return, in whole or in part, of the variable components of remuneration paid (or to withhold sums that have been deferred), that were calculated on the basis of data that later turned out to be manifestly erroneous;	-	Para. 2.2.2 ("Clawback clause")
g)	any indemnity, provided for on the termination of the directorship, is defined in such a way that its total amount does not exceed a certain amount or a certain number of years of remuneration. This indemnity is not paid if the termination of the relationship is due to the achievement of objectively inadequate results.	-	Para. 2.2.2 ("Severance indemnity in case of resignation, dismissal or termination of employment")

Section II

Section II – Implementation of the 2014 Remuneration Policies

Introduction

This section is broken down into two parts and illustrates by names, through tables attached in the second part, the compensations of members of administration and audit bodies, as well as of the General Manager, in line with the 2014 Policy and the information concerning shareholdings in the Company held by them.

The implementation of the Policy, as verified by the Remuneration Committee during its periodic assessment as envisaged by the Corporate Governance Code, remained in line with the general principles indicated in the resolutions adopted by the Board of Directors. With reference to the representation of each of the items comprising the remuneration, including the conditions in the event of the discontinuance of office or termination of the employment relationship, one should refer to the analytical details in Section I. The indicated items of compensation are consistent:

• for outgoing Directors, with the Policy approved during the year 2013 by the Board of Directors and submitted to the non-binding advisory vote of the Shareholders' Meeting held on May 14, 2013 pursuant to art. 123-ter, paragraph 6 of the Consolidated Law on Finance, which was favourable;
• for Directors holding office, with the Policy approved during 2014 by the Board of Directors and submitted to the nonbinding advisory vote of the Shareholders' Meeting held on May 27, 2014 pursuant to art. 123-ter, paragraph 6 of the Consolidated Law on Finance, which was favourable.

Part One

Fixed compensation

For 2014:

• the outgoing non-executive Directors were paid, pro rata, their fixed remuneration approved by the Shareholders' Meeting on May 13, 2011 (€ 35,000 per year for each member of the Board) while the non-executive Directors in office were paid, pro rata, their fixed remuneration approved by the Shareholders' Meeting on May 27, 2014 (€ 35,000 per year for each member of the Board);
• the outgoing Chairman was paid, pro rata temporis, the fixed remuneration deliberated by the Shareholders' Meeting on May 13, 2011 (€ 50,000 per year), the fixed remuneration deliberated by the Board of Directors on May 18, 2011 (€ 500,000), as well as the amount for the office of Chairman of the Board of Directors of the subsidiary, Terna Rete Italia S.p.A. (€ 250,000 per year). Therefore the overall remuneration package for the outgoing Chairman, in terms of fixed remuneration, amounted to € 348,388;
• the Chairman in office was paid, pro rata temporis, the fixed remuneration deliberated by the Shareholders' Meeting on May 27, 2014 (€ 50,000 per year) and the fixed remuneration deliberated by the Board of Directors on 25, June 2014 (€ 188,000 per year). Therefore the overall remuneration package for the Chairman, in terms of fixed remuneration, amounted to € 142,094;
• the outgoing CEO and General Manager was paid, pro rata temporis:
• the fixed remuneration as Director deliberated by the Shareholders' Meeting on May 13, 2011 (€ 35,000 per year);
• the fixed remuneration deliberated by the Board of Directors on May 18, 2011 for the assigned powers and duties (€ 250,000 per year);
• the fixed component of remuneration as General Manager (€ 1,250,000 per year).
• Therefore the overall remuneration package for the outgoing CEO and General Manager, in terms of fixed remuneration, amounted to € 618,750.
• the Chief Executive Officer and General Manager in office was paid, pro rata temporis:
• the fixed remuneration as Director deliberated by the Shareholders' Meeting on May 27, 2014 (€ 35,000 per year);
• the fixed remuneration deliberated by the Board of Directors on June 25, 2014 for the assigned powers and duties (€ 200,000 per year);
• the fixed component of remuneration as General Manager (€ 850,000 per year).

Therefore, the overall remuneration package for the CEO and General Manager in office, in terms of fixed remuneration, amounted to € 648,710.

The amounts relative to the fixed compensation are specified in the relative column of Table 1.

Variable compensation

1.1 Short-term variable incentive

For 2014:

• the outgoing CEO was paid the annual variable compensation (€ 250,000). The payment of this bonus was dependent on reaching the gate condition expressed by a BSC total score for the Company for the year 2013 of over 100 (the score achieved by the BSC was equal to 144) and the achievement of the pre-determined corporate objectives of particular significance to the Company, proposed ex-ante by the Committee, approved by the Board of Directors and measured ex-post, by the same Committee, according to an on/off dichotomous scale. These objectives, also for the year 2013, were:
• Group Net Profit;
• Alignment of the Group Governance with anti-corruption legislation;
• the outgoing General Manager was paid the short-term annual variable compensation (€ 600,000). The payment of this bonus was conditional on achieving a "gate" condition expressed by the fixed EBITDA target for 2013 (reached) and by achieving a Group BSC score at the maximum value (the BSC score achieved was 144, therefore above threshold of 130 for receiving the maximum incentive). For 2013, the annual specific objectives (KPI) of the Group BSC concerned:
• Economic-financial perspective (weight 60%)
  • 1. Value of the Group Incentivized Investments
  • 2. Group Net Income
• 3. Net Debt to RAB ratio
• Process perspective (weight 20%)
  • 4. Compliance of the Plan of the new structure of the Group (with particular reference to the local divisions of Terna Rete Italia S.p.A.)
• Customer perspective (weight 10%)
• 5. Quality of service, measured through Regulated Energy Not Supplied (RENS)
• Innovation perspective (weight 10%)
  • 6. Development of the authorisations relative to the "storage" project
  • 7. Development of new projects (with reference, for example, to the Non-Traditional Activities and the project for helicopter inspections of the lines).

