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Report on Parent company fiancial statements

To the Shareholders,

During the year which ended on 31 December 2008, as regards the activity of the Board of Statutory Auditors, we performed the supervision activity envisaged by the Law, adapting operations to the principles of conduct recommended by the
National Council of Chartered Accountants and accounting experts.
The auditing activities were assigned to the Independent Auditors, PricewaterhouseCoopers SpA (hereinafter “PWC”), and are listed in their reports.

Our activities consisted of the following:

We carried out the monitoring activities envisaged by the Law and the Company Bylaws. Within the limits of pertinence, we gained details on and monitored the adequacy of the Company structure, observance of the principles of correct administration and the adequacy of the directions issued to the Subsidiaries, acquiring information from the managers of the pertinent company functions.

47 audit visits were carried out during the year, some of which were at Regional and Foreign Correspondent Offices: the results of these visits, when it was deemed necessary to do so, were reported to the General Manager.

During the year, in accordance with the new legislation of Corporate Law, the Board also met with the company executives responsible for certain Management Divisions to obtain – among other things – information on the adequacy of the organisational structure, the internal control system and the administrative-accounting system.

Specific meetings were also held with PWC, during which information was requested also on the audit of the accounts which the firm has been appointed to perform for the 2007-2009 triennium, pursuant to article 2409 bis of the Civil Code. No “censurable actions” were reported to us pursuant to article 2408 of the Civil Code. We have no knowledge of other facts or aspects of such nature as to require mention to the Shareholders’ Meeting.

The Board acknowledged the progress made in the introduction of the provisions envisaged by Legislative Decree 231/2001 since the report by the Chairman of the Oversight Committee to the Board of Directors and the Board of Statutory Auditors
on 29 January 2009. Said report, forwarded on 28.01.2009 also provided information on the activity of the Ethical Committee.

In 2008 the Statutory Auditors attended all the meetings of the Board of Directors (44 during 45 days) during which they obtained information from Directors on the general performance of the business and its outlook, as well as on Company
operations of greater financial and capital significance, in terms of size and characteristics.

We can reasonably consider that the actions taken were compliant with the Law and the Company Bylaws and do not appear to be manifestly imprudent or such as to compromise the Company’s assets or financial position.

We report, in addition, that the Board of Directors, in its meeting of 25 October 2005, delegated powers of enquiry to its members, pursuant to article 26 of the Company Bylaws. For this purpose, two Committees of Enquiry were set up within
the Board of Directors, for Administration and Organisation to which “special assignments” were given, aimed especially at enquiring into strategic problems. During the year, the Board of Statutory Auditors, for its part, issued the opinions pursuant to article 2389 (3) of the Civil Code relating to the aforementioned “special assignments”.

We also report that, in 2008, 2 Shareholders’ Meetings were held. Due to subsequent adjournments of the second, the number of actual meetings totalled 14, all of which were attended by the Board of Statutory Auditors.

The Company has drawn up the Parent Company Financial Statements using the accounting principles and main valuation criteria with a view to the continued operation of the company and in compliance with the provisions of art. 2423 of the Civil Code and subsequent articles, which are the same as those applied in previous years. The financial statements of Rai SpA at 31 December 2008, which were delivered to us by the Board on 1 April 2009 and are submitted for your approval, are expressed in euros, without cents, as indicated in article 2423 (5) of the Civil Code. These financial statements consist of the Parent Company’s Balance Sheet, Income Statement and Notes to the Financial Statements and are accompanied by the Directors’ Report on operations. We hereby certify, also on the basis of meetings held with the Independent Auditors, PWC, that the Parent Company financial statements have been drawn up, in all three components (Balance Sheet, Income Statement and Notes to the Financial Statements), in accordance with the provisions of law.

In the Report on Operations, which should be referred to for further details, the Directors describe the significant events which occurred during 2008. The Parent Company financial statements for 2008 present a loss of about 37.0 million euros,
while the Group Consolidated financial statements present a loss of about 7.1 million euros. The Directors also explain the Company’s situation and activities which are performed, overall and in the single sectors in which it operates, also through subsidiaries, pursuant to article 2428 of the Civil Code. This document also provides information on research and development, relations with subsidiaries and associated companies, the outlook for the business, significant events occurring after the end of the year and on the Company’s objectives and policies regarding the management of financial risk and exposure to interest rate, credit and liquidity risks, fulfilling the informative obligations regarding the main risks of uncertainty to which the Company and Group are exposed.
In addition, three tables analysing the balance sheet, income statement and cash flow statement have been presented to provide an effective tool for a better understanding of the financial statements.

