Gruppo Editoriale L Espresso Società per azioni

Gruppo Editoriale L Espresso Società per azioni Annual Report 2008 The Annual Report has been translated from that issued in Italy, from the Italian into the English language solely for the convenience of international readers.

Gruppo Editoriale L Espresso 2008 5 Contents Financial Highlights 9 Report of the Board of Directors at December 31, 2008 Operating performance and consolidated results at December, 31 2008 13 Results by area 14 Subsequent events and outlook 18 Consolidated results at December 31, 2008 19 Results of Parent Company Gruppo Editoriale L Espresso SpA at December 31, 2008 26 Reconciliation between the Parent Company s Financial Statements and the Consolidated Financial Statements 29 Main risks and uncertainties to which the Parent Company and the Group are exposed 29 Other information 31 Proposed allocation of 2008 Net Profit 32 Information required by Consob Regulation no. 11971 35 Report on Corporate Governance 49 Consolidated Financial Statements at December 31, 2008 Consolidated Balance Sheet 70 Consolidated Income Statement 71 Statement of Consolidated Cash Flows 72 Statement of Changes in the Consolidated Shareholders Equity 73 Notes to the Consolidated Financial Statements at December 31, 2008 77 Attachments 128 Certification of the Consolidated Financial Statements pursuant to art. 154 bis of Legislative Decree no. 58 February 24, 1998 135 Report of the Independent Auditors 139 Financial Statements of Parent Company Gruppo Editoriale L Espresso SpA at December 31, 2008 Balance Sheet 142 Income Statement 143 Statement of Cash Flows 144 Statement of Changes in the Shareholders Equity 145 Notes to the Financial Statements of Gruppo Editoriale L Espresso SpA at December 31, 2008 149 Certification of the Financial Statements of Gruppo Editoriale L Espresso SpA pursuant to art. 154 bis of Legislative Decree no. 58 February 24, 1998 199 Report of the Board of Statutory Auditors 203 Report of the Independent Auditors 209 Summary reclassified financial data of subsidiaries 213

Gruppo Editoriale L Espresso 2008 7 Company Gruppo Editoriale L Espresso Società per Azioni Share Capital Euro 61,384,768.20 Tax ID and Rome Company Register no. 00488680588 VAT no. 00906801006 Registered office Rome, Via Cristoforo Colombo, 149 Secondary office Rome, Via Cristoforo Colombo, 90 Board of Directors: Chairman Vice Chairman Managing Director Directors Board of Statutory Auditors: Chairman Statutory Auditors Independent Auditors Carlo De Benedetti Marco Benedetto Monica Mondardini Agar Brugiavini Rodolfo De Benedetti Francesco Dini Sergio Erede Mario Greco Maurizio Martinetti Luca Paravicini Crespi Tiziano Onesti Enrico Laghi Luigi Macchiorlatti Vignat Deloitte & Touche SpA

Gruppo Editoriale L Espresso 2008 9 Financial Highlights Consolidated operating data ( million) 2007 2008 Revenues 1.098 1.026 Gross operating profit 223 143 Operating profit 181 95 Pre-tax profit 163 76 Net profit 96 21 Consolidated financial data ( million) Dec. 31, 2007 Dec. 31, 2008 Net capital employed 811 768 Shareholders' Equity (incl. minority interests) 546 489 Group Shareholders' Equity 535 478 Minority interests 11 11 Net financial position (265) (279) Dividends distributed (67) (69) Personnel 2007 2008 Employees at year-end 3.414 3.344 Average number of employees 3.414 3.426 Main ratios 2007 2008 ROS (Operating profit/revenues) 16,4% 9,3% ROCE (Operating profit/net capital employed) 22,3% 12,4% ROE (Net profit/shareholders' Equity) 17,5% 4,2%

Report of the Board of Directors

Report of the Board of Directors 13 Report of the Board of Directors at December 31, 2008 Operating performance and consolidated results at december 31, 2008 Consolidated results 2007 2008 % change ( million) 2008/2007 Revenues, of which: 1,098.2 1,025.5-6.6% circulation 277.2 276.3-0.3% advertising 657.1 608.2-7.4% add-on products 127.9 114.9-10.2% Gross operating profit 223.4 142.5-36.2% Operating profit 180.6 95.3-47.2% Profit before taxes 163.0 75.7-53.6% Net profit 95.6 20.6-78.4% Dec.31, Dec.31, ( million) 2007 2008 Net financial position (264.9) (278.9) Shareholders Equity before minority interests 546.5 489.3 Group Shareholders Equity 535.4 478.4 minority interests 11.1 10.8 Employees 3,414 3,344 Results of the Espresso Group for the 2008 financial year must be put into perspective in the context of the strong global downturn affecting the economy as a whole and the publishing sector in particular. The already critical state of the publishing sector in the first half of the year has in fact strongly deteriorated in the second half of 2008 as a result of the drastic contraction of advertising investment caused by the ensuing recession. According to data published by Nielsen Media Research, the advertising market as a whole registered in 2008 a 2.8% decline on the previous year (while advertising on the press declined by 7.1%), as a result of a stable first half and a progressive decline in the second half. In the 4th Quarter, advertising spending declined by 9.5% for the market as a whole, and by 13.4% for the press. The contraction of advertising spending affected the Espresso Group whose sales declined consistently. To face the current and expected future evolution of the market, the Group adopted a number of measures aimed at containing costs, consisting primarily of a reduction in promotional campaigns and personnel costs, and the launch of corporate reorganization plans. Once fully operational, savings resulting from these measures will amount to 47 million per year, and will imply extraordinary charges amounting to 25.6 million ( 22.1 million at the gross operating profit level). The entire amount of extraordinary charges was recorded in 2008, against only a portion ( 15.7 million) of expected future cost savings. ***** Consolidated net revenues of the Espresso Group amounted in 2008 to 1,025.5 million, down 6.6% on 1,098.2 million in 2007. In the year, advertising revenues of the Group amounted to 608.2 million, down 7.4% on 2007, due in particular to lower sales registered by newspaper la Repubblica and by the Group s periodicals, in addition to the decline in advertising revenues of the radio and television sector. Advertising on local newspapers was instead more stable, while advertising sales of the Group s Internet sites grew again strongly. Excluding revenues from add-on products, circulation revenues amounted to 276.3 million, in line with the previous year. Circulation of la Repubblica and L espresso declined however significantly on the previous year, due primarily to the decision to eliminate or reduce a number of initiatives with a high promotional content but whose contribution to revenues was marginal. Revenues from the sale of add-on products declined by 10.2% to 114.9 million, a performance to be deemed as very positive considering the strong market contraction scenario in which it was achieved. Consolidated gross operating profit amounted to 142.5 million, down 36.2% on 223.4 million in 2007. Such performance reflects the contraction of

