Annual Report and Financial Statements

at December 31, 2007

RCS MediaGroup S.p.A. Via San Marco, 21 – 20121 Milan Share capital €762,019,500 – Company Register, Tax Code & VAT number 12086540155 Business Register number 1524326

This is an English translation of the Italian annual report, which is the sole authoritative version

LETTER TO SHAREHOLDERS

To our shareholders,

The RCS Group considerably increased its international presence during 2007. In fact, in April 2007 it acquired Recoletos, a Spanish media group which publishes Marca, a sports daily, and Expansion, a financial daily, both of which Spain's leaders in their respective sectors. The Group also intensified its penetration of the New Media market, not only through DADA's expansion abroad, particularly in the business solutions and domain and hosting markets, but also through the acquisition of Digicast and the development of innovative digital activities both for newspapers and magazines, resulting in a major increase in traffic on our newspaper websites.

A three-year business plan for 2008-2010 was approved in July 2007; its underlying strategy is based on integrating the Group's different areas of business and media, on multimediality and international expansion, by consolidating our presence particularly in France and Spain.

The RCS Group reported good results in 2007 despite little growth in the economy at large. In such a context, the RCS Group's revenues increased by 15% on 2006, also thanks to consolidation of the Recoletos group and Digicast as from April, both acquired during the year, revealing our ability to develop and innovate in a fast-changing market like the media one, where multimedia and multiplatform publishing systems are increasingly the trend relative to the printed word.

Advertising revenues were 21.9% higher, with like-for-like growth of 7.7% ie. ignoring the Recoletos group's contribution, with all sectors of the business generally outperforming the market.

Distribution revenues were lower, in line with the sector's general trend, particularly where add-on products were concerned, as a result of predicted, gradual market saturation. Corriere della Sera and La Gazzetta dello Sport retained their market leadership. In particular, La Gazzetta dello Sport, whose circulation grew once more in 2007, was the most read newspaper in Italy; Corriere della Sera reported a clear reversal of trend relative to its direct competitor, even though its circulation was lower. El Mundo increased its circulation, closing the gap still further on the market leader. Circulation of Marca increased after being restyled in the second half of the year. Book revenues were higher also thanks to the particular success of titles such as La casta (The caste) by Sergio Rizzo and Gianantonio Stella, Scusa ma ti chiamo amore (Sorry but I'm calling you darling) by Federico Moccia and Gesù di Nazareth (Jesus of Nazareth) by Pope Benedict XVI.

In 2007 your Group earned around 40% of its revenues from abroad, compared with 33% in 2006.

The Group continued during 2007 to make its products even more competitive by investing in full-color printing for La Gazzetta dello Sport, which unveiled its new format at the start of April 2008.

A series of corporate actions were also taken during the year, giving the Group 34.6% of Gruppo Finelco, which runs the national radio stations of Radio 105 Network and Radio Monte Carlo, as well as Virgin Radio (formerly Play Radio, previously controlled by the RCS Group).

One year from the launch of Corriere di Bologna, the start of 2008 saw the birth of Corriere Fiorentino, available from newsstands together with Corriere della Sera, and of Atcasa, an interior design portal accessed through www.corriere.it.

Despite the signs of global economic slowdown, we hope that the positive results and particular developments reported by the Group in 2007 will let it carry on improving its profitability in 2008, as well as developing its publishing media and products, including multimedia and multiplatform ones, such as to ensure our titles the continued opportunity of operating on the basis of our traditional values, in an authoritative and independent context.

With the due caution advised by the current economic situation and the resulting uncertainties on the advertising market, we currently expect this year's results to be broadly in line with forecast.

