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Notes to the Parent Company financial statements

1) Activity of the company

Rai-Radiotelevisione italiana SpA (hereinafter Rai) is exclusively assigned the public service broadcasting of radio and television programmes using any technical media.

Following authorisation by the Italian Ministry of Communications, the company may enlist the aid of subsidiaries for activities relating to the performance of the pertinent services.

Rai's operations must be conducted in compliance with the applicable regulations in force contained in Law 103 of 14 April 1975 ("New regulations governing radio and television broadcasting"), Law 223 of 6 August 1990 ("Regulation of the public and private radio and television system"), the "Measures governing the concession holder for the public radio and television broadcasting service" issued with Law 206 of 25 June 1993 and subsequent amendments, Law 249 of 31 July 1997 on the "Establishment of the Communications Authority and regulations governing telecommunications and the radio and television system" and Law 112 of 3 May 2004 ("Regulations establishing principles for the organization of the radio and television system and Rai-Radiotelevisione Italiana SpA, as well as granting authority to the Government to issue a consolidated radio and television law"). With Legislative Decree 177 of 31 July 2005 approval was given to the Consolidated Law governing Radio and Television, incorporating additional clauses, amendments and cancellations necessary for the co-ordination of the services or their proper implementation. The Consolidated Law also contains the provisions of Law 112/04, relating to the radio and television general public service and, consequently, articles 3 and 5 of Law 206/93 not repealed by Law 112/04.

The general public radio and television service concession is assigned to Rai until 6 May 2016, on the basis of the Consolidated Law governing Radio and Television, issued with article 49 of Legislative Decree 177 of 31 July 2005.

Article 45 of the same Consolidated Law envisages that the general public radio and television service be provided by the concession holder on the basis of a National Service Agreement lasting three years, entered into with the Italian Ministry of Communications, identifying the rights and obligations of the concession holder.

With ministerial decree of 6 April 2007, published in Official Gazette no. 123 of 29 May 2007, approved the National Service Contract entered into on 5 April 2007 between the Ministry of Communications and Rai for 2007-2009.

The contract became valid the day following its publication and expired on 31 December 2009. Negotiations for its renewal are underway.

The rationale underlying the above regulatory framework lies in the public interest functions entrusted to the concession holder. Under these regulations, Rai has special institutional characteristics and operating constraints, in addition to the specific obligations undertaken with the Service Contract.

2) Introduction

The Parent Company financial statements at 31 December 2009 are prepared in conformity with the relevant provisions of the Italian Civil Code. They are supplemented with annexes featuring the reclassified statements comprised of tables for the analysis of the balance sheet and income statement, and of cash flows.

The financial statements are expressed in euros, without decimals; the Notes to the financial statements and the related detailed Schedules are stated in thousands of euros.

In order to render the financial statements as at 31 December 2009 fully comparable with those of the preceding year, certain items have been reclassified.

With regard to the merger by incorporation of Rai Click SpA completed during the year, schedule 42 was drawn up, disclosing the information required by the laws on the first financial statements for the year following merger.

Rai's financial statements have been audited by PricewaterhouseCoopers SpA, which has also been engaged to conduct the audit procedures under Article 2409 bis of the Civil Code, in accordance with the resolution of the Shareholders' Meeting of 16 July 2007.

3) Accounting policies

Before examining the individual items, we have provided an overview of the main accounting policies used in drafting the financial statements, which were adopted from the perspective of the Company as a going concern and comply with the provisions of Articles 2423 et seq. of the Civil Code.
Such policies are unchanged from those applied in the preceding year. There are no exceptional cases requiring derogation from the requirements under Article 2423-bis et seq. of the Civil Code.

a) Industrial patents and intellectual property rights:

The acquisition and production costs of programmes, composed of external costs that can be allocated directly to each project and the cost of internal resources used to create programmes, are recorded according to the following criteria:

1) costs for repeat-use television productions are capitalised under intangible assets and, if such productions are usable at year-end, are carried under industrial patents and intellectual property rights and amortised on a straight-line basis over the period of their estimated useful life. If such programmes are not yet usable at year-end, the costs are carried under intangible assets under development and payments on account.

The objective difficulty of establishing an appropriate correlation between advertising revenues and licence fees and the amortisation of the rights, which is further complicated by the many ways in which they can been used, has prompted Rai to designate three years as the useful life of repeat-use programmes, represented by TV series, cartoons and comedies, and four years for that of library exploitation rights for sports events.
Costs for concession rights with a shorter duration are amortised over the period they are available.

In addition, an impairment provision has been established for programmes for which transmission or re-broadcasting is at risk.

2) Costs for immediate-use television programmes are expensed in a single year, which is normally that in which they are used. More specifically:

- News, light entertainment and all radio programming. Costs are expensed in the year in which they are incurred, which is normally the year in which the programmes are broadcast.
- Sports events. Costs are booked to the year in which the event takes place.
- Documentaries. Costs are charged against income in a single amount at the time the programmes are ready for broadcasting or the rights are usable.

b) Software licences are carried with industrial patents and intellectual property rights net of amortisation and are amortized over three years from the year they enter service.

c) Costs incurred for the construction of the digital terrestrial network are capitalised under intangible assets net of amortisation and amortised on a straight-line basis over the forecast period of use from the date the service is activated.

d) Trademarks are amortized over ten years from the year they enter service.

e) Deferred charges are carried under other intangible assets net of accumulated amortisation. They regard improvements to leased or licensed property and accessory charges applied to loans. Amortisation for leasehold improvements is determined on the basis of the shorter of the residual duration of the related contracts and the estimated period of benefit of the costs, calculated using amortisation rates which reflect the rate of economic deterioration of the relative assets. Accessory charges applied to loans are amortised in relation to the duration of the loan.

f) Tangible non-current assets � which are shown net of accumulated depreciation � are recorded at cost, increased by internal personnel costs incurred in preparing them to enter service, and revaluations pursuant to laws. The costs of tangible non-current assets as determined above are depreciated in accordance with Article 2426 (2) of the Civil Code. Ordinary maintenance costs are expensed in the year in which they are incurred.