14 Report of the Board of Directors the advertising market and the recording of 22.1 million in non-recurring reorganization charges, offset only in part by savings already achieved in the year as a result of cost reduction measures implemented. The decline affected all sectors of activity and is due to a generalized reduction in advertising revenues affecting all of the Group s media. Consolidated net profit amounted, after the recording of 13.3 million in extraordinary tax accruals, to 20.6 million, down from 95.6 million in 2007. At December 31, 2008, consolidated net financial debt amounted to 278.9 million, up 14.1 million on 264.9 million at the end of 2007. Cash generated from operating activities amounted to 111.4 million and was more then offset by the payment of 68.8 million in dividends for the 2007 financial year, capital expenditure, which absorbed 47.2 million, and the acquisition of 4,385,000 treasury shares for 9.1 million. At December 31, 2008, the Group employed 3,344 persons, 70 less than the 3,414 it employed at the end of the previous year, reflecting the first effects of reorganization plans being implemented. Results by area Repubblica Division The Repubblica Division includes the development, production and marketing of publishing products relating to newspaper la Repubblica (national newspaper, 9 local editions, supplements and monthly magazines Velvet and XL), in addition to the Repubblica.it Internet site. Operating highlights 2007 2008 % change ( million) 2008/2007 Revenues 524.6 491.7-6.3% Operating and personnel costs (458.6) (447.6) -2.4% Gross operating profit 66.0 44.0-33.3% Depreciation, amortization and write-downs (12.9) (12.9) - Operating profit 53.1 31.2-41.3% Employees 712 700 Figures for the division include the share in revenues and costs of the parent company that may not be attributed to a specific activity In 2008, newspaper la Repubblica confirmed, for the eighth consecutive poll, its ranking as the most read information newspaper in Italy, with 3.1 million readers, 4.2% more than in the previous year. Internet site Repubblica.it continued to be enriched with new multimedia content, modern interactive instruments and stronger coverage of local news. In January 2009 the site registered 13 million unique users (an average of over 1.1 million per day), consolidating its leadership in the market. Particular attention was devoted to the development of new editorial products distributed on mobile phones, including the latest generation of smartphones. The Repubblica Mobile service improved its offer with news and service information (cinema, dining out, etc.) which vary according to the place in which the user is located at the time of the request. In December, the application was the most visited mobile news center, with 185 thousand unique monthly users and 2.1 million page views.

Report of the Board of Directors 15 ***** Results of the Repubblica Division for 2008 were strongly affected by the sharp downturn affecting the national press. Circulation of major domestic newspapers declined on the previous year. In the first ten months of 2008, information dailies having a circulation of over 100,000 copies registered a 3.6% decline on the corresponding period in the previous year. Similarly, sales of add-on products sold in conjunction with newspapers registered, in a continuing declining segment, a further contraction, after a long period of strong growth protracted until 2005. Advertising sales of national newspapers registered in the year an 8.7% decline (source: FCP), which was almost double in the last quarter, in which they were down 15%. Advertising on the web continued instead to grow, registering a 13.9% increase on 2007, though still representing in absolute terms a small portion of total advertising revenues, unable to compensate to a significant degree the decline of advertising on the press. ***** In this market scenario, total revenues of the division declined by 6.3% on the previous year, to 491.7 million. Circulation revenues, net of revenues from add-on products, were stable on 2007 (down 0.9%). Circulation of la Repubblica declined instead significantly (by -10.4%, to an average of 557 thousand copies per issue) due primarily to the decision to modify a number of marketing initiatives, among which educational program Repubblica@Scuola for which the distribution of the printed copies of the newspaper was replaced with its digital version. Revenues from the sale of add-on products declined slightly on the previous year (down 3.1%), despite the strong downturn in the market. This was made possible thanks to the continuing success of comic books series Tex, launched in 2007, and the overall success of new initiatives and in particular the Corso di inglese (English course), cinema and theater DVD series. Advertising revenues registered an overall decline of 10.1%, with a strong contraction of national commercial ads of la Repubblica and periodicals sold in conjunction with the newspaper, while advertising on Internet site Repubblica.it increased (up 23.5%). Gross operating profit of the division amounted to 44 million, down 33.3% on 66 million in 2007. In view of the reduction in turnover, a number of cost reduction measures allowing to offset in part the decline in revenues were implemented. Periodicals Division The Periodicals Division includes weekly magazine L espresso, monthly magazine National Geographic and periodicals Limes, Micromega and Guide de L espresso, in addition to the respective Internet sites. Operating highlights 2007 2008 % change ( million) 2008/2007 Revenues 94,2 82,1-12,8% Operating and personnel costs (81,6) (75,6) -7,3% Gross operating profit 12,6 6,5-48,6% Depreciation, amortization and write-downs (1,1) (1,1) -0,4% Operating profit 11,5 5,4-53,2% Employees 118 112 Figures for the division include the share in revenues and costs of the parent company that may not be attributed to a specific activity In 2008 the Group s periodicals reported a growth in readership. In particular, weekly magazine L espresso reached an average 2.4 million readers, representing a 5.3% increase on 2007. As for all Group publications, the Internet site of L Espresso has grown in importance through an enhanced offer, allowing users to read and comment the anticipation of articles to be published in the printed edition and to hold debates with authors on issues selected by readers. In January 2009, the number of unique users of the site exceeded 1.2 million and page views were over 6.1 million.