Therefore, the total short-term variable compensation was equal to €850,000.

The amounts relative to the variable compensation are specified in the relative column of Table 1.

1.2 Long-term variable incentive

With reference to the LTI Plan 2011-2013, following verification that the targets, for the two specific objectives (1. Group cumulated gross profit, 2. Incentivized Investment) were achieved, allowing the maximum score of 150% to be reached and since the "gate" condition was also exceeded, represented by the cumulative EBITDA target for the Group for the three years of the Plan, the Board of Directors decided, on the proposal of the Committee, to pay in favour of the outgoing General Manager and the other beneficiaries, an end-of-period balance13, of an amount equal to 50% of the maximum envisaged incentive.

The outgoing General Manager, therefore, was paid an amount of € 1,125,000.

Compensation for membership of Board Committees

For 2014:

• the outgoing Chairmen of the Audit and Risk Committee (currently the Audit, Risk and Corporate Governance Committee) and the Remuneration Committee, as well as the outgoing Coordinator of the Related-Party Transactions Committee, in addition to their fee as Directors (€ 35,000 per year), were accorded remuneration amounting to € 60,000 per year, paid on a pro rata temporis basis;
• the outgoing members of the Audit and Risk Committee (currently the Audit, Risk and Corporate Governance Committee) and the Remuneration Committee, as well as the Related-Party Transactions Committee, in addition to their fee as Directors (€ 35,000 per year), were accorded remuneration of € 50,000 annually, paid on a pro rata temporis basis;

¹³ The fee on account, amounting to € 1,125,000, was paid during 2013.

• the Chairmen in office of the Appointments Committee, the Remuneration Committee and the Coordinator in office of the Related-Party Transactions Committee, in addition to their fee as Directors (€ 35,000 per year), were accorded remuneration of € 50,000 annually, paid on a pro rata temporis basis;
• the Chairman in office of the Audit, Risk and Corporate Governance Committee, in addition to the fee as Director (€ 35,000 per year), was accorded remuneration of € 60,000 annually, paid on a pro rata temporis basis;
• the members in office of all Committees, in addition to their fee as Directors (€ 35,000 per year), were accorded remuneration of € 40,000 annually, paid on a pro rata temporis basis.

The fees for their office as Directors and for their membership of Committees were paid on a pro rata temporis basis and the related amounts are specified in Table 1.

Severance indemnity in case of resignation, dismissal or termination of employment

In 2014, the Chairman of the Board of Directors and the CEO and General Manager, were paid an amount by way of indemnity in the event of resignation, dismissal or termination, as highlighted under the item "Severance indemnities for end of office or termination of employment" in Table 1.

Benefits

In line with the Policy, during 2014, the outgoing Chairman and the CEO, in the capacity as General Manager, were granted benefits as listed in Table 1.

Part Two

Table 1 - Compensation earned by Directors, statutory auditors, General Directors and other executives with strategic responsibilities

Table 3B - Monetary incentive plans for Directors, General Directors and other executives with strategic responsibilities

Scheme 7-ter - Table 1 - Shareholdings of members of management and audit bodies, of General Managers and of senior executives with strategic responsibilities

	COMPENSATION EARNED BY DIRECTORS, STATUTORY AUDITORS, GENERAL DIRECTORS
A	B	C	D	1		2
Name and surname	Office	Period in which office was held	Expiration of office	Fixed compensation		Compensation for the participation in committees
Luigi Roth	Chairman BoD	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
(I) Remuneration in the company that draws up the Financial Statements				20,308.00 € 203,080.00 €	(1) (2)
(II) Remuneration from subsidiaries and associates				125,000.00 €	(3)
(III) TOTAL				348,388.00 €		0.00 €
Catia Bastioli	Chairman BoD	27/05/2014 - 31/12/2014
(I) Remuneration in the company that draws up the Financial Statements				12,918.00 €	(1)
				129,176.00 €	(2)
(III) TOTAL				142,094.00 €
Flavio Cattaneo	CEO	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
				14,583.00 €	(4)	NO
(I) Remuneration in the company that draws up the Financial Statements				104,167.00 €	(5)
				500,000.00 €	(6)
(III) TOTAL				618,750.00 €		0.00 €
Matteo Del Fante	CEO	27/05/2014 - 31/12/2014	Approval 2013 Financial Statements
				20,896.00 €	(4)
(I) Remuneration in the company that draws up the Financial Statements				119,407.00 €	(5)
				508,407.25 €	(6)
(III) TOTAL				648,710.25 €		0.00 €
Francesco Pensato	Director	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
(I) Remuneration in the company that draws up the Financial Statements				14,216.00 €	(4)	20,308.00 €	(14)
(II) Remuneration from subsidiaries and associates				14,216.00 €		20,308.00 €
(III) TOTAL
Paolo Dal Pino	Director	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
				14,216.00 €	(4)	24,370.00 €	(13)
(I) Remuneration in the company that draws up the Financial Statements						20,308.00 €	(12)
						20,308.00 €	(16)
(II) Remuneration from subsidiaries and associates
(III) TOTAL				14,216.00 €	(8)	64,986.00 €
Matteo Del Fante	Director	01/01/2014 - 27/05/2014	Approval 2016 Financial Statements
(I) Remuneration in the company that draws up the Financial Statements				14,216.00 €	(8)	20,308.00 €	(17)
(II) Remuneration from subsidiaries and associates