As regards the performance of resources, the Directors particular highlight certain aspects concerning the licence fee and advertising.
We ought to point out that the per-unit licence fee for 2008 – which rose by 2.0 euros to 106.0 euros – continues to be one of the lowest in Europe; it is also subject to the highest rate of tax evasion (over 26%) which could be contrasted with the introduction of new legislative tools and the revision of the collection mechanisms.
Advertising revenues fell by about 3% in 2008, largely as a result of the serious economic/financial crisis, the effects of which were felt particularly in the final months of the year.

Remaining within the sphere of the Report, the Directors point out that the separate accounting model was also applied – pursuant to the laws in force – to the latest approved financial statements for the year ended 31 December 2007, which were audited by Deloitte & Touche. The results highlighted that, contrary to that established by article 47 of the Consolidated Radio and Television Law, public funds (licence fees) do not entirely cover the costs of the Public Service, with a deficit of 420 million euros, which fell to 159.0 million after the attribution of the portion of advertising revenues (261 million euros) taken by the same Public Service.

A specific section of the Directors’ Report is dedicated to the Service Agreement with the Ministry of Communications (now the Ministry for Economic Development) signed on 5 April 2007 for the 2007-2009 triennium. On this matter, attention is drawn to the main innovative aspects that characterise the agreement in force pointing out that, by requesting a net increase in performances, the Institutions have imposed a significant change in the role and mission of the Public Service. Generally speaking, the strategic purpose of this Service has been identified in the quality of the offering, respecting the Country’s values and identity.

The new programming arrangements will undoubtedly increase operating costs, which will inevitably be reflected on the way operations are balanced.
There is also a section dedicated to the television market which, during the last five years, has witnessed the launch and consolidation of the new multi-channel platforms, which have altered the competitive scenario characterised by the increased articulation of the distribution platforms; satellite for now is complimentary to the Digital Terrestrial platform; Internet Protocol Television (IPTV) continues to remain marginal; while the “web” is consolidating its role as a distribution channel for audiovisual content and is destined top become an increasingly central platform in the Rai strategy, together with the Digital Terrestrial system. The latter, which has been operational in Sardinia since October, will completely replace analogue broadcasting throughout the whole of Italy from 2012, should things go according to plan. An investment of approximately 300 million euros is envisaged to accomplish this plan.

It is therefore fundamental, as sustained by the Report, that Rai be guaranteed licence-fee revenues, eliminating the consistent evasion, in order to combat the effects of the declining advertising market resources.

In the rapidly changing context in which Rai operates, the Directors draw particular attention to the significant increase already made to the Digital Terrestrial offering. In recent years, the three traditional general-interest channels have been joined by three new channels (Rai Sport, Rai Gulp and Rai 4), as well as two satellite channels, RaiNews 24 and Rai Storia.

To this end, the Board has observed that the advent of a multi-channel and multi-platform system increases the difficulty in maintaining the recognition and diversification of the Public Service, all within a sphere in which the economic impact cannot yet be assessed.

The Notes to the Parent Company Financial Statements contain a description of the accounting policies adopted and provide, with the supplementary schedules presented, the other disclosures required under article 2427 of the Civil Code; in accordance with the various regulations, information is given, inter alia, on revaluations made to tangible assets still carried in the balance sheet.

For all the items recorded in the Balance Sheet and Income Statement, details are given in relation to the reasons for the differences from the corresponding items of the financial statements at 31 December 2007, as envisaged by article 2423 ter (5) of the Civil Code.

Pursuant to article 2429 (3) of the Civil Code, complete copies of the latest financial statements of subsidiaries have been deposited at the Company’s registered office together with the reports of the relative Boards of Statutory Auditors and Independent Auditors, as well as a summary statement of the key data from the latest financial statements of the associated companies.

The reports of the Boards of Statutory Auditors and Independent Auditors are positive, each in their own right.

