Glossary

Accident frequency index

based on standard UNI 7249 it is included among the indicators for measuring workplace safety. The above standard establishes that the index is calculated as the number of accidents which take place for every million hours worked in a given period and/or in a given setting and at corporate level.

Adjusted net profit

this is the net profit obtained excluding special items, the warehouse profit/loss, as well as, in calculating the net profit of business segments, the financial expense/income related to the net financial debt, that relating to non-hedging derivative financial instruments other than those for commodities and foreign exchange differences.

Appointments Committee

it is composed of two independent non-executive directors (one of whom is the Chairman) and one non-executive director and has consultative and advisory functions with regard to the Board of Directors. The main tasks include: proposing candidates for the office of director if the office of one or more directors is vacated during the year, ensuring compliance with the provisions for the minimum number of independent directors and the quotas for the less represented gender; it puts forward candidates to the Board of Directors for the company bodies of the subsidiaries included in the scope of consolidation and of strategic foreign investee companies. It develops and proposes, among other things, the annual self-evaluation procedures of the Board and its Committees.

Balanced Scorecard

this is the instrument underlying the short-term variable incentive system supporting the achievement of the company objectives through the translation of the company strategy into a collection of performance metrics that can be measured for each eligible party.

Benefits

these are the elements included in the non-monetary component of the remuneration aimed at improving the individual and family wellbeing of employees from an economic and social profile. This category includes all resources intended to satisfy the pension and healthcare requirements (supplementary pension, healthcare, insurance cover) but also the so-called prerequisites, which consist of goods and services that SNAM S.p.A. places at the disposal of its employees.

Code of Corporate Governance

as defined by Borsa Italiana, it is the “Code of corporate governance of listed companies” approved by the Corporate Governance Committee. The document, in line with the experience of the main international markets, indicates the best practices of corporate governance recommended by the Committee for listed companies, to be applied in accordance with the comply or explain principle which requires an explanation of the reasons for any failed compliance with one or more recommendations in the application principles or criteria.

Control, Risk and Related-Party Transactions Committee

it is composed of three independent non-executive directors and makes proposals and provides advice to the Board of Directors making suitable enquiries to support decisions concerning the internal control and risk management system, as well those relating to the approval of financial reports.

Consolidated Finance Act (TUF)

the “Consolidated Act of provisions on financial intermediation” is Legislative Decree 58 of 24 February 1998 (and later amendments). The TUF introduced legislation on financial matters “for principles”, which at primary regulatory level only dictates general guidelines, deferring the definition of detailed rules to the Regulatory Authorities (e.g. CONSOB).

Corporate System Framework

this is a Snam Group internal document, approved by the Board of Directors, which is designed to provide descriptions and illustrations with regard to Snam S.p.A. and its subsidiaries on: (i) the Snam Group (ii) the organisational and governance model; (iii) the corporate management system; (iv) the Group operating model.

EBITDA (Earnings before interest, tax, depreciation and amortization)

also defined as “gross operating margin” is a profitability indicator which is a measure of the company’s gross operating performance, before interest (financial management), tax (fiscal management), depreciation of assets and amortisation (Earnings Before Interest, Taxes, Depreciation and Amortisation).

EBIT (Earnings Before Interest and Taxes)

also defined as the Operating Profit. It is an indicator of profitability which is obtained by subtracting amortisation and provisions from the EBITDA (see EBITDA).

Executive directors

they are directors vested with specific duties by the Board of Directors.

Fair Value of equity payments

also defined as fair value. International Financial Reporting Standard 2 (IFRS 2) defines fair value as “The consideration at which an asset can be exchanged, or a liability extinguished, or an instrument representing the capital assigned, in a free transaction between informed and willing parties.”

Fixed Remuneration

this includes all annual fixed payments, before the deduction of tax and pension expenses for the part the employee is responsible for, not therefore including annual bonuses, other bonuses, indemnities, fringe benefits, refund of expenses, and any other form of remuneration of a variable or occasional nature.

Free Cash Flow

is the (monetary) flow of cash produced by operational management and non-operational management.

Independent directors

Snam directors in possession of the requirements of independence laid down by the Code of Corporate Governance to which Snam adheres to.

Issuers’ Regulation

this is CONSOB Regulation 11971 of 14 May 1999 containing the rules for entities issuing financial instruments.