g) Equity investments are carried at purchase cost adjusted in the event of permanent impairment in value. The value of companies with negative shareholders' equity is set at zero and Rai's share of the deficit is specifically provided for under the provisions for risks and charges. Adjustments for permanent impairment are reversed in the event that such impairment is subsequently recovered due to sufficient operating earnings by the investee company.

h) Fixed-income securities carried as non-current financial assets are valued at purchase cost. Positive or negative differences between purchase cost and redemption value are taken to income in the amount accruing for the year.

i) Non-current assets which, at the balance sheet date, have suffered a permanent impairment in value, are carried at the lower value. Should the reasons for the writedown made in previous years no longer apply, the assets are revalued within the limits of the amount of the writedown.

j) Other securities carried under current financial assets are valued at the lower of purchase cost � determined as the weighted average cost � and estimated realisable value, which is given by market value.

k) Inventories of raw materials, supplies and consumables (technical materials) are valued at purchase cost, which is determined on the basis of weighted average cost, written down taking account of market trends and estimated non-use due to obsolescence and slow turnover. Inventories of items for resale (relating to periodicals and book publishing) are carried at the lower of purchase cost, which is determined on the basis of weighted average cost, and estimated realisable value as determined by market prices.

l) Accrued income and prepaid expenses, and accrued expenses and deferred income, are recorded on an accruals basis for the individual entries.

m) Provisions for pension and similar liabilities, which comprise the provision for supplementary staff severance pay, the social security benefits provision and the company supplementary pension fund, are made in accordance with collective bargaining agreements. The Company supplementary pension fund is valued on the basis of an actuarial appraisal.

n) The provision for taxes includes probable tax liabilities arising out of the settlement of tax disputes and includes deferred tax liabilities calculated on timing differences which have resulted in lower current taxes. Deferred tax assets arising from charges which are tax-deductible on a deferred basis and from tax losses are taken up under Current Assets caption 4 ter ("Deferred tax assets") if there is reasonable certainty that they will be recovered in the future.

o) Other provisions for risks and charges include provisions to cover specific losses or liabilities, the existence of which is certain or probable, but the amount or date of occurrence of which is uncertain. They are set up on a case-by-case basis in relation to specific risk positions and their amount is determined on the basis of reasonable estimates of the liability that such positions could generate.

p) The provision for staff severance pay is determined in conformity to applicable law and labour contracts. It reflects the accrued entitlement of all employees at the balance-sheet date net of advances already paid.

q) Payables are shown at nominal value; receivables are carried at estimated realisable value, net of the provision for bad debts as determined on the basis of a case-by-case assessment of the solvency risks of the individual debtors.

r) Payables and receivables denominated in currencies other than the Euro � with the exception of hedged positions, which are valued at the rate applying to the financial instrument � are recorded at the exchange rates applying at the balance sheet date. Profits and losses ensuing from such conversion are taken to the income statement as components of financial income or expense. Any net profit is taken to a specific non-distributable reserve until the profit is realised.

s) Payments on account include advances paid by customers for services that have not yet been performed.

t) Costs and revenues are taken to the income statement on a consistently applied accruals basis.

u) Dividends are taken to income in the year in which they are received.

v) Income taxes are recorded on the basis of an estimate of taxable income in conformity with applicable regulations, taking account of deferred tax positions. The tax liability to be settled on presentation of the tax declaration is carried under taxes payable, together with liabilities relating to taxes already assessed and due.

The Company has opted for the Group to be taxed on a consolidated basis and accordingly, as the consolidating entity, attends to all requirements connected with the settlement of IRES tax for all companies within the consolidated taxation arrangement.

The consolidation of the group's taxable income is regulated by an agreement between the Parent Company and the subsidiaries.

The fundamental principles at the basis of this agreement are neutrality (absence of negative effects for the single companies), proportional use of losses and their integral reintegration on the basis of the IRES rate in force at the time of use, offsetting revenues.

w) In order to hedge interest rate and exchange rate risk, the Company uses derivative contracts to hedge net exposures arising from specific transactions. Interest differentials to be collected or paid on interest rate swaps are taken to the income statement on an accruals basis over the duration of the contract. Accrued interest differentials that have not been settled at the end of the year or which have been settled before they actually accrue are taken to accrued income and prepaid expenses, or accrued expenses and deferred income, as the case may be. Derivative contracts hedging exchange rate risks are used to cover contractual commitments in foreign currencies and entail adjusting the value of the underlying item. The premium or discount arising from the differential between the spot and future exchange rates for hedging transactions carried out via future acquisition of value and premiums paid in relation to options is taken to the income statement over the duration of the contract.

If the market value of derivatives contracts that do not fully qualify for hedge accounting presents a negative value, a specific risk provision is set up for said value.

x) Collections are recorded by bank transaction date; for payments account is likewise taken of the instruction date.

4) Parent Company balance sheet
Assets

Non-current assets

Intangible assets

This caption includes the cost of non-physical factors of production with lasting utility, net of amortisation and writedowns in the event of permanent impairment of value.

Industrial patents and intellectual property rights.

As indicated in Schedule 1, they amount to 234,440 thousand euros, as follows:

- 233,697 thousand euros for the cost of television programmes available for use, and compared with the figure as at 31 December 2008, shows a net decrease of 41,007 thousand euros. The aforementioned decrease is represented by the difference between new assets for 257,430 thousand euros (of which 93,528 thousand euros transferred from non-current assets under development and payments on account for rights that became available during the year), a writedown against the risk of non-transmission and/or repeatability of certain programmes, amounting to 25,375 thousand euros, and the amortisation charge for the year of 273,062 thousand euros.
- 743 thousand euros refers to software licences, which amounted to zero as at 31 December 2008. This value is represented by the difference between new assets for 1,114 thousand euros (of which 239 thousand euros transferred from non-current assets under development and payments on account for products that became available during the year), and the amortisation charge for the year of 371 thousand euros.

As regards television programmes available for use, the overall sum, gross of the writedown, is broken down between:

- rights to television programmes owned or held under unlimited-term licences amounting to 221,868 thousand euros (at 31 December 2008: 256,974 thousand euros);
- rights to television programmes owned or held under fixed-term licences amounting to 47,197 thousand euros (at 31 December 2008: 48,981 thousand euros).