16 Report of the Board of Directors ***** Periodicals as a whole registered at the end of October 2008 a 5.9% decline in circulation across all segments of the market. Advertising revenues for the sector declined overall by 5.5%, with news magazines registering a much sharper decline of 11.6% (source: FCP). ***** Total revenues of the Division declined in 2008 to 82.1 million, a 12.8% reduction on the previous year. Net of the contribution of add-on products, circulation revenues registered a slight decline (down 1.1%). In terms of circulation, the Group s main periodical, L espresso, was the most affected, registering a 6.8% decline to an average of 369 thousand copies per issue, caused by the decision taken in the year to suspend some distribution methods that were scarcely remunerative. The other publications registered a stable circulation, averaging 118 thousand copies per issue for National Geographic, and 13 and 14 thousand copies respectively for Limes and Micromega. Advertising sales declined by 14.5%, reflecting the downturn in the market. In view of the negative situation, the Group implemented, already in the first half of the year, a number of measures aimed at reducing production costs and inefficient marketing initiatives. These measures allowed to limit the impact of the reduction in revenues on the gross operating profit of the division, that declined from 12.6 million in 2007, to 6.5 million in 2008. Local newspapers The Local newspapers Division includes 16 local newspapers and a bi-weekly magazine, in addition to the respective Internet sites. Operating highlights 2007 2008 % change ( million) 2008/2007 Revenues 276.7 270.5-2.3% Operating and personnel costs (207.0) (212.6) +2.7% Gross operating profit 69.7 57.8-17.0% Depreciation, amortization and write-downs (12.9) (15.7) +21.6% Operating profit 56.8 42.2-25.8% Employees 1,277 1,242 The Group s local newspaper network reached in 2008 an average of over 3.1 million readers per day, posting a 7% increase in readership on the previous year. A good performance was also registered by the related Internet sites which have now steadily exceeded a monthly average of 1 million unique users, with peaks of over 1.5 million users. Success with the public is allowing advertising online to take off, with sales albeit still small in absolute terms more than doubling on the previous year thanks in particular to the contribution of classified ads (commercial ads and personnel recruitment). ***** The local newspapers market has also experienced a downturn, though less marked than the national newspaper segment, both in terms of circulation and advertising sales. Circulations of local newspapers at the end of October recorded a 1.2% reduction on previous year, while advertising revenues for the whole year declined by 5.7% on 2007 (source: FCP). ***** Total revenues of the Group s local newspapers amounted in 2008 to 270.5 million, down 2.3% on the previous year. Circulation revenues remained stable and the slight decline in total revenues (down 1.6% on 2007) is due to lower sales of add-on products. Circulation of the Group s local newspapers averaged 467 thousand copies per issue, as compared with 473 thousand copies in 2007. Circulation increased for Il Centro (up 2%), Trentino Alto Adige newspapers (up 0.6%), La Città (up 0.9%) and Nuova

Report of the Board of Directors 17 Sardegna (up 1.6%), while it declined slightly for Emilia Romagna s (Gazzetta di Modena, Gazzetta di Reggio and Nuova Ferrara) and Tuscany s newspapers (Il Tirreno), affected by a more competitive environment. Advertising revenues were in line with the previous year (down 0.1%), registering a slight increase in local advertising (up 1.3%), allowing to offset the 10.1% decline in national advertising. These results appear all the more positive when compared with the performance of the related market, described above. Despite the better than the market performance, gross operating profit of the Group s local newspapers declined from 69.7 million in 2007 to 57.8 million in 2008, as a result of the slight decline in revenues coupled with an increase in operating costs and depreciation charges, which grew primarily due to extraordinary charges on streamlining plans to be introduced. Radio The Radio sector includes the Group s three national radio stations Radio Deejay, Radio Capital and m2o, and the respective Internet sites. Operating highlights 2007 2008 % change ( million) 2008/2007 Revenues 86.1 79.0-8.2% Operating and personnel costs (42.0) (47.4) +12.8% Gross operating profit 44.1 31.6-28.2% Depreciation, amortization and write-downs (3.9) (4.4) +14.3% Operating profit 40.2 27.2-32.3% Employees 167 167 According to Audiradio figures for 2008, the Group s three radio stations had a contradicting performance: Radio Deejay recorded an average daily audience of 5.2 million listeners (13 million in the week), confirming its ranking, despite the decline in audience, as one of the leading Italian private radio stations. Radio m2o s audience continue instead to grow, reaching an average daily audience of one and a half million listeners (up 3.7% on one year ago), and an average weekly audience of 3.7 million (up 4.4%), while Radio Capital s average daily audience declined to 1.6 million listeners, 5.9 million in the week. The acceleration imparted in the year to multimedia activities, developed in a complementary manner by exploiting synergies with the radio stations, allowed to strengthen the role of the three radio stations on all platforms on which products are distributed (ranging from the Internet to mobile phones and satellite), achieving strong results in areas such as web streaming, podcasts and new applications for smartphones. Radio Deejay s social network has grown to reach over 400 thousand users in the month and an official channel of the radio station, allowing the exchange and broadcast of video content among members of the of the Internet community, has recently been launched on You Tube. The offer of products on mobile phones has also developed steadily through the availability of podcasts on traditional mobile phones and the launch of the new ideejay application for smartphones allowing users to listen to the radio station live, consult rankings, videos and photos, in addition to being able to interact with programs being broadcasted. A few weeks from the launch, over 100 thousand downloads were made. ***** The radio market had a performance in line with the previous year, both in terms of audiences and advertising revenues, which have however shown a continuing decline, which has become steeper in the last quarter in which advertising revenues registered a 6.7% decline on the corresponding period in the previous year (source: FCP). ***** After many years in which they registered a significant growth, in 2008 the Group s radio stations recorded a decline in revenues due to both the stronger competitive scenario and the downturn in the sector.