With regard to matters falling within the sphere of competence of the Board of Statutory Auditors, we report that, in connection with valuation and accounting aspects, we concur with the accounting policies reported for the individual
financial statement components, which have remained unchanged from 2007, and are in accordance with the general principles indicated in article 2423 bis of the Civil Code and with the more specific provisions of the following article 2426.

In addition, we wish to point out that:
• there are no formation, start-up and expansion costs, nor deferred costs for research, development or advertising, carried under intangible assets in the balance sheet;
• deferred tax assets relate mainly to the negative taxable amount for the year, which is completely offset by the taxable amounts of subsidiaries within the 2008 scope of consolidation, and have been disclosed within the limits of the tax benefits
which can be obtained in future years;
• the deferred tax provision has been reduced due to the adjustment of accelerated depreciation on tangible assets and increased amortisation on programmes allocated in previous years;
• there have been no “exceptional cases” during the year which would entail making derogations from standard accounting principles as permitted under article 2423 (4) of the Civil Code.

Since tax year 2004, Rai has opted to be taxed on a Group consolidated tax basis, pursuant to article 117 of the Consolidated Income Tax Law as amended by Legislative Decree no. 344/2003.

We consider it useful, for information purposes, to supplement our report with information on the following aspects.

The critical matter of evasion of the Rai licence fee – an issue examined by the Court of Auditors in the Report presented to Parliament on 4 December 2008 – is absolutely unacceptable, especially considering the fact that it is decidedly lower than that paid in other European countries. The fight against evasion must be pursued with decision, due to the respect which should be paid to the directives of the Order and to the relative damages which it causes to Government finances and the income statement of the Concession holder.

Another reason for its pursuit is the fact that the considerable resources unlawfully subtracted from the Rai finances mean that the company is somewhat condition by advertising revenues, which are currently suffering a severe decline, with potential negative effects on the quality of Rai’s television product.

Specifically, using - as is our custom - information obtained from the Internal Auditing Department and from contacts with the Independent Auditors PWC, we directed our attention to the status of corporate procedures and internal control, both within Rai SpA and the Group.

As regards Rai SpA, the process for updating and completing the overall system of procedures has not yet been completed.
Another editorial protocol, approved by the General Management and formally brought to the attention of Rai during the year, has also been introduced.

However, the Board renews its recommendation to continue with the rapid completion and updating of the procedures manual in order to benefit from a more integrated system of internal controls.

Finally, we wish to make a few brief comments on the Internal Auditing Department, the activities of which were dedicated to its inherent functions which are aimed at the systematic audit of the various corporate areas and in-depth analysis of specific operations performed following specific requests by General Management, as in the past. IThe two aforementioned operations can be traced back to the type of ethical audit and also required the analysis and assessment of certain important business processes, also in relation to the provisions of Legislative Decree 231/2001; commitments of this type do however tend
to increase.

On this matter, it was noted that Management continues to cooperate with the proceedings for the activities of the Body, as requested; moreover, it is present within all the Oversight Committees of the subsidiaries, apart from RaiNet
and Rai Way.

Taking account of the increasing commitments mentioned above, the Board feels that it would be wise to assess the need to take appropriate management action to permit the Internal Auditing Department to effectively perform its functions
over Rai and the entire Group, also evaluating the adequacy and strengthening of the number of people working in the department.

As regards relations between Rai and the Group companies, the Board of Statutory Auditors recommends action to strengthen the standardisation of the Group “conduct”, also with a view to developing an internal auditing system within the Group, extended also to the areas which are not strictly administrative. This would take place via the issue and formalisation of operating procedures relating to the main company processes, in compliance with a mid-term schedule.

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In the light of all the matters described and considered above, we express our favour for the approval of the parent company financial statements at 31 December 2008, as proposed by the Board of Directors, closing with a loss of 37,010,139.30 euros. We also agree with the further request, contained in the same proposal for resolution, regarding the entire coverage of the loss of 37,010,139.30 euros with the use of:

• “Profits brought forward” totalling 5,861,185.07 euros
• Other reserves, of which:
– 1,261,586.09 euros from the reserve fund for taxed capital grants;
– 13,848,977.66 euros from merger surplus;
– 16,038,390.48 euros from other reserves.

Rome, 7 May 2009

THE STATUTORY AUDITORS

Mr Domenico TUDINI
Prof. Gennaro FERRARA
Prof. Paolo GERMANI