COMPENSATION EARNED BY DIRECTORS, STATUTORY AUDITORS, GENERAL DIRECTORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES A B C D 1 2 3 4 5 6 7 8 Variable non-equity remuneration Non-monetary benefits Other remuneration Total Fair value of equity-based remuneration Severance indemnities for end of office or termination of employment Bonuses and other incentives Stake in profits 20,308.00 € (1) 3,290.00 € 23,598.00 € 203,080.00 € (2) 203,080.00 € 137,500.00 € (22) (II) Remuneration from subsidiaries and associates 125,000.00 € (3) 125,000.00 € (III) TOTAL 348,388.00 € 0.00 € 0.00 € 0.00 € 3,290.00 € 0.00 € 351,678.00 € 137,500.00 € (22) 12,918.00 € (1) 12,918.00 € 129,176.00 € (2) 129,176.00 € (III) TOTAL 142,094.00 € 142,094.00 € 14,583.00 € (4) NO no 14,583.00 € 104,167.00 € (5) 250,000.00 € (18) 354,167.00 € 133,750.00 € (22) 500,000.00 € (6) 600,000.00 € (19) 28,511.00 € 1,128,511.00 € 1,800,000.00 € (20) 1,125,000.00 € (21) 1,125,000.00 € 7,650,000.00 € (20) (III) TOTAL 618,750.00 € 0.00 € 1,975,000.00 € 0.00 € 28,511.00 € 2,622,261.00 € 9,583,750.00 € 20,896.00 € (4) 20,896.00 € 119,407.00 € (5) 119,407.00 € 508,407.25 € (6) 17,126.00 € 525,533.25 € (25) (III) TOTAL 648,710.25 € 0.00 € 0.00 € 0.00 € 17,126.00 € 0.00 € 665,836.25 € (I) Remuneration in the company that draws up the Financial Statements 14,216.00 € (4) 20,308.00 € (14) no no 34,524.00 € (III) TOTAL 14,216.00 € 20,308.00 € 0.00 € 0.00 € 0.00 € 0.00 € 34,524.00 € 14,216.00 € (4) 24,370.00 € (13) 38,586.00 € 20,308.00 € (12) 20,308.00 € 20,308.00 € (16) 20,308.00 € (III) TOTAL 14,216.00 € (8) 64,986.00 € 0.00 € 0.00 € 0.00 € 0.00 € 79,202.00 € (I) Remuneration in the company that draws up the Financial Statements 14,216.00 € (8) 20,308.00 € (17) no no 34,524.00 € (III) TOTAL 14,216.00 € 20,308.00 € 0.00 € 0.00 € 0.00 € 0.00 € 34,524.00 €