18 Report of the Board of Directors In 2008, advertising revenues of the radio station declined by 8.2% on 2007. With regard to costs, 2008 absorbed the effect of the structural increase in broadcasting costs (the average number of broadcasting stations in operation grew from 891 in 2007, to 916 in 2008), of higher costs incurred in the enrichment of the programs broadcasted by the three radio stations and larger promotional costs of Radio Deejay. Despite the critical economic situation, gross operating profit for 2008 was equal to 31.6 million, which, though declining by 28.2% on the previous year, still reflects a high operating margin (40% of sales). Rete A - All Music Operating highlights 2007 2008 % change ( million) 2008/2007 Revenues 22.7 18.2-19.6% Operating and personnel costs (23.3) (27.2) +16.6% Gross operating profit (0.6) (9.0) n.s. Depreciation, amortization and write-downs (3.1) (4.8) +54.7% Operating profit (3.7) (13.7) n.s. Employees 105 77 After investing in the enhancement of the image and content of the television station, and reporting negative results as a consequence of lower than expected advertising revenues, in the second half of 2008 the TV station simplified its programming schedule, suspending all main entertainment programs in favor of a prevalently musical programming. The structure was also streamlined to bring it into line with reduced personnel requirements. With regard to investments in network infrastructure, the transition from analogue to digital terrestrial television was started in the year with the coming into operation of digital broadcasting stations is Sardinia, the first Italian region in which analog television was switched off. In the last quarter of 2008, Rete A has therefore had to bear the investment for the activation in the region of the multiplexes for both frequencies assigned to it. Based on the schedule set by the competent ministry, the digitalization process will continue in 2009 involving Valle d Aosta, Western Piemonte, Trentino-Alto Adige, Lazio and Campania regions. Once the switch-off of analog television is complete, Rete A will control over ten channels covering the whole national territory. ***** The Group s television sector reported a 19.6% decline in revenues as advertising revenues were negatively affected, in addition to the negative economic environment, by the discontinuity of the programming schedule in the year. At the same time, costs increased by 16.6% due essentially to extraordinary charges on the corporate reorganization carried out in the second half of the year, which will result in a significant reduction in costs in 2009. As a result of the above described factors, the television segment reported a gross operating loss of 9 million. Subsequent events and outlook The deepening economic crisis and the increasingly negative outlook for 2009 determined a drastic reduction in advertising investments from the last months of 2008. The first months of 2009 point to a continuing negative trend of advertising expenditure without showing any possible sign of recovery in the short-term, which makes forecasts very difficult. The strong deterioration of results and the critical outlook impose the adoption of more effective cost reduction measures with the aim of ensuring the continuity and the development of the Group s media, whose value continues to be confirmed by the key positions they occupy in the respective markets. With this end, management is currently devoted to the implementation of cost reduction plans already launched, and to the formulation of new measures to achieve a more efficient and effective corporate and organizational structure. Top management intends moreover to strengthen the Group s management action by monitoring directly critical areas, as already the case of its advertising concessionaire.

Report of the Board of Director 19 Consolidated results at december 31, 2008 Consolidated Income Statement ( million) 2007 2008 Revenues 1,098.2 1,025.5 Change in inventories 0.7 (2.6) Other operating income 17.6 17.7 Purchases (167.3) (150.1) Services received (422.5) (388.0) Other operating charges (20.5) (30.5) Investments valued at equity 1.2 1.1 Personnel costs (284.0) (330.7) Depreciation, amortization and write-downs (42.8) (47.2) Operating profit 180.6 95.3 Financial income (expense) (17.6) (19.6) Pre-tax profit 163.0 75.7 Income taxes (66.5) (54.5) Net profit 96.5 21.2 Minority interests (0.9) (0.6) GROUP NET PROFIT 95.6 20.6 Revenues and operating results were discussed in detail in the first part of the present report, to which we make reference for a more detailed analysis.

20 Report of the Board of Director Consolidated Balance Sheet ASSETS Dec. 31, Dec. 31, ( million) 2007 2008 Intangible assets with an indefinite useful life 649.2 656.1 Other intangible assets 4.0 4.3 Intangible assets 653.2 660.4 Property, plant and equipment 220.4 221.0 Investments valued at equity 26.9 27.8 Other investments 4.1 2.6 Non-current receivables 1.9 1.5 Deferred tax assets 45.6 47.6 NON-CURRENT ASSETS 952.1 960.8 Inventories 30.5 27.7 Trade receivables 303.3 258.3 Marketable securities and other financial assets 0.1 0.1 Tax receivables 23.0 20.8 Other receivables 27.6 23.5 Cash and equivalents 152.1 120.7 CURRENT ASSETS 536.5 451.1 TOTAL ASSETS 1,488.6 1,411.9 LIABILITIES AND SHAREHOLDERS EQUITY Dec. 31, Dec. 31, ( million) 2007 2008 Share capital 65.2 61.4 Reserves 310.4 245.9 Retained earnings (loss carry-forwards) 64.2 150.6 Net profit (loss) 95.6 20.6 Group Shareholders Equity 535.4 478.4 Minority interests 11.1 10.8 SHAREHOLDERS EQUITY 546.5 489.3 Financial debt 396.5 379.8 Provisions for risks and charges 10.8 24.1 Employee termination indemnities and other retirement benefits 92.6 90.9 Deferred tax liabilities 102.9 108.0 NON-CURRENT LIABILITIES 602.9 602.9 Financial debt 20.5 19.9 Provisions for risks and charges 15.5 34.7 Trade payables 187.0 147.6 Tax payables 24.7 19.3 Other payables 91.4 98.3 CURRENT LIABILITIES 339.2 319.8 TOTAL LIABILITIES 942.1 922.7 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 1,488.6 1,411.9

