Financials Rai 2014 Reports and Financials as at 31 December 2014 2014. A year with Rai. Reports and financial statements as at 31 December 2014 Contents Introduction 5 Parent Company financial statements as at 31 December 2014 11 Consolidated financial statements of the Rai Group as at 31 December 2014 145 Financial statements of subsidiary companies 219 Financial statements of associated companies 241 Corporate Directory 246 Introduction Parent Company Consolidated 5 Introduction Corporate Bodies 6 Organisational Structure 7 Letter to Shareholders from the Chairman of the Board of Directors 9 6 Introduction Parent Company Consolidated Corporate Bodies Board of Directors (1) Chairman Anna Maria Tarantola Directors Gherardo Colombo Rodolfo de Laurentiis Antonio Pilati Marco Pinto Guglielmo Rositani Benedetta Tobagi Luisa Todini (2) Antonio Verro Secretary Nicola Claudio Board of Statutory Auditors Chairman Carlo Cesare Gatto Statutory Auditors Domenico Mastroianni Maria Giovanna Basile Alternate Statutory Auditors Liana Meucci Pietro Floriddia General Manager Luigi Gubitosi Independent Auditors PricewaterhouseCoopers (1) Nomination expires on approval of financial statements as at 31 December 2014. (2) Resigned on 20 November 2014, with immediate effect. Introduction Parent Company Consolidated 7 Organisational Structure (summary) Board of Directors Chairman of the Board of Directors Internal Supervisory Audit Board General Manager Legal (1) Matters CFO Human Resources and CTO (2) Communication Corporate Other and Public Structure Deputy General Manager Corporate Relations Coordination of radio and Support television offering Functions Editorial and News • Generalist tv channels • Semi-generalist tv channels • Thematic tv channels • News • Rai Fiction • Rai World • Radio - Channels - Public Service Channels - News Rai Cinema SpA Commercial and Advertising Rai Com SpA Rai Pubblicità SpA Broadcasting Rai Way SpA (3) (1) The Finance, Planning and Budget, Controller, Administration, Fixed Assets and General Services and Licence Fee functions all report directly to the Chief Financial Officer. (2) The TV Production, Technology Strategy, ICT, Web and Digital Terrestrial TV functions all report directly to the Chief Technology Officer. (3) Listed company since 19 November 2014. Although the company is subject to overall management and coordination by Rai, it manages its activities autonomously, generating revenues from its own client base and using its own competencies, technologies and human and financial resources. Introduction Parent Company Consolidated 9 Letter to Shareholders from the Chairman of the Board of Directors Letter to Shareholders from the Chairman of the Board of Directors Shareholders, 2014 was a mixed year for Rai, which started As a result of the changed circumstances and well enough, suddenly became complicated and notwithstanding the further streamlining initiatives, then finished very well. the net result for the interim period was very negative as was the financial position. Our 2013-2015 Business Plan has focused on three macro objectives: to return to long-term In order to counter such trends and avoid having financial stability; to guarantee the excellence of decisions imposed upon us, Rai took action in Rai’s product offering and to provide Rai with state terms of both normal day to day management of the art technology. activities and extraordinary management activities. Each of these three priority area pillars has With regard to the former, given the negative been broken down into specific activities as advertising revenue trends, further cost cutting part of a structured and participative managed initiatives were implemented in relation both to process with clear objectives and deadlines and external costs – which were reduced by Euro 80 with responsibility for each of the results being million with respect to 2013 – and personnel costs. assigned to accountable managers. This has been an unprecedented process within Rai, which has In terms of extraordinary management activities, introduced significant improvement and enabled Rai took steps to generate value from the Group’s the Company to set a solid basis on which to re- strategic and balance sheet assets. establish itself. The listing of Rai Way, which attracted the Significant progress was already apparent in attention of key institutional investors, generated 2013 with the achievement of a balanced budget receipts of Euro 280 million and a net capital outturn and maintenance of a sustainable net gain of Euro 228 million for Rai – through sale of financial position, following the loss of Euro 246 34.93% of the total equity on the stock exchange. million suffered in 2012, which had undermined the stability of the Company. As a result, the year ended with a net Group profit for the year (the most relevant figure) of around Notwithstanding existing commitments of Euro Euro 58 million, a substantially level operating 95 million in relation to rights for significant result and significantly lower debt (Euro 315 sports events, further streamlining of management million) compared to 2013. The targets set for the processes was identified as a key objective year were therefore fully achieved. for 2014, together with the introduction of development initiatives which, given the lack of The objectives set in relation to the second pillar available funding, had initially been excluded by of the Business Plan (to maintain position as market this Board of Directors on taking office. leader and strengthen the quality of the product offering), included reinforcement of the public During the early part of the year, the outlook service editorial role, multi-channel development changed significantly: contrary to expectations of the free television offering (through adaptation regarding improvement in the negative general of certain strategic television genres) and creation economic conditions, the decline in the advertising of increased capacity to exploit the extraordinary market continued and so undermined expectations potential of the web. These commitments run in of revenue growth. In addition, the approval of parallel with the generation of loyalty among Decree-Law 66 of 24 April 2014, as amended young and dynamic audiences. by Law 89/2014, unexpectedly reduced the license fees to be paid to Rai for 2014 by Euro 2014 saw delivery of high quality content. We 150 million. The negative effects of these events all recall the success of I Dieci comandamenti; compounded the impact of non-indexation of the Roberto Benigni provided us with two wonderful per-unit licence fee and the progressive increase in intense evenings. But there were many other great late and non-paying subscribers. programmes, such as, for example, the television drama (fiction) Qualunque cosa succeda, about 10 Introduction Parent Company Consolidated Letter to Shareholders from the Chairman of the Board of Directors the Ambrosoli case, which honoured the memory In recent years, therefore, on all fronts, whether of a great civil servant and hero. financial, editorial or technological, Rai has demonstrated high levels of professional Television drama (fiction) is one of Rai’s biggest competence and the ability to react successfully to strengths. It now covers a much broader range of changing circumstances and do well. subjects than in the past, including contemporary issues, without forgetting important historical Further action is, however, required to achieve figures and events that have shaped the identity future financial stability in a steady and structured and memory of our country. manner and this will require an element of change in the nature of activities performed by the Group Culture, in a non-elite and non-exclusive sense, is in delivering its public service mission in a digital firmly at the centre of a new plan to create quality context. product able to attract new generations. We are therefore aware that to ensure Rai’s Of a similar nature is the significant and complex successful future as a media company, it challenge that we have taken-on in relation to will be necessary to continue to change the how we deal with education and school matters. organizational and operational structure while remaining true to our editorial approach. We could make reference to numerous other news, entertainment and sports programmes all of which, in one way or another, guide and support our country which is in need of positive examples and hope to help build a better future. The technology pillar which had been overlooked until recently, has received a significant boost from the complete digitalization of national and regional news programmes, the digitalization and transfer to high definition (HD) of traditional audio-video infrastructures and the digitalization of archives and other initiatives which are progressively redesigning the Company’s production model and processes. In just a few years, Rai has taken significant steps to improve a relevant and appropriately scaled internal control and risk management framework, which facilitates decision-making and helps ensure the safeguarding of corporate assets, the efficiency and effectiveness of business processes, the reliability of financial reporting and compliance with relevant legislation, regulations and internal policies. The Company’s organisational model is evolving from being hierarchical to being process-based, which is considered to be a more suitable model to face the challenges of the digital world. In order to improve coordination,