40 2015 Annual Remuneration Report

TABLE 1 (continued)
	COMPENSATION EARNED BY DIRECTORS, STATUTORY AUDITORS, GENERAL DIRECTORS
A	B	C	D	1	2
Name and surname	Office	Period in which office was held	Expiration of office	Fixed compensation	Compensation for the participation in committees
Michele Polo	Director	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
	(I) Remuneration in the company that draws up the Financial Statements			14,216.00 €	(4) 20,308.00 €	(14)
(II) Remuneration from subsidiaries and associates
(III) TOTAL				14,216.00 €	20,308.00 €
Romano Minozzi	Director	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
	(I) Remuneration in the company that draws up the Financial Statements			14,216.00 €	(4) 20,308.00 €	(12)
					20,308.00 €	(16)
(II) Remuneration from subsidiaries and associates (III) TOTAL				14,216.00 €	40,616.00 €
		OFFICE EXPIRED	Approval 2013 Financial
Fabio Buscarini	Director	7/2013	Statements
	(I) Remuneration in the company that draws up the Financial Statements					(4)
(II) Remuneration from subsidiaries and associates
(III) TOTAL				0.00 €	0.00 €
Antonio Segni	Director	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
	(I) Remuneration in the company that draws up the Financial Statements			14,216.00 €	(4)
(II) Remuneration from subsidiaries and associates
(III) TOTAL				14,216.00 €	0.00 €
Salvatore Machi	Director	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
	(I) Remuneration in the company that draws up the Financial Statements			14,216.00 €	(4) 24,370.00 €	(11)
(II) Remuneration from subsidiaries and associates					24,370.00 €	(15)
(III) TOTAL				14,216.00 €	48,740.00 €
Luca Aurelio Guarna	Chairman of the Board of Statutory Auditors	01/01/2014 - 27/05/2014	Approval 2013 Financial Statements
	(I) Remuneration in the company that draws up the Financial Statements			22,402.00 €	(9)
(II) Remuneration from subsidiaries and associates
(III) TOTAL				22,402.00 €	0.00 €
Alberto Luigi	Standing Auditor	01/01/2014 -	Approval 2013 Financial
Gusmeroli	(I) Remuneration in the company that draws up the Financial Statements	27/05/2014	Statements	18,329.00 €	(10)
(II) Remuneration from subsidiaries and associates
(III) TOTAL				18,329.00 €	0.00 €
Lorenzo Pozza	Standing Auditor	01/01/2014 -	Approval 2013 Financial
		27/05/2014	Statements
	(I) Remuneration in the company that draws up the Financial Statements			18,329.00 €	(10)
(II) Remuneration from subsidiaries and associates
(III) TOTAL		01/01/2014 -	Approval 2013 Financial	18,329.00 €	0.00 €
Stefania Bettoni	Alternate Auditor	27/05/2014	Statements
	(I) Remuneration in the company that draws up the Financial Statements			0.00 €
(II) Remuneration from subsidiaries and associates
(III) TOTAL		01/01/2014 -	Approval 2013 Financial	0.00 €	0.00 €
Flavio Pizzini	Alternate Auditor	27/05/2014	Statements
	(I) Remuneration in the company that draws up the Financial Statements			0.00 €
(II) Remuneration from subsidiaries and associates
(III) TOTAL				0.00 €	0.00 €

COMPENSATION EARNED BY DIRECTORS, STATUTORY AUDITORS, GENERAL DIRECTORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES

3		4	5	6	7	8
Variable non-equity remuneration						Severance indemnities
		Non-monetary benefits	Other	Total	Fair value of equity	for end of office
Bonuses and other	Stake in profits		remuneration		based remuneration	or termination of employment
incentives
		no	no	34,524.00 €
0.00 €	0.00 €	0.00 €	0.00 €	34,524.00 €
		no	no	34,524.00 €
				20,308.00 €
0.00 €	0.00 €	0.00 €	0.00 €	54,832.80 €
		no	no	0.00 €
0.00 €	0.00 €	0.00 €	0.00 €	0.00 €
		no	no	14,216.00 €
0.00 €	0.00 €	0.00 €	0.00 €	14,216.00 €
		no	no	38,586.00 €
				24,370.00 €
				62,956.00 €
		no	no	22,402.00 €
0.00 €	0.00 €	0.00 €	0.00 €	22,402.00 €
		no	no	18,329.00 €
0.00 €	0.00 €	0.00 €	0.00 €	18,329.00 €
		no	no	18,329.00 €
0.00 €	0.00 €	0.00 €		18,329.00 €
		no	no	0.00 €
0.00 €	0.00 €	0.00 €		0.00 €
		no	no	0.00 €
0.00 €	0.00 €	0.00 €		0.00 €

42 2015 Annual Remuneration Report

TABLE 1 (continued)