Report of the Board of Director 21 Balance Sheet Intangible assets amount to 660.4 million, up 7.2 million on December 31, 2007 ( 653.2 million) due primarily to investments in radio broadcasting frequencies made by subsidiary Elemedia ( 5.9 million) and Rete A ( 1 million). Property, plant and equipment amount to 221 million, up 0.6 million on December 31, 2007 ( 220.4 million). Net capital expenditure made in the year, equal to 45.5 million, was in fact offset almost in full by the 40.8 million depreciation expense for the period and by 4.1 million in write-downs relating primarily to printing equipment and other production equipment no longer in use. Investments amount to 30.3 million, in line with 31 million at December 31, 2007. Non-current receivables amount to 1.5 million and consist of security deposits and tax receivables on advances paid on employee termination indemnities. The item is in line with December 31, 2007. Deferred tax assets amount to 47.6 million and include temporary differences between amounts recorded in the balance sheet and those recognized for tax purposes. The 2 million increase is due primarily to the higher taxes payable on risk and personnel provisions that are temporarily not deductible, only partly offset by the 6.2 million drawdown of the provision by subsidiary Elemedia to offset taxes for the period. Inventories amount to 27.7 million and include inventories of paper, printing material, publications and products sold optionally with publications. The 2.8 million decline on December 31, 2007 is due primarily to lower stocks of add-on products. Trade receivables amount to 258.3 million, down 44.9 million on December 31, 2007 due primarily to lower advertising sales in the last quarter of the year with respect to the same period in 2007. Tax receivables amount to 20.8 million, down 2.1 million on 23 million at December 31, 2007 due to the use of tax credits on investments (as per Law no.62/2001, the so-called Publishing Law) to offset taxes due for the year. Other receivables amount to 23.5 million and include 5 million of grants covering part of the interest payments on subsidized loans stipulated at the end of 2005 ( 8.6 million at December 31, 2007); advances to suppliers, agents and freelance workers; accrued income relating to rent and rights on licenses for the sale of add-on products to be published in the first months of 2009. Cash and equivalents, held in the form of short-term deposits, decline by 31.4 million on December 31, 2007 to 120.7 million. Cash flow generated by operations ( 111.4 million) was more than absorbed by the payment of 68.8 million in dividends, the acquisition of treasury stock for 9.1 million, the scheduled repayment 16.9 million in loans, and a net outflow of 47.2 million for investing activities.

22 Report of the Board of Director Shareholders Equity at December 31, 2008 amounted to 489.3 million ( 546.5 million at December 31, 2007), of which 478.4 million belonging to the Group ( 535.4 million at the end of 2007), and 10.8 million relating to minority interests ( 11.1 million at December 31, 2007). In compliance with the resolution taken by the Shareholders Meeting of April 17, 2008, a total of 25,215,000 treasury shares were annulled and the capital stock was thus reduced from 65,167,018.20 to 61,384,768.20. As a result of this operation, the Reserve for treasury stock, recorded under IFRS as a reduction of the Shareholders Equity, was reduced by 95.3 million, against a parallel reduction of 3.8 million in the share capital, the 80.5 million reduction of the Share premium reserve, thus being reduced to zero, and the 11 million write down of the Voluntary reserve. As a result of the annulment, treasury shares held by the parent at December 31, 2008, whose value is subtracted from the Shareholders Equity, were 6,635,000, representing 1.62% of the share capital. Non-current financial payables amounted to 379.8 million and include 300 million of bonds issued on October 27, 2004 and subsidized 10-year loans extended in the last quarter of 2005. Current and non-current risk provisions amounted to 58.9 million, up 32.6 million on 26.3 million at the end of 2007. The increase is due primarily to accruals for extraordinary charges linked to corporate reorganization plans launched in 2008, in addition to a 13.3 million extraordinary tax accrual. For more detail we refer to the related notes in the financial statements. Employee termination indemnities and other retirement benefits amount to 90.9 million ( 92.6 million at December 31, 2007). The 1.7 million decline is due primarily to the employee termination indemnities and fixed indemnities for managers of newspapers paid out in the year ( 8.5 million), offset only in part by the financial effect of the valuation of provisions (interest cost) and the discounted-back value of accruals relating to Fixed Indemnities (service cost), in addition to the cost of phantom stock options, equal in total to 6.8 million. Deferred tax liabilities amount to 108 million ( 102.9 million at December 31, 2007) and include 38.8 million relating to the tax impact of the recording of TV broadcasting frequencies of All Music. The 5.1 million increase is due primarily to the deduction of accumulated amortization on intangible assets with an indefinite useful life. Current financial debt amounts to 19.9 million, down 0.6 million on December 31, 2007, due to the termination of some leasing contracts at the end of 2007. Trade payables amount to 147.6 million, down 39.5 million due primarily to the containment of production costs (paper and printing) of newspapers and periodicals of the Group, to cost savings in the production and launch of add-on products, to lower commissions due by the advertising concessionaire to agents and media centers, and to different payment terms. Tax payables amount to 19.3 million, declining by 5.4 million due to lower Ires and Irap (corporate tax and regional tax on productive activities) and VAT payables. Other payables amount to 98.3 million, up 6.8 million on 91.4 million at December 31, 2007 due primarily to higher payables to employees as a result of reorganization plans underway.