Overall investments in television programmes made in 2009 amount to 299,394 thousand euros, including 135,492 thousand euros in programmes which are not yet available at 31 December 2009, which are carried under intangible assets under development and payments on account.

Analysing investments by type, at 31 December 2009, 257,863 thousand euros had been invested in fiction programmes (series, miniseries, TV movies, soap operas etc), 11,811 thousand euros in documentaries, 13,100 thousand euros in cartoons and comedy programmes, 15,500 thousand euros in football libraries and 1,120 thousand euros in other categories.

Concessions, licences, trademarks and similar rights. The item, which is stated net of accumulated amortisation, includes costs incurred on the acquisition of licences for digital terrestrial frequencies, and own trademarks (for example, the Rai logo). They total 21,328 thousand euros, of which 21,303 thousand euros relating to digital network frequencies.

Intangible assets under development and payments on account. These amount to 194,909 thousand euros, of which:

- 190,809 thousand euros for television programmes still not available and therefore not subject to amortisation, and compared with the figure as at 31 December 2008, show a net increase of 41,964 thousand euros, as indicated in Schedule 1. Specifically, the aforementioned increase is equal to the balance between increases for new assets (135,492 thousand euros) and decreases for items transferred to Industrial patents and intellectual property rights in that they relate to productions and/or purchases which became usable during the year (93,528 thousand euros);
- 1,715 thousand euros refer to software licences and, compared with the figure as at 31 December 2008, show a net increase of 1,476 thousand euros. The aforementioned increase is equal to the balance between increases for new assets (1,715 thousand euros) and decreases for items transferred to Industrial patents and intellectual property rights in that they relate to productions and/or purchases which became usable during the year (239 thousand euros);
- 1,200 thousand euros refer to the cost to purchase options on agreements for the commercial exploitation of products held in football libraries;
- 1,185 thousand euros refer to alterations and improvements under way on property under leasehold or concession.

For television programmes that have not yet become available, the total of 190,809 thousand euros includes:

- 150,767 thousand euros for television programmes owned by the Company that were not ready at 31 December 2009 or for which usage rights began after 31 December 2009 (at 31 December 2008: 108,779 thousand euros);
- 40,042 thousand euros regarding third-party television programmes held on fixed-term licence beginning after 31 December 2009 (at 31 December 2008: 40,066 thousand euros).

Other intangible assets. The amount of 11,743 thousand euros includes:
- 10,544 thousand euros for costs incurred, net of accumulated amortisation, on alterations and improvements to property under leasehold or concession (at 31 December 2008: 10,515 thousand euros);
- 1,099 thousand euros for costs incurred, net of accumulated amortisation, on stand-by loans with a duration of three years, to be broken down throughout the loan period (zero at 31 December 2008);
- 100 thousand euros for the purchase of a right to the first negotiation and option on the broadcasting of football matches, net of amortisation calculated over the concession period (as at 31 December 2008: 150 thousand euros).

Tangible assets

These comprise the costs and related revaluations of tangible fixed assets with a useful life of several years that are owned by the Company and used in operations. They are carried net of standard depreciation and writedowns for lasting value impairments if any.

The standard depreciation rates applied are listed below:
- Buildings and light structures
� Offices in industrial buildings 3%
� Other industrial buildings and roads 6%
� Light structures 10%
- Plant and machinery
� General and radio technical plant 12.5%
� Transmission and television plant 19%
� Recording plant and fitted vehicles 25%
- Industrial and sales equipment 19%
- Other assets:
� Standard equipment 19%
� Office furniture and equipment 12%
� Electronic office equipment 20%
� Transport vehicles 20%
� Motor cars, motor vehicles and the like 25%

Tangible assets at 31 December 2009 amount to 333,854 thousand euros, showing an overall net decrease of 11,114 thousand euros on 31 December 2008 comprising the balance between 59,661 thousand euros and decreases of 70,775 thousand euros, as detailed in Schedule 2.



It should be noted that new tangible assets recorded, which reflect investments made in the year, comprise 5,513 thousand euros for the capitalisation of the cost of internal personnel engaged in the construction of buildings, plant and machinery.

As regards disclosure of financial lease transactions it should be noted that since 2004 only the building located in Aosta was acquired under this type of contract, to serve as the regional headquarters for Valle d'Aosta. The statements required under article 2427 (22) of the Civil Code, referred to in Document 1 of the Organismo Italiano di Contabilità (Italian Accounting Board), showing the effects on the balance sheet and the income statement of the so-called financial method, are presented hereunder.

The gross value of revaluations recorded under non-current tangible assets is reported below, listed according to the applicable regulations:

- 58,530 thousand euros gross in implementation of Law 576 of 2 December 1975 and Law 72 of 19 March 1983, the purchase cost of which was 73,759 thousand euros. This comprises property acquired by 31 December 1946, the gross value of which, amounting to 430 thousand euros, includes revaluation pursuant to Law 74 of 11 February 1952;
- 57,566 thousand euros gross in implementation of Law 413 of 30 December 1991;
- 520,943 thousand euros gross in implementation of Decree Law 263 of 29 April 1994, the effects of which were ratified by Law 650 of 23 December 1996.

Non-current financial assets

These represent the cost of durable financial investments and related revaluations, net of any writedowns described in the comments on the individual items.

Equity investments: these amount to 306,435 thousand euros and include investments in shares or other forms of equity in companies, including consortiums. They are reported in the balance sheet under separate headings arranged by decreasing levels of ownership

The components of the value of equity investments, their distribution among the individual investee companies and transactions during the period are detailed in Schedule 3. Schedule 4 shows the list of investments in subsidiaries and associated companies pursuant to article 2427, item 5, of the Civil Code.

The following section discusses the more significant developments in investee companies and the consequent impact on Rai financial statements:

Equity investments in subsidiaries

- NewCo Rai International SpA (99.954% Rai): the share capital of 1,300 thousand euros is represented by 1,300,000 shares with a par value of 1 euro each. The extraordinary Shareholders' Meeting, held on 16 October 2009, resolved the settlement of the losses totalled at 30 June 2009, amounting to 702,892.36 euros, with the zeroing the share capital of 500,000 euros and payment by the shareholders, in proportion to the shares owned until then, of the additional sum of 202,892.36 euros. At the same time, the reconstruction and increase of the capital to the amount of 1,300,000 euros was resolved, with the issue of 1,300,000 new shares with a par value of 1 euro each. Rai subscribed to these shares for a total of 1,299,402 euros, with the remaining 598 euros worth of shares going to Rai Trade. The company ended 2009 with a loss of 1,701 thousand euros, already partially settled for the sum of 539 thousand euros. Consequently, the value of the investment was written down for the remainder.

