ANNUAL REPORT

2008 Group’s Consolidated Annual Report – Explanatory Notes
Equity management
The Group’s objectives regarding the management of the Company’s capital are aimed at protecting
the Group’s ability to concurrently ensure shareholders’ return, stakeholders’ interest
and compliance with the covenants, while maintaining an ideal structure of the Company’s capital.
Types of financial risks and correlated hedging activities
Mediaset has defined specific policies for the management of the Group’s financial risks, aimed
at reducing its exposure to exchange rate risks, interest rate risks and liquidity risks. For the
purpose of optimising the structure of management costs and the resources dedicated, this activity
is centralized within parent company Mediaset S.p.A., the company which has been assigned
the task of collecting the information regarding the positions exposed to risk to ensure
the relevant hedging.
Mediaset S.p.A. and Gestevision Telecinco directly operate in their markets of reference, carrying
out a financial risk control and risk management activity for their subsidiaries. The selection
of the financial counterparts is concentrated on those with a high credit rating, while concurrently
ensuring a limited concentration of exposure towards the same.
Exchange rate risk
The Group’s exposure to exchange rate risk stems from the acquisition of television and film
rights in currencies other than the Euro, mainly in US dollars, within the framework of the relevant
areas of operations accomplished by RTI S.p.A, Medusa Film S.p.A. and Gestevision
Telecinco S.A.
In compliance with the Group’s policies, the Group companies have adopted an exchange rate
risk management policy aimed at eliminating the effect of exchange rate fluctuations by predetermining,
at the time of the transaction, the value of recognition of such rights following acquisition.
The exchange rate risk emerges from the early stages of the negotiation regarding the stipulation
of any contract and continues until the payment of the amount due for the acquisition of
the rights. From an accounting standpoint, starting from the contract’s effective date until the
date of recognition of the asset, the Mediaset Group applies the hedge accounting method, including
thorough documentation (hedging relationship) of the risk hedged against, the purposes
and periodic verifications of its effectiveness.
In particular, in the period going from the date of definition of the commitments regarding the
purchases and the subsequent accounting of the hedged television right, the cash flow hedge
method is applied pursuant to IAS 39. Based on this method, as more widely detailed in the
”Summary of the accounting principles and valuation criteria” Section, the effective portion of
the change in the value of the derivative is accounted for in a reserve in Shareholders’ equity,
which is used to adjust the recognition value of the right in the financial statements (basis adjustment),
producing an effect on the income statement when the item hedged against (the
right) is amortised.
Concurrently with the recognition of the right, in the period going from the taking out of a loan
to its reimbursement, due to the termination of the formal coverage of cash flow hedge, the
subsequent accounting is made by natural hedge, the effect of which is reflected on the adjustments
of the exchange rates on the debt and the adjustment of the fair value of the derivative
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