Report of the Board of Director 23 Changes in the Consolidated Net Financial Position ( million) 2007 2008 SOURCES OF FUNDS Net profit (loss) for the period, including minority interests 96.5 21.2 Depreciation, amortization and write-downs 42.8 47.2 Accruals to provisions for stock option costs 2.0 0.4 Net change in provisions for personnel costs (15.1) (1.7) Net change in provisions for risks and charges 2.4 32.6 Losses (gains) on disposal of fixed assets (0.8) (1.5) Write down (revaluation) of equity investments - 1.4 Adjustment for investments valued at equity (0.2) (0.9) Cash flow from operating activities 127.6 98.7 Decrease (Increase) in non-current receivables 1.2 0.4 Increase in payables / Decrease in deferred tax assets 15.1 3.1 Increase in payables/ Decrease in tax receivables 16.2 (3.3) Decrease (Increase) in inventories 5.1 2.8 Decrease (Increase) in trade and other receivables (19.6) 49.0 Increase (Decrease) in trade and other payables 19.6 (33.1) Changes in current assets 37.6 19.0 CASH FLOW FROM OPERATING ACTIVITIES 165.2 117.7 Net divestments in equity investments - 0.1 Increases in capital and reserves 0.3 - Other changes 0.0 - TOTAL SOURCES OF FUNDS 165.6 117.8 USES OF FUNDS Net investment in fixed assets (41.7) (53.0) Net equity investments (0.3) - (Acquisition) sale of treasury stock (58.6) (9.1) Dividends (paid) (67.2) (68.8) Other changes - (0.9) TOTAL USES OF FUNDS (167.7) (131.9) Financial surplus (deficit) (2.1) (14.1) BEGINNING NET FINANCIAL POSITION (262.7) (264.9) ENDING NET FINANCIAL POSITION (264.9) (278.9) Changes in the net financial position are commented in the paragraph that follows.

24 Report of the Board of Director Consolidated Statement of Cash Flows and Net Debt The comparison between financial flows from January 1, 2008 and December 31, 2008 and those for the same period in 2007 are reported in the table that follows. ( million) 2007 2008 OPERATING ACTIVITIES Net profit (loss) for the period, including minority interests 96.5 21.2 Adjustments: - Depreciation, amortization and write-downs 42.8 47.2 - Accruals to provisions for stock option costs 2.0 0.4 - Net change in provisions for personnel costs (15.1) (1.7) - Net change in provisions for risks and charges 2.4 32.6 - Losses (gains) on disposal of fixed assets (0.8) (1.5) - Adjustments to the value of financial assets - 1.4 - Adjustment for investments valued at equity (0.2) (0.9) - Dividends (received) - (0.1) Cash flow from operating activities 127.6 98.6 Changes in current assets and other flows 36.0 12.8 CASH FLOW FROM OPERATING ACTIVITIES 163.7 111.4 of which: Interest received (paid) (13.7) (13.8) Income taxes received (paid) (46.2) (39.7) INVESTING ACTIVITIES Outlay for purchase of fixed assets (40.5) (55.5) Outlay for purchase of investments (2.4) - Received on disposal of fixed assets 2.0 2.7 Public grants received 0.2 5.5 Dividends received - 0.1 CASH FLOW FROM INVESTING ACTIVITIES (40.7) (47.2) FINANCING ACTIVITIES Increases in capital and reserves 0.3 - (Acquisition) sale of treasury stock (58.6) (9.1) Issue (repayment) of other financial payables (17.4) (16.9) Dividends (paid) (67.2) (68.8) Other changes (0.3) (0.8) CASH FLOW FROM FINANCING ACTIVITIES (143.1) (95.7) Increase (decrease) in cash and cash equivalents (20.2) (31.5) Cash and cash equivalents at beginning of the period 172.3 152.1 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 152.1 120.7 The lower cash flow from operating activities for 2008 (down 52.3 million) on 2007 was due, in addition to the decline in the operating results, to changes in deferred tax assets and of VAT payables, in addition to the rise in trade and other receivables. In 2007, 3.8 million of deferred tax assets were recorded in compliance with new Employee Termination Indemnity rules and the provision for deferred tax assets of subsidiary Elemedia was drawn down by 12.3 million to offset taxes due in the period. On the other hand, financial