- Rai Cinema SpA (99.997678% Rai): the share capital of 200,000 thousand euros is represented by 38,759,690 shares with a par value of 5.16 euros each. During 2009, the company paid a dividend for 2008 of 15,504 thousand euros, which Rai recorded under Income from equity investments in the amount pertaining to it. 2009 ended with a net profit of 40,874 thousand euros.

- Rai Click SpA (100% Rai): on 15 May 2009, Rai Trade sold its shares to Rai, which gained exclusive control of the company. By deed of merger dated 12 October 2009, the resolution of Rai's Board of Directors dated 30 July 2009 and the resolution of Rai Click's Extraordinary Shareholders' Meeting held on 3 August 2009 were implemented, proceeding with the merger of the two companies, via the incorporation of Rai Click SpA into RAI-Radiotelevisione Italiana SpA on the basis of the respective financial statements at 31 December 2008, effective for economic and tax purposes from 1 January 2009.

- Rai Corporation (100% Rai): the share capital of 500,000 thousand US$ is represented by 50,000 shares with a par value of 10 US$ each. The holding is carried at a gross value of 8,713 thousand euros in that this includes the payment on account of share capital of US$ 10,000,000 which was made during 2005. At 31 December 2009 the value of the holding, already written down at 31 December 2008 for 1,599 thousand euros, was further written down for 433 thousand euros to adjust it to the equity held in the company, at the exchange rate in force on 31 December 2009.

- Rai Net SpA (99.9% Rai): the share capital of 5,160 thousand euros is represented by 1,000,000 shares with a par value of 5.16 euros each. During 2009, the company paid a dividend for 2008 of 1,500 thousand euros, which Rai recorded under Income from equity investments in the amount pertaining to it, equating to 1,498 thousand euros. At 31 December 2009 the value of the holding, 47,893 thousand euros which had already been written down at 31 December 2008 by 39,956 thousand euros, was revalued by 121 thousand euros in view of the profit earned by the company in 2009.

- RaiSat SpA (94.9% Rai): the share capital of 2,585 thousand euros is represented by 500,000 shares with a par value of 5.17 euros each. The company ended 2009 with a profit of 5,150 thousand euros. During the same period it paid a dividend of 6,900 thousand euros relating to the 2008 result, of which 6,548 thousand euros pertained to Rai, which was taken to income from equity investments. Furthermore, in 2010 Rai purchased the shares held by RCS MediaGroup and Rai Trade, becoming the sole owner of the investment.

- Rai Trade SpA (100% Rai): the share capital of 8,000 thousand euros is represented by 100,000 shares with a par value of 80 euros each. The company ended 2009 with a profit of 2,375 thousand euros. During 2009 it paid a dividend of 2,500 thousand euros on the result for 2008, which was taken to income from equity investments.

- Rai Way SpA (99.99926% Rai): the share capital of 70,176 thousand euros is represented by 13,600,000 shares with a par value of 5.16 euros each. The company ended 2009 with a profit of 15,033 thousand euros. During 2009, the company paid a dividend for 2008 of 18,632 thousand euros, which Rai recorded under Income from equity investments in the amount pertaining to it.

- Sacis SpA in liquidation (100% Rai): the share capital of 102 thousand euros is represented by 200,000 shares with a par value of 0.51 euros each. The company, which has been in liquidation since 23 January 1998, reported a loss of 17 thousand euros for 2009.

- Sipra SpA (100% Rai): the share capital of 10,000 thousand euros is represented by 100,000 shares with a par value of 100 euros each. The company ended 2009 with a profit of 1,517 thousand euros. During 2009 it paid a dividend of 5,000 thousand euros on the result for 2008, which was taken to income from equity investments.

Equity investments in associated companies

- Audiradio Srl (30.23% Rai): the company ended the year with a profit of 91 thousand euros. The share capital of 258 thousand euros is represented by 258,000 shares with a par value of 1 euro each.

- Auditel Srl (33% Rai): the company ended the year with a profit of 109 thousand euros. The share capital of 300 thousand euros is represented by 300,000 shares with a par value of 1 euro each.

- San Marino Rtv SpA (50% Rai): this company was established in 1991 by Rai and E.RA.S. - Ente di Radiodiffusione Sammarinese with an equal holding in the company. It was set up pursuant to Law 99 of 9 April 1990 ratifying the collaboration treaty between the Republic of Italy and the Republic of San Marino concerning radio and television. It closed 2009 with a net profit of 8 thousand euros. The share capital of 516 thousand euros is represented by 1,000 shares with a par value of 516.46 euros each.

- Euronews - Sociètè Anonyme (22.84% Rai): following changes to the company's shareholder structure in 2009, upon completion of the merger by incorporation between Secemie (the incorporating company) and Socemie (the incorporated company), the percentage held by Rai rose from 21.25% to 22.84%. The share capital of 3,631 thousand euros is represented by 242,039 shares with a par value of 15 euros each. The company ended 2009 with a profit of 1,285 thousand euros. During the same period it paid a dividend of 298 thousand euros relating to the 2008 result, of which 81 thousand euros pertained to Rai, which was taken to income from equity investments.

- Tivù Srl (48.25% Rai): the company ended 2009 with a profit of 165 thousand euros. The share capital of 1,000 thousand euros is held by Rai and R.T.I. � Reti Televisive Italiane S.p.a. � each with a share of 48.25% and by TI Media � Telecom Italia Media S.p.a. � which holds the remaining 3.5%.

Equity investments in other companies

- Almaviva � The Italian Innovation Company SpA (1.201% Rai): the value of the holding is unchanged from 2008, amounting to 324 thousand euros. The share capital is represented by 107,567,301 ordinary shares with a par value of 1.00 euro each.

- Banca di Credito Cooperativo di Roma S.c.p.a. (variable capital company; insignificant percentage held by Rai): carried at a value of 1 thousand euros, equivalent to the amount paid on 16 January 2009 to purchase 100 shares.

