Internal Control Committee

Functions of the Internal Control Committee

As of 2004, within the Board of Directors, a specific Internal Control Committee was created, with advisory and proposalmaking functions.

Following the renewal of the Board of Directors during the meeting of May 13, 2011, the Internal Control Committee was re-established and its members were appointed.

The Committee was assigned the following duties, as already identified within “Terna S.p.A.’s Organizational Rules for the Remuneration Committee” which were approved on January 24, 2007:

  • assisting the Board of Directors in establishing Internal Control System guidelines and periodically checking the adequacy and actual implementation of the System (Article 8.C.1 of the Governance Code);
  • assessing, together with the Executive in Charge of the preparation of accounting documents and the Auditors, the correct application of accounting principles and their uniformity for the preparation of the consolidated financial statements (Article 8.C.3, letter a) of the Governance Code);
  • expressing opinions on request of the CEO, on specific aspects concerning identification of main Company risks and planning, implementation and management of the Internal Control System (Article 8.C.3, letter b) of the Governance Code);
  • examining the work plan prepared by the Executive in Charge of internal control as well as the periodical reports prepared by him. (Article 8.C.3, letter c) of the Governance Code);
  • evaluating the proposals coming from the auditing companies to obtain assignment, as well as the results presented in the report and in the suggestion letter (Article 8.C.3, letter d) of the Governance Code);
  • reporting, at least every six months, to the Board of Directors about activity carried out and adequacy of the Internal Control System (Article 8.C.3, letter g) of the Governance Code);
  • carrying out further duties potentially assigned by the Board of Directors especially concerning relations with the auditing company.

Additional specific duties are assigned to the Committee based on the Organizational Model adopted by Terna in compliance with Legislative Decree no. 231/01 and with Terna’s Code of Ethics.
The Internal Control Committee is currently composed of Paolo Dal Pino (as Coordinator), Salvatore Machì, Matteo Del Fante, Francesco Pensato and Michele Polo, who are all non-executive and mostly Independent Directors. At least one member has adequate accounting and financial experience.

In 2011, the Internal Control Committee met 4 times, with the regular participation of all members. Each meeting lasted an average of fifty minutes; the Chairman of the Board of Statutory Auditors or another Statutory Auditor appointed thereby was present at each meeting, given the Board’s specific supervisory functions with respect to the Internal Control System, as required by current legislation concerning listed companies (Article 8.C.4 of the Governance Code). As a result of the renewal of the Board of Directors and of the new composition of the Committee with new members (May 13, 2011), the first meeting was held by outgoing members and subsequent meetings were held by the newly appointed members.
Upon the Committee’s request, the meetings were also attended by Directors of the Company whose presence was deemed helpful for the best information regarding the items on the agenda.

In particular, in 2011, the Internal Control Committee evaluated the operation of the internal control system linked to and involving various interested parties and bodies, providing support to the Board of Directors for analyzing and following the photovoltaic Project, providing a positive opinion on the main financing transactions, positively examining the approach to managing the Company’s risks regarding security and examining and monitoring the audit activities for 2011 and it also met with the Independent Auditors to evaluate auditing activities with particular attention to the methods used in carrying out said activities, and the results obtained. Furthermore, it examined the progress of financial risk management. Pursuant to what provided for by the Governance Code, the committee assessed, together with the

Executive in Charge, the correct use of the accounting standards and received information on control activities implemented for compliance with the provisions of law 262/05 and subsequent amendments. The Committee also received due information from the Vigilance Body under Legislative Decree no. 231/01 with reference to the adequacy and the development of the Model and the activity carried out by this Body.
At the beginning of 2012, the Committee conducted a preliminary analysis of novelties concerning the internal control system introduced by the Governance Code of Italian listed companies (December 2011) which should be applied during 2012.

In 2012, the Committee will hold as many meetings as are sufficient for carrying out the duties assigned. During the year up to the date of approval of this Report, the Committee has held two meetings.
During the meeting of March 20, 2012, the Board of Directors evaluated the duties and operation of the Committee. The generally positive evaluation of the composition, size and responsibilities of the Committee was confirmed by the Board of Directors within the yearly review of the Board itself and of the Committees.
The Committee was granted adequate financial resources.