Report of the Board of Director 25 year 2007 was affected by the net 10.2 million impact of the decline in provisions for deferred taxes (both tax assets and liabilities) due to the restatement of the same to adjust them to new IRES (corporate tax) and IRAP (regional tax on productive activities) tax rates. In 2008 instead, deferred tax assets increase by 8.8 million due to higher taxes payable on temporarily non-deductible risk and personnel provisions, offset only in part by the drawdown of 6.2 million of the provision by subsidiary Elemedia. Accruals and uses of the deferred tax provision in the year resulted a 8.6 million decline in cash flow. The 3.3 million decline in tax payables/receivables in 2008 is due primarily to lower IRES (corporate tax)/irap (regional tax on productive activities) payables, down 4.5 million, and to lower VAT payables, down 5.2 million, only in part offset by the 6.4 million use/collection of tax credits and other tax receivables. The lower flow as compared to that generated in 2007 (down 19.5 million) can be traced to a higher use/collection of tax receivables in 2007, to higher VAT payables accrued in 2007 due in part to the first-time inclusion in the Group s VAT consolidation procedure of subsidiaries Rete A and All Music and, finally, to a different amount of tax payables at the end of 2007. Trade payables and other payables decline between January 1 and December 31, 2008 by 33.1 million due to lower costs for the production and launch of add-on products with respect to 2007, and to the performance of the different business areas. In 2007, instead, trade payables had increased by 19.6 million due to the existence at the end of the year of Employee Termination Indemnities accrued but not yet paid out to pension funds as provided by applicable norms, and to higher operating costs due to the larger volume of add-on products distributed in the last quarter of 2007. Finally, fluctuations in trade receivables in the two years under examination are closely correlated with the performance of the advertising market, already commented in detail in the first part of the present report. Cash flow from investing activities was is negative by 47.2 million due primarily to capital expenditure made in the year. In 2008 new radio and television broadcasting frequencies were acquired and existing low and high frequency broadcasting equipment were upgraded ( 15.3 million), investments were made in the rotary presses and other printing equipment of la Repubblica, local newspapers and magazines ( 24.6 million), while offices, editorial offices and radio recording studios were acquired and renovated ( 9.9 million), information systems were updated, networks upgraded and projects for the renewal of the editorial system were undertaken ( 6.2 million). Cash flow from financing activities absorbed resources amounting to 95.7 million. In the year, dividends payments amounted to 68.8 million while 4,385,000 shares of the company were acquired for 9.1 million, and 16.9 million of loans were repaid.

26 Report of the Board of Director The table that follows shows the breakdown of the net financial position of the Group. ( million) Dec. 31, Dec. 31, 2007 2008 Financial receivables from Group companies - - Financial payables to Group companies - - Cash and bank deposits 152.1 120.7 Current account overdrafts (0.0) (0.0) Net cash and cash equivalents 152.1 120.7 Marketable securities and other financial assets 0.1 0.1 Bond issue (307.9) (307.2) Other bank debt (107.8) (91.7) Other financial debt (1.4) (0.7) Other financial assets (liabilities) (417.0) (399.6) NET FINANCIAL POSITION (264.9) (278.9) ) Results of Parent Company Gruppo Editoriale L Espresso SpA at December 31, 2008 Income Statement ( million) 2007 2008 Revenues 618.8 573.7 Change in inventories 0.4 (1.7) Other operating income 8.0 8.7 Purchases (113.5) (100.5) Services received (311.8) (288.6) Other operating charges (8.9) (12.0) Personnel costs (109.1) (129.1) Depreciation, amortization and write-downs (14.0) (14.0) Operating profit 70.0 36.5 Financial income (expense) (15.3) (14.0) Dividends 135.5 55.3 Pre-tax profit 190.2 77.8 Income taxes (24.0) (28.2) NET PROFIT 166.2 49.7

Report of the Board of Director 27 Balance Sheet ASSETS Dec. 31, Dec. 31, ( million) 2007 2008 Intangible assets with indefinite useful life 220.7 220.7 Other intangible assets 2.2 2.5 Intangible assets 222.8 223.2 Property, plant and equipment 60.9 60.1 Investments 391.9 400.5 Non-current receivables 0.4 0.4 Deferred tax assets 10.9 14.9 NON-CURRENT ASSETS 686.9 699.0 Inventories 25.4 22.6 Trade receivables 125.5 101.4 Tax receivables 18.4 14.8 Other receivables 11.4 10.9 Cash and cash equivalents 224.8 196.2 CURRENT ASSETS 405.4 346.0 TOTAL ASSETS 1,092.3 1,045.0 LIABILITIES AND SHAREHOLDERS EQUITY Dec. 31, Dec. 31, ( million) 2007 2008 Share capital 65.2 61.4 Reserves 80.1 86.1 Retained earnings (loss carry-forwards) 64.2 150.6 Net profit (loss) 166.2 49.7 SHAREHOLDERS EQUITY 375.6 347.7 Financial payables 333.0 327.3 Provisions for risks and charges 5.5 18.5 Employee severance and other retirement benefits 41.0 40.2 Deferred tax liabilities 39.7 43.0 NON-CURRENT LIABILITIES 419.2 429.1 Financial payables 125.9 107.5 Provisions for risks and charges 4.0 11.6 Trade payables 115.6 90.2 Tax payables 10.4 11.8 Other payables 41.6 47.1 CURRENT LIABILITIES 297.5 268.2 TOTAL LIABILITIES 716.7 697.2 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,092.3 1,045.0

28 Report of the Board of Director Statement of Cash Flows and Net Debt The comparison between financial flows from January 1, 2008 and December 31, 2008 and those for the same period in 2007 are reported in the table that follows. ( million) 2007 2008 OPERATING ACTIVITIES Net income (loss) for the period, including minority interests 166.2 49.7 Adjustments: - Depreciation, amortization and write-downs 14.0 14.0 - Accruals to provisions for stock option costs 2.0 0.4 - Net change in provisions for personnel costs (6.6) (0.8) - Net change in provisions for risks and charges (0.3) 20.7 - Losses (gains) on disposal of fixed assets (0.0) (0.0) - Adjustments to the value of financial assets - 1.4 - Dividends (received) (135.5) (55.3) Cash flow from operating activities 39.8 30.0 Changes in current assets and other flows 11.3 9.9 CASH FLOW FROM OPERATING ACTIVITIES 51.1 39.9 of which: Interest received (paid) (13.6) (11.4) Income taxes (paid) received (19.6) (13.0) INVESTING ACTIVITIES Outlay for purchase of fixed assets (8.0) (13.7) Outlay for purchase of investments (1.7) (10.0) Received on disposal of fixed assets 1.6 0.0 Public grants received - 1.2 Dividends received 135.5 55.3 CASH FLOW FROM INVESTING ACTIVITIES 127.4 32.8 FINANCING ACTIVITIES Increases in capital and reserves 0.3 - (Acquisition) sale of treasury stock (58.6) (9.1) Issue (repayment) of other financial debt (5.9) (5.0) Dividends (paid) (67.2) (68.8) Other changes 0.0 0.0 CASH FLOW FROM FINANCING ACTIVITIES (131.3) (82.9) Increase (decrease) in cash and cash equivalents 47.2 (10.2) Cash and cash equivalents at beginning of the period 60.2 107.4 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 107.4 97.2 The operating performance was described in the section on individual divisions to which we refer. Below we discuss the financial performance of the Group. Capital expenditure of the parent company in 2008 amounted to 13.7 million and consisted primarily in investments for the optimization of the operation of new rotary presses and their technological upgrade, the development of editorial systems of la Repubblica and L espresso,