- C.F.I � Consorzio per la Formazione Internazionale (consortium for international education): the investment, which was carried at the value of the share in the consortium paid in upon joining, 30 thousand euros, has been fully written off since, under the bylaws of the consortium, withdrawal does not entitle members to reimbursement of their contribution.

- Consorzio Nettuno � Consorzio per la realizzazione di università a distanza (consortium for the distance learning university): the investment of 21 thousand euros, has been fully written off since, under the bylaws of the consortium, withdrawal does not entitle members to reimbursement of their contribution.

- Consorzio Sardegna Digitale in liquidation: the company, which has been in liquidation since 11 April 2009, completed the liquidation transactions and the Consortium Members' Meeting held on 30 October 2009 approved the distribution plan, resolving the closure of the company. Consequently the investment was zeroed.

- Consorzio Valle d'Aosta Digitale � Consorzio per la transizione dalla televisione analogica alla televisione digitale terrestre nel territorio della regione Valle d'Aosta (Consortium for the transition from analogue to digital terrestrial television in the Valle d'Aosta region). The investment of 7 thousand euros, has been fully written off since, under the bylaws of the consortium, withdrawal does not entitle members to reimbursement of their contribution.

- International Multimedia University Umbria SpA (1.533% Rai): the investment has been fully written off since there is no longer any certainty that the amounts paid in can be recovered.

- Istituto Enciclopedia Treccani SpA (0.83% Rai): the holding, carried at a gross value of 478 thousand euros and already written down at 31 December 2008 by 93 thousand euros, was adjusted again by 67 thousand euros to adapt the value of the investment to the company's equity. The share capital is represented by 750,000 shares with a par value of 51.65 euros each.

Receivables: these are booked, as highlighted in Schedule 5, for the amount of 4,719 thousand euros (at 31 December 2008: 4,676 thousand euros). They consist of 2,700 thousand euros for payments on account for mandates to sell rights add production and the distribution of initiatives regarding archive materials of football clubs, 1,540 thousand euros for cautionary deposits and 479 thousand euros for loans to employees. Schedule 9 details their distribution by maturity and Schedule 10 by geographic area.



Other securities: these are carried at 3,763 thousand euros and relate entirely to securities pledged as collateral; details thereof are given in Schedule 6.

CURRENT ASSETS  

Inventories

Inventories amount to 712 thousand euros net of the inventory provision (at 31 December 2007: 858 thousand euros). As shown in schedule 7, they comprise:

• Raw materials, supplies and consumables: these amount to 497 thousand euros net of the inventory provision for 15,385 thousand euros. They consist entirely of supplies and spare parts for maintenance and the operation of equipment, considered as consumables since they are not directly incorporated into products.
• Finished goods and merchandise: these consist entirely of inventories associated with the book and periodicals publishing business, amounting to 215 thousand euros net of a writedown of 644 thousand euros to bring them into line with their estimated realisable value.

Receivables

Receivables total 1,002,631 thousand euros, showing a decrease of 97,663 thousand euros on 31 December 2007, as can be seen in schedule 8, which gives a breakdown of receivables, and in schedules 9 and 11 which show their distribution by maturity, type and by currency. Their distribution by geographic area is shown in schedule 10.

Receivables from customers: these relate to trade receivables, excluding those from subsidiaries and associated companies, which are carried under separate headings. They total 391,202 thousand euros, with a nominal value of 406,646 thousand euros which has been written down by 15,444 thousand euros to bring them to their estimated realisable value and compared with 31 December 2008 they show a decrease of 192,687 thousand euros.

Details of the caption are divided into:

- receivables for public broadcasting services to central government and other public entities: as shown in the following table, these amount to a nominal 184,207 thousand euros, up 73,287 thousand euros on 31 December 2008, equivalent to the balance between the increase in invoices issued and for amounts accrued for 2009 less collections.




The following should be noted in connection with the above receivables:

� Prime Minister's Office: receivables for services deriving from the broadcasting of the television, radio and multimedia offering for foreign markets relate to services rendered in 2007 for 30,000 thousand euros, in 2008 for 35,000 thousand euros and in 2009 for 33,634 thousand euros. Receivables for broadcasting of programmes in Slovenian, French, German and Ladin, on the other hand, relate to services rendered in 2008 for 24,044 thousand euros and in 2009 for 23,119 thousand euros;
� Ministry for the Economy and Finance: in relation to the management of television licence fee collection, the receivable of 11,931 thousand euros refers to 2008, with 11,552 referring to 2009;
� Autonomous Region of Valle d'Aosta: the receivable of 8,090 thousand euros relates to the reimbursement of costs incurred for the operation of equipment for the reception of French-language programmes for the years from 1994 to 2009.

- Receivables for licence fees: these amount to 23,825 thousand euros, up 3,762 thousand euros on 31 December 2008, representing licence fees for preceding years already paid by subscribers but not yet transferred to Rai.

- Other receivables: these amount to nominal value 198,614 thousand euros, up 116,507 thousand euros on 31 December 2008. They relate to the sale of rights, technical assistance to third parties etc.

Receivables from subsidiaries: these amount to 637,329 thousand euros (at 31 December 2008: 602,086 thousand euros). They represent the year-end balance of transactions with subsidiaries, as shown in Schedule 8. They include financial receivables of 245,804 thousand euros (208,908 thousand euros at 31 December 2008) and non-financial receivables of 391,525 thousand euros (at 31 December 2008: 393,178 thousand euros).

Receivables from associated companies: these amount to 271 thousand euros (31 December 2008: 74 thousand euros). They represent the balance of non-financial transactions with San Marino Rtv (105 thousand euros), Audiradio (90 thousand euros), Tivù (72 thousand euros), Auditel (4 thousand euros).

Tax receivables: these are carried at nominal value of 53,251 thousand euros (36,175 thousand euros at 31 December 2008). They comprise 44,283 thousand euros for the balance of Group VAT credits, 6,313 thousand euros for tax refunds requested (including credit for IRES following the introduction of the law that made the IRAP paid during previous tax years partly deductible), credit for IRAP for the year of 2,598 thousand euros and the remainder relating to minor items.