COMPENSATION EARNED BY DIRECTORS, STATUTORY AUDITORS, GENERAL DIRECTORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES A B C D 1 2 3 4 5 6 7 8 Name and surname Office Period in which office was held Expiration of office Fixed compensation Compensation for the participation in committees Calari Cesare Director 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 20,896.00 € (4) 35,822.00 € (13) 56,718.00 € (II) Remuneration from subsidiaries and associates (III) TOTAL 20,896.00 € 35,822.00 € 0.00 € 0.00 € 0.00 € 0.00 € 56,718.80 € Cerami Carlo Director 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 20,896.00 € (4) 29,852.00 € (11) no no 50,748.00 € (II) Remuneration from subsidiaries and associates 23,881.00 € (24) (III) TOTAL 20,896.00 € 53,733.00 € 0.00 € 0.00 € 0.00 € 0.00 € 74,629.00 € Corsico Fabio Director 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 20,896.00 € (4) 23,881.00 € (11) no no 44,777.00 € (II) Remuneration from subsidiaries and associates 23,881.00 € (24) 23,881.00 € (III) TOTAL 20,896.00 € 47,762.00 € 0.00 € 0.00 € 0.00 € 0.00 € 68,658.00 € Del Fabbro Luca Director 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 20,896.00 € (4) 29,852.00 € (23) no no 50,748.00 € 23,881.00 € (14) 23,881.00 € (II) Remuneration from subsidiaries and associates 0.00 € (III) TOTAL 20,896.00 € 53,733.00 € 0.00 € 0.00 € 0.00 € 0.00 € 74,629.00 € Porcelli Gabriella Director 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 20,896.00 € (4) 23,881.00 € (11) no no 44,777.00 € 23,881.00 € (16) 23,881.00 € (III) TOTAL 20,896.00 € 47,762.00 € 68,658.00 € Saglia Stefano Director 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 20,896.00 € (4) 29,852.00 € (15) 50,748.00 € 23,881.00 € (24) 23,881.00 € (III) TOTAL 20,896.00 € 53,733.00 € 74,629.00 € Cemerano Simona Director 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 17,500.00 € (8) 20,000.00 € (17) no no 37,500.00 € (III) TOTAL 17,500.00 € 20,000.00 € 0.00 € 0.00 € 0.00 € 0.00 € 37,500.00 € Schioppo Riccardo Standing Auditor 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 32,836.00 € (9) no no 32,836.00 € (III) TOTAL 32,836.00 € 0.00 € 0.00 € 0.00 € 0.00 € 0.00 € 32,836.00 € Simone Vincenzo Standing Auditor 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 26,866.00 € (10) no no 26,866.00 € (III) TOTAL 26,866.00 € 0.00 € 0.00 € 0.00 € 0.00 € 26,866.00 € M. Alessandra Zunino de Pignier Alternate Auditor 27/05/2014 - 31/12/2014 Approval 2016 Financial Statements (I) Remuneration in the company that draws up the Financial Statements 26,866.00 € (10) no no 26,866.00 € (III) TOTAL 26,866.00 € 0.00 € 0.00 € 0.00 € 0.00 € 26,866.00 € (1) Remuneration established by the Shareholders' Meeting pursuant to art. 2389, paragraph 1 for the office of Chairman of the BoD paid pro rata temporis (2) Remuneration established by the Meeting of the BoD pursuant to art. 2389, paragraph 3 for the office of Chairman of the BoD paid pro rata temporis

(3) Remuneration for the office of Chairman of the BoD in the subsidiary Terna Rete Italia S.p.A. paid pro rata temporis

(4) Remuneration established by the Shareholders' Meeting pursuant to art. 2389, paragraph 1 for the office of Board member (5) Remuneration established by the Meeting of the BoD pursuant to art. 2389, paragraph 3 for the office of CEO paid pro rata temporis

(6) Remuneration as General Manager paid pro rata temporis

(8) Remuneration established by the Shareholders' Meeting pursuant to art. 2389, paragraph 1 for the office of Board member - Deposited with CDP and paid pro rata temporis

(9) Remuneration established by the Shareholders' Meeting pursuant to art. 2389, paragraph 1 for the office of Chairman of the Board of Statutory Auditors paid pro rata temporis (10) Remuneration established by the Shareholders' Meeting pursuant to art. 2389, paragraph 1 for the office of Statutory Auditor paid pro rata temporis

(11) Remuneration for the office of Chairman of the Remuneration Committee paid pro rata temporis

(12) Remuneration as member of the Remuneration Committee paid pro rata temporis

(13) Remuneration for the office of Chairman of the Control and Risk Committee (currently the Audit, Risk and Corporate Governance Committee) paid pro rata temporis (14) Remuneration as a member of the Control and Risk Committee (currently the Audit, Risk and Corporate Governance Committee) paid pro rata temporis

4		5	6	7	8
					Severance indemnities
Non-monetary benefits		Other remuneration	Total	Fair value of equity based remuneration	for end of office or termination of employment
			56,718.00 €
0.00 €		0.00 €	56,718.80 €
no		no	50,748.00 €
0.00 €		0.00 €	74,629.00 €
no		no	44,777.00 €
			23,881.00 €
0.00 €		0.00 €	68,658.00 €
no		no	50,748.00 € 23,881.00 €
			0.00 €
0.00 €		0.00 €	74,629.00 €
no		no	44,777.00 €
			23,881.00 € 68,658.00 €
			50,748.00 €
			23,881.00 €
			74,629.00 €
no 0.00 €		no 0.00 €	37,500.00 € 37,500.00 €
no		no	32,836.00 €
0.00 €		0.00 €	32,836.00 €
no		no	26,866.00 €
0.00 €			26,866.00 €
no		no	26,866.00 €
0.00 €			26,866.00 €

COMPENSATION EARNED BY DIRECTORS, STATUTORY AUDITORS, GENERAL DIRECTORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES

(15) Remuneration for the office of Coordinator of the Related-Parties Committee paid pro rata temporis (16) Remuneration as member of the Related-Parties Committee paid pro rata temporis

(17) Remuneration as a member of the Control and Risk Committee – Deposited with CDP and paid pro rata temporis

(18) MBO for the office of CEO in relation to the objectives assigned for 2013

(19) MBO value for the office of General Manager in relation to the objectives assigned for 2013

(20) Way-out of previous executive management equals € 7.65 million plus all amounts due as established under the National Collective Bargaining Agreement (CCNL) for Executives (€ 1.8 million) (21) The bonus relative to the 2011-2013 Long-Term Incentive Plan, totalling € 2,250,000 was settled in 2014, with a payment of € 1,125,000 (the advance payment of € 1,125,000 had been paid in 2013).