Lock up

indicates the period of time during which the shares granted are subject to restrictions regarding their sale and/or transfer.

Long-term variable incentives

this refers to the Long-Term Share-Based Plan – ILT, which gives the right, for the parties involved, to receive a pre-defined number of shares in relation to the results achieved at the end of the vesting period (see vesting).

Managers with strategic responsibilities

based on IAS 24 they are “parties which have the power and responsibility, directly or indirectly, for the planning, management and control of the entity’s assets”. In SNAM S.p.A. there were 6 parties at the approval date of this Report, listed within this document.

Non-compete agreements

based on Article 2125 of the Italian Civil Code it is the “agreement through which involvement in the activities of the employer are restricted in the period following the termination of the agreement”.

Non-executive directors

they are directors not vested with specific duties by the Board of Directors and do not have individual powers delegated to them.

Pay Mix

it is the percentage of fixed remuneration and short-term and long-term variable incentives paid.

Pay policy

this is the collection of remuneration programmes in terms of fixed and variable remuneration implemented at company level in order to support the reaching of the strategic targets.

Performance Plan

this is the instrument that defines the targets based on the short-term variable incentives system.

Proxy Advisors

A Company, used by institutional investors, that issues specific recommendations, based on shareholders’ meeting documents and their voting policies, which can have a significant weighting in directing the vote on the Remuneration Report.

Related-Party Transactions

the “Transactions in which directors and statutory auditors have an interest and related-party transactions” procedure, adopted pursuant to and in accordance with Article 2391-bis of the Italian Civil Code and the “Regulation containing provisions on related-party transactions” (adopted by Consob through resolution 17221 of 12 March 2010, later amended through resolution 17389 of 23 June 2010) which establishes the principles and rules that Snam and its companies, directly or indirectly, controlled should adhere to in order to ensure the essential and procedural transparency and correctness of transactions with Related Parties and Stakeholders and directors and auditors of Snam, realised by Snam and its subsidiaries, also taking into account the aim of avoiding the risk of depleting the company’s assets.

Remuneration Committee

it is composed of two independent non-executive directors (one of whom is the Chairman) and one non-executive director and has consultative and advisory functions with regard to the Board of Directors on the subject of the remuneration of directors and managers with strategic responsibilities. Specifically, the Committee submits the annual remuneration report to the Board for approval and formulates proposals relating to the remuneration of directors with powers and members of Board Committees. The Remuneration Committee, pursuant to the “Transactions in which directors and statutory auditors have an interest and related-party transactions” procedure, issues an opinion with regard to transactions involving the remuneration of Snam directors and managers with strategic responsibilities.

Salary review

it is the review process for the annual fixed remuneration for all eligible managers.

Severance pay

the monetary amount to be paid to the director at the time they no longer hold that position.

Severance pay termination of employment indemnity

the monetary amount to be paid to the employee at the time of the termination of their employment as a senior manager.

Short-term variable incentives

this refers to the Annual Monetary Incentive Plan - IMA, which gives the right, for the parties involved, to receive an annual cash reward based on results achieved in the previous year in relation to defined objectives.

Stock Option

financial instrument through which the company grants beneficiaries the right to subscribe or acquire shares in the actual company or another company that is part of the same group at a strike price.

Sustainability Committee

the Committee is composed of three non-executive directors the majority of whom are independent, including the Chairman. The Sustainability Committee carries out proposal and consultation functions with regard to the Board of Directors on matters of sustainability, understood as the processes, initiatives and activities intended to oversee the commitment of the Company to sustainable development along the value chain.

Sustainability indexes

Dow Jones Sustainability World Index, FTSE4GOOD and VigeoEurope are the stock exchange indexes made up of listed companies selected internationally from those which have achieved the best performances in terms of sustainability and Corporate Social Responsibility.

Target level

in the short-term incentive, it is the standard achievement level of the target which gives the right to receive 100% of the incentive.

Threshold level

represents the minimum level to be reached below which the Plan makes no provision for the assignment of any incentive.

Variable remuneration

it is composed of the short-term variable incentives and the long-term incentives (see the definitions in this glossary).

Vesting (vesting period)

period between the allocation and the completion of the ownership of the right to receive the reward.