Deferred tax assets: these amount to 30,013 thousand euros and represent the credit deriving from items deductible on a deferred basis for tax purposes, as explained more fully in the section dealing with income taxes, for 29,974 thousand euros, in addition to which there are items transferred from Group companies participating in the consolidated taxation arrangement. Details of deferred tax assets, regarding the movements in 2009, are provided in the following table:

Other: these receivables from others amount to 112,115 thousand euros (at 31 December 2008: 155,078 thousand euros). Net of writedowns of 1,209 thousand euros, they reflect the value of other types of receivable as described below:

- advances to suppliers on sports events filming rights, carried at nominal value of 87,607 thousand euros;

- advances to Social Security Departments on contributions payable for artistic activities and for advance payment of severance pay, carried at nominal value of 8,909 thousand euros;

- receivables from personnel carried at nominal 6,500 thousand euros. They are entirely composed of advances of various types, mainly for travel expenses (2,942 thousand euros) and production expenses (1,429 thousand euros);

- miscellaneous advances to suppliers carried at nominal value of 5,626 thousand euros;

- receivables from the European Union for subsidies and grants for nominal 76 thousand euros, consisting entirely of receivables for research projects;

- receivables from others, carried at nominal value of 3,397 thousand euros.

Cash and cash equivalents

These are listed in Schedule 12, and comprise:

- Bank and post office deposits: these amount to 19,502 thousand euros (at 31 December 2008: 31,861 thousand euros). They represent sight or short-term balances on deposit or current account with banks, financial institutions and the Post Office.

- Cheques: these amount to 9 thousand euros (at 31 December 2008: 14 thousand euros).
- Cash and cash equivalents on hand: these amount to 381 thousand euros (31 December 2008: 327 thousand euros) and include liquid funds in the form of cash and equivalent instruments (duty stamps, cashier's cheques or bank-guaranteed cheques etc) held by the Company at 31 December 2009.

Schedule 11 gives a breakdown of the caption by euros and other currencies and Schedule 24 shows amounts at banks and the Post Office held with Group Companies and restricted by attachments.

ACCRUED INCOME AND PREPAID EXPENSES

Accrued income and prepaid expenses total 24,100 thousand euros. They are detailed in Schedule 13.

Liabilities

Shareholders’ equity

Shareholders' equity totals 497,109 thousand euros.

The components of Shareholders' equity and the effects of operations carried out in 2009 and the previous year are shown in Schedule 14.

Schedule 15 presents the classification of the Shareholders' equity items in compliance with their origin, possibility of use and distribution, as well as their use during the previous three years.

The notes indicated hereunder provide further details on the contents of the individual items.

Share Capital

At 31 December 2009 share capital was represented by 242,518,100 ordinary shares of par value 1 euro each, owned by the Ministry of the Economy and Finance (241,447,000 shares, equal to 99.5583% of the share capital) and SIAE, the Italian Association of Authors and Publishers (1,071,100 shares, equal to 0.4417% of share capital).

Legal Reserve

The legal reserve amounts to 6,977 thousand euros.

Other reserves

Other reserves total 327,544 thousand euros, which refer entirely to merger surplus.

Provisions for risks and charges

These amount to 5,860 thousand euros representing the balance of unallocated profits.

Net loss for the year

This amounts to 79,929,950.22 euros.

Provisions for risks and charges

These amount to 397,583 thousand euros, down 25,409 thousand euros net on 31 December 2008. The composition of these items and details of the decrease are shown in Schedule 16. The notes which follow provide additional information on the individual provisions.

Provision for pension and similar liabilities: this amounts to 152,614 thousand euros and comprises the supplementary

• The provision for supplementary seniority benefits amounts to 1,907 thousand euros (at 31 December 2008: 2,229 thousand euros). It represents the liability in respect of indemnities in lieu of notice towards employees hired before 1978 who have reached the compulsory retirement age. The amount is revalued each year for consumer price inflation. In the event of early termination of employment, or changes in category, the amounts accrued are released.

• The provision for retirement benefits amounts to 283 thousand euros (at 31 December 2008: 442 thousand euros), includes amounts accrued until 31 December 1988 and supplementary amounts allocated in subsequent periods in order to protect the real value of the provision for eligible employees in accordance with the terms of the national collective labour agreement.

Since 1 January 1989 retirement benefits paid by Rai and withholdings from employees have been paid into CRAIPI (supplementary retirement fund for Rai employees) and FIPDRAI (supplementary retirement fund for Rai managers), associations which are responsible for managing retirement funds under the agreements entered into between Rai and the trade unions. Upon retirement, the funds accumulated by Rai, CRAIPI and FIPDRAI are paid out unless employees opt, at the time they obtain the pension rights, to obtain equivalent life annuities. In this case, Rai, FIPDRAI and CRAIPI funds remain with the associations to finance the said life annuities.

• The provision for supplementary seniority benefits amounts to 150,424 thousand euros (at 31 December 2008: 151,307 thousand euros). It includes:
– 141,396 thousand euros for supplementary pension benefits currently being paid (at 31 December 2008: 140,836 thousand euros) consisting of funds accrued for employees who have opted for the supplementary pension plan under the trade union agreements which are kept at an adequate level to ensure said benefits, with respect to actuarial reserves.

– 9,028 thousand euros (at 31 December 2008: 10,471 thousand Euros) for supplementary pensions that will be paid to eligible managerial staff still in service in the event that some of these opt for the supplementary pension plan. Benefits are calculated on the basis of pay earned, seniority and financial and demographic parameters normally used in similar cases.

The provision for current and deferred taxes: this amounts to 12,564 thousand euros (at 31 December 2008: 26,369 thousand euros). The following table shows a breakdown of the item and changes during 2009.

Other provisions: these amount to 232,405 thousand euros (at 31 December 2008: 242,645 thousand euros). They include provisions for costs or losses the existence of which is certain but the amount of which cannot be exactly determined, or which are probable and the amount of which can be reasonably estimated. The main items are detailed in Schedule 16. The release of the fund for costs matured is due to the application of the renewal of the national labour contract for journalism.
As regards pending litigation with employees and third parties, the amount carried in the provisions for liabilities and risks is the best estimate of the likely liability based on the most up-to-date information available.