Piergaetano Marchetti

4 NOTICE OF AGM

The shareholders are called to a general meeting to be held in ordinary session at 10.30 am on April 28, 2008 in first call, in the company's offices in Via Balzan 3, Milan, and if necessary, on April 29, 2008 in second call, at the same time and place, to vote on the following:

Agenda

1. Financial statements at December 31, 2007; Directors' report on operations; Report by the Board of Statutory Auditors. Allocation of net income for the year. Related resolutions. 2. Proposed authorization for buyback and disposal of treasury shares; consequent revocation of the shareholders' resolution dated April 27, 2007 relating to the authorization to buy back and dispose of treasury shares.

Ordinary shareholders are entitled to take part in the meeting, in accordance with the law and the company's by-laws, provided the company has received the required certificate, issued by their respective intermediaries confirming their ownership of the shares, at its registered office at least two business days before the date set for the meeting. The documentation relating to the matters on the agenda and required by prevailing law will be filed within the prescribed deadlines at the company's registered office and at Borsa Italiana S.p.A. for viewing by the shareholders and the general public; in fact, the draft Group and Individual Annual Reports and Financial Statements at 31 December 2007 (with the related reports by the Board of Directors) will be filed by 28 March 2008, also in accordance with art. 82.2.b) of the Regulations adopted in CONSOB Resolution 11971/1999 and subsequent amendments and additions. Shareholders are entitled to obtain a copy of this documentation, which will also be published on the company's website at www.rcsmediagroup.it.

on behalf of the Board of Directors Piergaetano Marchetti Chairman

5 Contents

Corporate officers 7 Group structure of RCS MediaGroup 9 Brief description of the Group 11 Information about the shares 12 Consolidated financial highlights of RCS Mediagroup 14 Directors' report on group operations by RCS MediaGroup 15 Group performance in the fourth quarter 16 Group performance in 2007 19 Segment performance 27 Significant events during the year 47 Significant subsequent events 50 Outlook for the current year 51 Treasury shares 52 Transactions with related parties 52 Management of financial risks 52 Personal data protection plan 52 Ownership structure and corporate governance 53 Consolidated financial statements 100 Consolidated income statement 101 Consolidated balance sheet 102 Consolidated cash flow statement 103 Statement of changes in consolidated capital and reserves 104 Explanatory notes 107 Certification by Head of Financial Reporting and Chief Executive Officer 180 RCS MediaGroup S.p.A. Annual Report and Financial Statements 181 Directors' report on parent company operations 182 Significant events during the year 185 Significant subsequent events 185 Outlook for the current year 185 Treasury shares 185 Transactions with related parties 185 Management of financial risks 185 Personal data protection plan 185 Shares held by directors and statutory auditors 186 Proposed resolutions 187 Parent company financial statements 188 Income statement 189 Balance sheet 190 Cash flow statement 191 Statement of changes in capital and reserves 192 Explanatory notes 193 Certification by Head of Financial Reporting and Chief Executive Officer 230 Attachments 231 List of group equity investments 232 Exchange rates against the euro 238 Quarterly consolidated income statements 240 Tables attached to the financial statements of RCS MediaGroup S.p.A. 242 Investments at December 31, 2007 and their movements 243 List of "other equity investments" and "other securities" not recorded as fixed assets and their movements 246 Reclassified income statement for holding companies 247 Independent Auditors’ Report 248 Independent Auditors’ Report on the Statutory Financial Statement 250 Report by the Board of Statutory Auditors 252

6 CORPORATE OFFICERS

Honorary Chairman

Cesare Romiti

Board of Directors (^)

Piergaetano Marchetti (*) Chairman Gabriele Galateri di Genola Deputy Chairman Antonio Perricone (*) (°) Chief Executive Officer Raffaele Agrusti Director Roberto Bertazzoni Director Claudio De Conto Director Diego Della Valle Director John P. Elkann (*) Director Giorgio Fantoni Director Franzo Grande Stevens Director Berardino Libonati Director Jonella Ligresti Director Paolo Merloni Director Andrea Moltrasio Director Renato Pagliaro (*) Director Corrado Passera Director Alessandro Pedersoli Director Carlo Pesenti (*) Director Virginio Rognoni Director

(^) The current Board of Directors was appointed on April 27, 2006 to hold office for financial years 2006-2007-2008 and therefore until the AGM called to approve the annual report and financial statements for the last of these years. It should be noted that Franzo Grande Stevens continued to be suspended from office during part of 2007, under an administrative penalty ordered by Consob (Italy's stockmarket regulator) pursuant to article 187-quater of Decree 58/1998.