(22) Termination benefits (TFM)

(23) Remuneration for the office of Coordinator of the Appointments Committee paid pro rata temporis

(24) Remuneration as member of the Appointments Committee paid pro rata temporis (25) Way-out of current executive management equals 24 month's salary (corresponding to € 3,700,000) plus all amounts due as established under the National Collective Bargaining Agreement (CCNL) for Senior Executives

44 2015 Annual Remuneration Report

	TABLE 3B
MONETARY INCENTIVE PLANS FOR DIRECTORS, GENERAL DIRECTORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES
A	B	1				2			3			4
Surname and first name	Office	Plan		Bonus for the year				Bonuses for previous years				Other bonuses
				(A)		(B)	(C)	(A)	(B)		(C)
				Payable/paid		Deferred	Deferral period	No longer payable	Payable/ paid		Still deferred
Flavio Cattaneo	CEO (1/1/2014 - 27/05/2014)
		MBO CEO	(1)	(1A) 250,000.00 €
		MBO GD	(1)	(1A) 600,000.00 €
(I) Remuneration in the company that draws up the Financial Statements		Long-term incentive plan 2011 -2013 approved by the BoD meeting held on 28 July 2011		(1) 1,125,000.00 € (2)		The assessment of having exceeded the Gate and the objectives and reference parameters for determining the incentive is made by the Board of Directors, on the basis of indications provided by the Remuneration Committee, on occasion of the approval of the draft Financial Statement as of 31 December 2013 (BoD meeting held on 25 March 2014).			750,000.00 (2)
(II) Remuneration from	subsidiaries and associates
	(III) TOTAL			1,975,000.00 €
Matteo Del Fante	CEO (from 27/05/2014)
		MBO AD		200,000.00 €
(I) Remuneration in the company that draws up the Financial Statements		MBO DG		450,000.00 €
		Long-term incentive plan 2014 -2015 approved by the BoD meeting held on 24 July 2014				550,000.00	The assessment of having exceeded the Gate and the objectives and reference parameters for determining the incentive is made by the Board of Directors, on the basis of indications provided by the Remuneration Committee, on occasion of the approval of the draft Financial Statement as of 31 December 2013 (BoD meeting of 25 March 2014).
(II) Remuneration from subsidiaries and associates
(III) TOTAL				650,000.00 €

TABLE 3B (continued) MONETARY INCENTIVE PLANS FOR DIRECTORS, GENERAL DIRECTORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES A B 1 2 3 4 Surname and first name Office Plan Bonus for the year Bonuses for previous years Other bonuses (A) (B) (C) (A) (B) (C) Payable/paid Deferred Deferral period No longer payable Payable/ paid Still deferred Luigi Roth Chairman BoD (1/1/2014 - 27/05/2014) (I) Remuneration in the company that draws up the Financial Statements (II) Remuneration from subsidiaries and associates (III) TOTAL 0.00 € Catia Bastioli Chairman BoD (from 27/05/2014) (I) Remuneration in the company that draws up the Financial Statements (II) Remuneration from subsidiaries and associates (III) TOTAL 0.00 €

(1) Variable remuneration represented in Table 1.

(1A) Remuneration paid on the basis of the 2013 final performance summary carried out by the BoD on 25 March 2014

(2) The long-term incentive plan, totalling € 2,250,000 over the three-year period 2011/2013 (€ 750,000 pertaining to 2013), was paid in advance in 2013 to the amount of € 1,125,000 while the remaining balance was paid in 2014.

SCHEME 7 ter - TABLE 1

Shareholdings of members of management and audit bodies, of General Managers and of senior executives with strategic responsibilities

Shares held by the Directors and the Auditors, General Managers and senior executives with strategic responsibilities

Pursuant to the provisions of Art. 84 quater, paragraph 4, of CONSOB Resolution no. 11971/99, in the tables below, the shares of TERNA S.p.A. and its subsidiaries are listed held by Directors, Auditors, general managers (Table 1), and by senior executives with strategic responsibilities (Table 2), as well as by not legally separated spouses and children, directly or through subsidiaries, trust companies or third parties, as indicated in the company's shareholder books, in notices received and other information obtained by the members of administration and audit bodies, general managers and senior executives with strategic responsibilities themselves. Therefore, all those who, in 2014, held positions as Directors, Auditors, general managers or senior executives with strategic responsibilities are included.