Provision for staff severance pay

The provision totals 322,351 thousand euros (at 31 December 2008: 334,526 thousand euros). The provision for staff severance pay is calculated on a case-by-case basis in accordance with the provisions of Article 2120 of the Civil Code, integrated by Financial Act 2007 (Law 296 of 27 December 2006), which set the date of 1 January 2007 for the entry into force of the new legislation on pension funds (Legislative decree 252, 2005).
By effect of this legislation, provisions for staff severance pay converge into pension funds other than those inside the company, unless employees ask to maintain the severance pay within the company. In this case, the provisions are paid into a fund managed by the INPS which transfers to the company all the benefits disbursed in the event of payment of advances or termination of the employment contract, as envisaged by Article 2120 of the Civil Code.
The composition of the provision and changes during the year are shown in Schedule 17.

Payables

Payables amount to 1,122,887 thousand euros, up 318,430 thousand euros on 31 December 2008. More specifically, financial debt to banks and totals 163,734 thousand euros, with a net increase of 161,357 thousand euros on the figure disclosed in the 2008 financial statements. No payables covered by collateral in the form of company assets are recorded.
A breakdown of the caption and the contribution deriving from the merger with Rai Click are given in Schedule 18, while Schedules 19 and 20 show the composition of payables by maturity, type and currency.
With regard to geographic distribution, about 88% relates to Italian residents, with about 11% relating to residents of non-EU countries.

The notes indicated hereunder provide further details on the contents of the individual items.

Due to banks: these amount to 163,734 thousand euros (at 31 December 2008: 2,377 thousand euros) representing current account overdrafts with certain banks.

Advances: these amount to 990 thousand euros (at 31 December 2008: 287 thousand euros) referring totally to other advance payments.

Suppliers: these amount to 537,616 thousand euros (at 31 December 2008: 456,591 thousand euros) and show an increase of 81,025 thousand euros with respect to the figure disclosed for the previous year. They include financial debt for 123 thousand euros (unchanged since 31 December 2008) and non-financial payables of 537,493 thousand euros (456,468 thousand euros at 31 December 2008).

Accounts payable to subsidiaries: these amount to 203,307 thousand euros (at 31 December 2008: 155,669 thousand euros), as detailed in Schedule 18. They include financial debt for 49,184 thousand euros (41,737 euros at 31 December 2008) and non-financial payables of 154,123 thousand euros (113,932 thousand euros at 31 December 2008).

Accounts payable to associated companies: these amount to 5,500 thousand euros (at 31 December 2008: 3,261 thousand euros), as detailed in Schedule 18. They include financial debt for 146 thousand euros (90 thousand euros at 31 December 2008) and non-financial payables of 5,354 thousand euros (3,171 thousand euros at 31 December 2008).
thousand euros) and non-financial payables of 3,171 thousand euros (at 31 December 2007: 2,571 thousand euros).

Tax payables: these amount to 60,291 thousand euros (31 December 2008: 54,938 thousand euros) and show an increase of 5,353 thousand euros with respect to the figure disclosed for the previous year. They consist of:

As regards debt in relation to IRES, as reported in the accounting policies, the company has opted for group taxation, transferring to itself, as the consolidating entity, the activities inherent in liquidation and payment of the tax with regard to the following companies: 01 Distribution, NewCo Rai International, Rai Cinema, Rai Click, Rai Way, RaiNet, RaiSat, Sipra and Rai Trade, within the consolidated taxation arrangement. All companies are entitled to make use of the consolidation tax arrangement until financial year 2009, apart from Sipra and Rai Trade, for which the last financial year available for use of this arrangement is 2010.

Welfare and social security institutions: these payables amount to 49,624 thousand euros (at 31 December 2008: 42,661 thousand euros). They reflect contributions due on remuneration paid to employees and consultants, to be paid over to the institutions at the scheduled dates. They consist of:

Other payables: these amount to 101,825 thousand euros (at 31 December 2008: 88,673 thousand euros), and show a net increase of 13,152 thousand euros on the previous year, as follows:

Accrued expenses and deferred income

This caption totals 53,588 thousand euros. Details and a comparison with the previous year are provided in Schedule 21.

The caption contains the entire amount contributed, disbursed by the Ministry for Communications during 2007, 2008 and 2009, of 49,319 thousand euros, in support of initiatives to accelerate the switch-over to the digital terrestrial platform, consisting of operations on systems and adaptation of the site infrastructures to extend areas covered by the digital signal and improve reception and the quality of service perceived by the user.
The task of making the necessary investments is entrusted to the subsidiary Rai Way SpA, which is also responsible for the design, installation, construction, maintenance, implementation, development and operation of the telecommunications networks. The contribution is disclosed in the income statement of each year in relation to amortisation booked by the subsidiary, considering the relationship between the amount of the contributions collected and the total investments envisaged for the accomplishment of related projects.

5) Memorandum accounts


Memorandum accounts amount to 616,414 thousand euros. A breakdown by type is provided in the table attached to the Parent Company balance sheet and they are analysed in detail in Schedules 22, 23 and 24.

The terms of the hedge contracts covering the specific company commitments or those taken on for the subsidiaries Rai Cinema SpA and RaiSat SpA relating to fair value are summarised in Schedule 25.

On the whole, hedging contracts entered into are, in observance of the Group policy, of a reasonable amount in relation to the overall entity of the commitments subject to such risks.

Purchasing commitments also include the value of the DEAR property complex, of 49,431 thousand euros, deriving from the exercise of the option envisaged in the rental agreements.
The final transfer agreement, set for 5 June 2008, was not signed, due to the failure of the counterparty to turn up for the meeting with the notary, denying Rai the right to become owner of the complex and activating legal proceedings with which the declaration of non-existence of the obligation to transfer ownership of the property was requested.
Rai, in reiterating the validity of the exercise of the pre-emption right, placed the purchase price at the disposal of the counterparty and took legal action of its own to obtain acknowledgement of its rights.

At 31 December 2009 there were no commitments of particular significance for the purchase or sale of goods and services in addition to those taken on in the normal course of business that would require specific information to be given for a better understanding of the Company's financial position.