Report of the Board of Director 29 the development of information systems and network infrastructure, in addition to ordinary maintenance work at the editorial offices. At December 31, 2008, financial debt of the parent company amounted to 238.6 million, up slightly from 234.1 million at December 31, 2007. The cash flow from operations, amounting to 39.9 million, together with the collection of 55.3 million in dividends from subsidiaries were able to offset almost in full capital expenditure made in the year, described above, the payment of 68.8 million in dividends, and the outlay of 9.1 million for the purchase of treasury stock, the planned repayment of 5 million in bank loans, and the payment of 10 million to cover subsidiary s losses. At the end of December, the Group employed 966 persons, 6 less than at December 31, 2007. Reconciliation between the Parent Company s Financial Statements and the Consolidated Financial Statements ( thousand) Net profit Shareholders Equity at 2007 2008 Dec. 31, 2007 Dec. 31, 2008 Parent company s financial statements 166,162 49,669 375,594 347,719 Netting of intragroup dividends (141,147) (66,100) - - Shareholders Equity and net profit of subsidiaries 62,963 33,512 372,390 350,529 Netting of carrying value of consolidated subsidiaries 475 2,745 (449,835) (457,827) Goodwill of publications, trademarks and frequencies 6,825-208,305 208,305 Effect of valuation on equity of affiliated companies 238 884 26,866 27,750 Other consolidation adjustments 82 (86) 2,045 1,969 Consolidated Financial Statements 95,598 20,624 535,365 478,445 Main risks and uncertainties to which the Parent Company and the Group are exposed The main risk factors to which the Group is exposed, linked to the publishing sector, can be classified as follows: general economic risk; operating risks; financial risks. General economic risk The operations of the Group and its financial situation is influenced by the various factors affecting the general economic outlook. In particular, the economic downturn and the current uncertain outlook for the short and medium term had a negative impact on household spending and investments made by businesses and, as a result, on the advertising market. The contraction in orders and sales spurred by a decline in consumption induced in fact companies to postpone the launch of new products and to reduce advertising spending. In the current market situation in which the strong decline in advertising sales and a smaller decline in circulations are causing a marked reduction in margins, the Group reacted by implementing cost reduction measures and devising new measures implying the future adoption of more effective measures aimed at ensuring the continuity and development of the Group s assets.

30 Report of the Board of Director Operating risks Risk of fluctuations in paper prices As it is active in the publishing sector, the Group acquires large quantities of paper and is therefore particularly exposed to fluctuations in the price of paper. To achieve a more efficient management of paper purchases and to strengthen its bargaining position with counterparts, thus promoting competition among suppliers, the management of paper purchases for the Group is centralized. In the past, the Group stipulated a number of paper swap contracts on a portion of its paper needs. As, however, it assessed their ineffectiveness in the medium term, the Group has decided to discontinue the use of such instruments. Credit risk The credit risk exposure of the Group relates to trade and financial receivables. Due to the sector in which it operates, the Group is not subject to significant credit risk on trade receivables. Though there are no significant concentrations of such risks, the Group however adopts operating procedures that bar the sale of publications, advertising spaces and other services to customers that do not possess an adequate risk profile or provide collateral guarantees. Despite these procedures, it is not possible to rule out that in the current market conditions a number of customers may fall behind with payments or not honor them altogether. The Group has therefore accrued a congruous provision for doubtful accounts. With regard to financial receivables, investments in short-term financial instruments and trading in derivatives are carried out only with banks that possess a high credit standing. Legal risks, risk of compliance with and changes in regulations for the sector It cannot be ruled out that the Group may be required to face liabilities resulting from legal and tax litigation of various nature. The Group has consistently accrued adequate amounts to provision for risks and charges recorded in the financial statements (see the related section in the notes). The Group has adopted a set of rules constituting a Code of Conduct that are transmitted to all employees on an ongoing basis, the consistent application of which is continuously monitored. With reference to Legislative Decree 231/2001 on administrative responsibilities of entities other than individuals, it is acknowledged that all Group companies have adopted an Organizational, Management and Control Model that is continuously updated in compliance with the most recent applicable norms. The Group is finally subject to risks deriving from changes in norms and regulations regarding in particular the radio and television sector and the resulting needs to comply with such changes. The Group monitors these changes actively and holds a constructive dialog with competent authorities to ensure the timely application of new norms issued. Financial risk The management of financial risk is regulated by a set of rules that outline the objectives, strategies, guidelines and operating procedures. In the management of financial resources and treasury the Group adopts a procedure that implies the application of prudence and limited risk criteria in the choice of financial and investment policies, prohibiting all speculative operations except for those adequately motivated and approved by the Board of Directors of the parent company. The parent company manages and coordinates a centralized intragroup current account, in which all subsidiaries take part, aiming at obtaining economic advantages in relationships with financial