SCHEME 7 ter - TABLE 1 (continued)
------------------------------------	--

Surname and name	Position	Shareholding in company	Number of shares held as of the end of the preceding year (2013)	Number of shares purchased (in 2014)	Number of shares sold (in 2014)	Number of shares held as of the end of the current year (2014)	Ownership1
Bastioli Catia	Chairman of the Board of Directors	TERNA S.p.A.	2,1002	0	0	2,1002	owner
Del Fante Matteo	CEO and General Manager	TERNA S.p.A.	0	0	0	0	-
Calari Cesare	Director	TERNA S.p.A.	0	0	0	0	-
Cerami Carlo	Director	TERNA S.p.A.	0	0	0	0	-
Corsico Fabio	Director	TERNA S.p.A.	0	0	0	0	-
Dal Fabbro Luca	Director	TERNA S.p.A.	0	0	0	0	-
He Yunpeng3	Director	TERNA S.p.A.	0	0	0	0	-
Porcelli Gabriella	Director	TERNA S.p.A.	0	0	0	0	-
Saglia Stefano	Director	TERNA S.p.A.	0	0	0	0	-
Camerano Simona4	Director	TERNA S.p.A.	0	0	0	0	-
Schioppo Riccardo Enrico Maria	Chairman of the Board of Statutory Auditors	TERNA S.p.A.	0	0	0	0	-
Simone Vincenzo	Standing Auditor	TERNA S.p.A.	0	0	0	0	-
Zunino de Pignier Maria Alessandra	Standing Auditor	TERNA S.p.A.	0	0	0	0	-
Pagani Rafaella Annamaria	Alternate Auditor	TERNA S.p.A.	0	0	0	0	-
Mantegazza Cesare Felice	Alternate Auditor	TERNA S.p.A.	0	0	0	0	-
Ricotti Renata Maria	Alternate Auditor	TERNA S.p.A.	0	0	0	0	-
Roth Luigi	Chairman of the Board of Directors5	TERNA S.p.A.	70,0006	-7	-7	-7	owner
Cattaneo Flavio	CEO and General Manager5	TERNA S.p.A.	0	0	0	0	-
Dal Pino Paolo	Director5	TERNA S.p.A.	2,150	0	2,150	0	owner
Machì Salvatore	Director5	TERNA S.p.A.	60,0008	0	40,000	20,0009	owner
Minozzi Romano	Director5	TERNA S.p.A.	3,970,00010	0	700,00011	3,270,00012	owner
Pensato Francesco	Director5	TERNA S.p.A.	0	0	0	0	-
Polo Michele	Director5	TERNA S.p.A.	1,700	0	0	1,700	owner
Antonio Segni	Director5	TERNA S.p.A.	0	0	0	0	-
Guarna Luca Aurelio	Chairman of the Board of Statutory Auditors13	TERNA S.p.A.	0	0	0	0	-
Gusmeroli Alberto Luigi	Standing Auditor13	TERNA S.p.A.	0	0	0	0	-
Pozza Lorenzo	Standing Auditor13	TERNA S.p.A.	0	0	0	0	-
Bettoni Stefania	Alternate Auditor13	TERNA S.p.A.	0	0	0	0	-
Pizzini Flavio	Alternate Auditor13	TERNA S.p.A.	0	0	0	0	-

(1) In this column – addition to Scheme 7 ter of Attachment 3A as set out by Art. 84 quater, paragraph 4, of CONSOB Resolution No. 11971/99 – it is listed if the participation is held as ownership, collateral, usufruct, deposit, carry forward, etc.

(2) of which 2,100 shares held by cohabitant.

(3) The Director Yungpeng He was appointed on January 21, 2015 by cooptation, pursuant to Art. 2386 of the Italian Civil Code, by indication of relative majority shareholder CDP Reti S.p.A., a joint-stock company controlled by Cassa Depositi e Prestiti S.p.A..

(4) Director in office from May 27, 2014 until 27 November 2014.

(5) Director in office until May 27, 2014.

(6) of which 70,000 shares held by spouse.

(7) Director in office until May 27, 2014: data not available at the date of this Report.

(8) of which 50,000 shares held by spouse.

(9) of which 10,000 shares held by spouse.

(10) of which 270,000 shares held through the subsidiary Iris Ceramica S.p.A. and 3,300,000 shares held by the spouse.

(11) by the spouse.

(12) of which 270,000 shares held through the subsidiary Iris Ceramica S.p.A (now Iris Ceramica Group S.p.A.) and 2,600,000 shares by the spouse.

(13) Member of the Board of Statutory Auditors in office until May 27, 2014.

Glossary

Audit, Risk and Corporate Governance Committee: established within the Board of Directors on the basis of Principle 7 of the Corporate Governance Code. It is composed of independent Directors or, alternatively, by at least 3 nonexecutive Directors, the majority of whom are independent and in this case the Chairman of the Committee shall be independent. For a description of the functions of the Audit, Risk and Corporate Governance Committee, one should refer to the Report on Corporate Governance and Ownership Structures.

Board of Directors (BoD): the collective body responsible for the management of the Company. The Board of Directors of Terna S.p.A. consists of 9 Directors. It is the body responsible for matters including the approval of the Remuneration Policy proposed by the Remuneration Committee.

Board of Statutory Auditors: this is the internal supervisory body of the Company, which is attributed the function of supervising the observance of the law and of the By-laws, compliance with the principles of sound administration and, in particular, on the adequacy of the organisational, administrative and accounting procedures adopted by the Company and its concrete operation. It expresses a mandatory, though not binding, opinion on the definition of the Remuneration Policy for Directors holding special office, which must be taken into account in the decisions taken by the Board of Directors.

BSC: Balanced Score Card, support tool in the strategic management of the enterprise which allows one to translate the mission and corporate strategy into a coherent set of performance indicators (KPIs), which facilitates their ability to be measured.

Clawback: these are contractual arrangements allowing the company to ask for the repayment, in whole or in part, of variable components of remuneration paid on the basis of data that subsequently turned out to be erroneous.