6) Income Statement

Production value

Revenues from sales and services: these amount to 2,895,617 thousand euros (at 31 December 2008: 2,878,438 thousand euros). They basically include revenues pertaining to the year from licence fees and advertising. A breakdown into major components is given in Schedule 26. As can be seen from the distribution of revenues by geographic area, they almost all originate in Italy.

Changes in inventories of work in progress, semi-finished and finished goods: these amount to 6 thousand euros (at 31 December 2008: 11 thousand euros). They are entirely attributable to the increase in the value of inventories associated

Internal cost capitalisations: the amount of 15,418 thousand euros (at 31 December 2008: 14,728 thousand euros) represents internal costs associated with non-current assets, which were capitalised under the specific asset captions. Details are shown in Schedule 27.

Other production-related income: this amounts to 124,642 thousand euros (at 31 December 2008: 164,562 thousand euros), as detailed in Schedule 28.

Production costs

This caption comprises costs and capital losses related to ordinary activities, excluding financial operations. The costs shown here do not include those relating to non-current tangible and intangible assets, which are recorded under the respective balance sheet accounts.

Raw materials, supplies, consumables and merchandise: these total 23,054 thousand euros (at 31 December 2008: 25,942 thousand euros), which include purchases of technical materials for inventory � excluding items used in the construction of plant, which are allocated directly to fixed assets � production materials (sets, costumes etc) and miscellaneous operating materials (fuel, office supplies, printed documents etc), net of discounts and allowances, as shown in Schedule 29.

Services: these amount to 838,302 thousand euros (at 31 December 2008: 831,026 thousand euros) and comprise costs for freelance workers and other external services, net of discounts and allowances, as shown in Schedule 30. Among other things, they include emoluments, remuneration for special functions, attendance fees and reimbursement of expenses paid to Directors for 2,350 thousand euros and to Statutory Auditors for 192 thousand euros. To provide a complete picture of the situation, following the merger by incorporation of Rai Click Spa into Rai Spa, the caption discloses costs of 38 thousand euros for the statutory auditors of the merged company

Use of third-party assets: these amount to 910,058 thousand euros (at 31 December 2008: 857,690 thousand euros), and expresses costs for rents, leases, usage rights and filming rights, as detailed in Schedule 31.

Personnel costs: employee-related costs amount to 903,548 thousand euros (at 31 December 2008: 902,714 thousand euros), broken down as indicated in the income statement. The average number of employees on the payroll in 2009 was 11,829, including employees on fixed-term contracts (at 31 December 2008: 11,698 units), as detailed in Schedule 32.

Amortisation, depreciation and writedowns: these amount to 378,459 thousand euros (at 31 December 2008: 381,195 thousand euros). The breakdown is shown directly in the income statement. In detail, amortisation in relation to intangible assets refers basically to industrial patents and intellectual property rights for 273,433 thousand euros (at 31 December 2008: 266,965 thousand euros), while Schedules 33 and 34 provide details of amortisation of fixed assets and writedowns in relation to non-current assets. They include a writedown of capitalised programmes amounting to 25,375 thousand euros, which was made to take account of the risk that certain programmes may not be transmitted or re-broadcast.

Changes in inventories of raw materials, supplies, consumables and merchandise: the amount of 93 thousand euros (at 31 December 2008: 156 thousand euros) represents the decrease in net inventories carried under current assets at 31

Provisions for risks: these amount to 27,569 thousand euros (at 31 December 2008: 13,009 thousand euros) and indicate allocations to provisions for risks. The most significant items are detailed in Schedule 16.

Other provisions: these amount to 1,740 thousand euros (at 31 December 2008: 1,619 thousand euros). The main items

Miscellaneous operating costs: these amount to 97,046 thousand euros (at 31 December 2008: 98,612 thousand euros). Their composition is shown directly in the income statement and further information is provided in Schedule 35.

Financial income and charges

Income from equity investments: these amount to 49,763 thousand euros (31 December 2008: 26,519 thousand euros), representing dividends distributed in 2009 by investee companies, as shown in Schedule 36.

Other financial income: this amounts to 5,412 thousand euros (at 31 December 2008: 14,910 thousand euros) broken down as follows:

• from non-current receivables: booked for 22 thousand euros, they are articulated as shown in Schedule 37.

• From non-current securities other than equity investments: this amounts to 84 thousand euros and relates to interest

• Financial income other than the above: this amounts to 5,306 thousand euros and mainly relates to interest on current receivables as shown directly in the income statement and detailed even further in Schedule 38.

Interest and other financial charges: these amount to 4,914 thousand euros (at 31 December 2008: 7,767 thousand euros). They relate to interest expense, commission expense for financial services received and other charges for financial operations, as shown directly in the income statement and in further detail in Schedule 39.

Foreign exchange gains and losses: these show a gain of total 806 thousand euros (at 31 December 2008: a loss of 4,067 thousand euros), representing the balance of foreign exchange charges and premiums on foreign currency hedge transactions as well as the effect of translating the value of payables and receivables in foreign currencies at year-end exchange rates or the rate in force at the time of the hedge in the case of exchange risk hedges, as detailed further in Schedule 40.

Value adjustments to financial assets

Revaluations: these amount to 199 thousand euros (at 31 December 2008: 2,140 thousand euros). They reflect the recovery of losses incurred by subsidiaries in previous years for 121 thousand euros, and by other investee companies for 78 thousand euros.
thousand euros.

Writedowns: these total 2,133 thousand euros (at 31 December 2008: 559 thousand euros). They comprise writedowns of non-current financial assets following losses incurred for the year.

Exceptional income and charges

The caption is comprised of charges of 6,664 thousand euros and income of 4,960 thousand euros and is analysed in Schedule 41.

Current income taxes for the year, and deferred tax charges and credits

These amount to 16,828 thousand euros. They are made up as follows:

The following table shows the origin and effects of deferred tax items during the year.

The following table presents the estimated reconciliation between the statutory result for the year and the taxable amount for IRES and IRAP purposes.

On the taxable amount for IRAP, current taxes of 26,700 thousand euros have been calculated.

7) Result for the year

The year closed with a loss of 79,929,950.22 euros.


8) Other information

As regards related parties disclosures, no significant transactions outside the normal market conditions took place. For details on relations with Group companies, envisaged by art. 2428 point 3 of the Civil Code, see the Report on Operations.