Consolidated Law on Finance: this is the Italian "Consolidated Law on Financial Intermediation" i.e. Legislative Decree No. 58 of 24 February 1998 (as amended).

Corporate Governance Code: as defined by Borsa Italiana in July 2014, this is the "Self-regulatory code for Listed Companies in relation to Corporate Governance". The document embodies a number of details about best practices on the organisation and operation of listed companies in Italy. These recommendations are not binding, even if listed companies should "keep the market and its shareholders informed about its governance structure and the degree of adherence to the Code."

Directors holding special office: defined in the Company By-laws and include the Chairman of the Board of Directors and the Chief Executive Officer

Directors not holding special office: all Directors except for the Chairman of the Board of Directors and the Chief Executive Officer.

Entry level: minimum level of performance indicators, below which the incentive plans do not provide for any bonuses.

Executive Directors: are the CEOs of the Company or of a subsidiary of strategic importance, including chairmen thereof when granted with individual management powers or when they play a specific role in the formulation of business strategies; executive directors are also those who hold management positions in the company or in a subsidiary of strategic importance, or in the parent company when the position also regards Terna. Finally, executive directors are also those directors who are members of the Executive Committee, when no Chief Executive Officer has been identified or when participation in the Executive Committee, taking into account the frequency of meetings and the subject of related resolutions, actually entails the systematic involvement of its members in the current management of Terna.

Gate: "gate condition" provided for by the (short and long-term) management incentive plans whose non-fulfilment does not allow the payment of the bonus.

Gross Annual Salary (RAL): the annual gross remuneration paid, inclusive only of fixed elements of employee remuneration. It excludes benefits paid in accordance with the employment contract and any amounts paid on an occasional basis for reimbursement of expenses, as well as any bonuses and variable components even if defined as guaranteed and/or paid on a one-off or continuous basis, either repeated or deferred, of the share of employee severance pay and any indemnity provided for by law and by the applicable collective agreement.

Issuer Regulation: CONSOB Issuer Regulation no. 11971 of 14 May 1999 and subsequent amendments and additions, which contains the rules relating to issuers of financial instruments.

Key Performance Indicator (KPI): the indicator used to measure the performance and achievement of previously defined objectives.

Long Term Incentive Plan (LTI): this is the long-term incentive plan that provides the persons concerned with a monetary bonus based on the achievement of long-term objectives defined by the Company.

Management by Objectives (MBO): the short-term incentive plan that enables the individuals involved to receive an annual cash bonus, based on established objectives and agreed with each participant in the Plan.

Maximum overperformance objective: this is the maximum level of achievement of objectives that entitles the person concerned to get a maximum pre-determined percentage, above 100% of the incentive.

Regulation on Related-Party Transactions: is the CONSOB Regulation No. 17221 of March 10, 2010 that identifies the rules to ensure transparency and the substantial and procedural correctness of related-party transactions carried out directly by the Company or through its subsidiaries.

Related-Parties Committee: consists of 3 independent directors who were assigned the functions and duties provided for by the CONSOB Regulation 17221/2010. For a description of the functions of the Related-Parties Committee, one should refer to the Report on Corporate Governance and Ownership Structures.

Remuneration Committee: established within the Board of Directors on the basis of Principle 6 of the Corporate Governance Code. It is composed of independent Directors or, alternatively, by at least 3 non-executive Directors, the majority of whom are independent and in this case the Chairman of the Committee shall be independent. For a description of the functions of the Remuneration Committee, one should refer to the Report on Corporate Governance and Ownership Structures.

Senior executives with strategic responsibilities: these are persons who, directly or indirectly, have the power and responsibility for the planning, direction and control of the Company's operations. For the definition of "senior executives with strategic responsibilities", please refer to Annex 1 to the Regulations on Related-Party Transactions no. 17221 of March 12, 2010.

Shareholder: any shareholder of the Company.

Shareholders' Meeting: the collective decision-making body of the Company. All holders of voting rights (either directly or by proxy) are represented within this body. It has the powers conferred on it by law and by the By-laws: the main ones are the approval of the Financial Statements, the appointment and removal of Directors, the Board of Statutory Auditors and its Chairman. With regard to Remuneration Policy, it expresses a non-binding opinion on Section I of the Remuneration Report.

Stakeholder: any individual who holds an interest in the Company.

Target objective: this is the level of achievement of objectives, that entitles the person to receive 100% of the incentive.

Coordination and Development by Terna S.p.A. - Department of Corporate Affairs

Department of Human Resources and Organization Department of External Relations and Communication

Editing Intrawelt s.a.s., Porto Sant'Elpidio

Photographs

Unless otherwise indicated, published photos are the property of the Terna archive. All rights reserved.

Vision

To improve the efficiency, technology and sustainability of the electricity service and the Company's competitiveness with the objective of excellence in terms of growth of electrical infrastructure at the national and international level, making a key contribution to a virtuous reduction in the costs of the system. To continuously enhance the professional skills of collaborators. To work with respect for the environment for an ever-decreasing impact on

www.terna.it

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