(*) Member of the Executive Committee. (°) Also holds the office of Chief Operating Officer.

Powers delegated by the Board of Directors

Without prejudice to internal observance of the functions and rules of corporate governance adopted, the Board of Directors has delegated:

• wide powers to the Chief Executive Officer & Chief Operating Officer for the conduct of the company's management, with limits on the size of financial commitments and/or risks that may be assumed for certain types of transaction;

• all powers of ordinary and extraordinary administration to the Executive Committee, except for those relating to the purchase and sale of majority equity investments in companies not controlled by the company, plus those reserved in law for the Board itself. 7

In addition, the Board has granted its Chairman with the same powers as the Chief Executive Officer & Chief Operating Officer, but to be exercised only when the latter is absent or unable, as well as joint authority with the Chief Executive Officer for certain limited types of transaction where the limit on the amount of the financial commitment and/or risk is still restricted but nonetheless higher than that permitted to the Chief Executive Officer acting on his own, and again only to be exercised in exceptional circumstances and cases of absolute necessity and urgency.

Board of Statutory Auditors (^)

Pietro Manzonetto Chairman Gianrenzo Cova Acting auditor Giorgio Silva Acting auditor Maurizio Bozzato Alternate auditor Cesare Gerla Alternate auditor Agostino Giorgi Alternate auditor

(^) The current Board of Statutory Auditors was appointed on April 27, 2006 to hold office for financial years 2006-2007-2008 and therefore until the AGM called to approve the annual report and financial statements for the last of these years.

Independent auditors (^)

RECONTA ERNST & YOUNG S.p.A.

(^) In office until the AGM called to approve the annual report and financial statements for 2008.

(More details about corporate officers can be found in the report on Ownership Structure and Corporate Governance).

GROUP STRUCTURE OF RCS MEDIAGROUP

9 GROUP STRUCTURE OF RCS MEDIAGROUP

100%

70.85% (*)

100%

34.5% IGPDECAUX

51%

46.9%

45%

34.6%

(*) The RCS Group has an overall interest of 96.31% in the Unidad Editorial Group

BRIEF DESCRIPTION OF THE GROUP

The RCS Group has a multimedia and international presence; it operates in the media and publishing sectors, with newspapers, magazines, books, partworks, radio and television stations, on-line websites, and in advertising space management, both in Italy and many other countries.

The RCS Group is market leader in Italy's newspaper publishing sector, with Corriere della Sera (the top national daily by distribution) and Gazzetta dello Sport (the top sports daily by distribution). The Group also publishes City and Urban in the free press segment. In the magazines sector, the RCS Group publishes 8 weeklies (including Oggi, A and Il Mondo) and 23 monthlies (including Amica, Style, Magazine and Dove). The RCS Group controls the publishing houses of Rizzoli, Fabbri, Bompiani, BUR, Sonzogno, Marsilio, Coccinella, Adelphi and Skirà and holds a 50% interest in R.L. Libri in partnership with the Mauri Spagnol group. It also has a presence in textbook publishing (mainly with Tramontana and Nuova Italia), in legal publishing (with La Tribuna), in handbooks and the partworks sector (in Italy and abroad, mainly through Fabbri). The Group is also present in the radio broadcasting sector following its acquisition of 34.6% of Gruppo Finelco, which runs the national radio stations of Radio 105 Network and Radio Monte Carlo, as well as Virgin Radio (formerly Play Radio, previously controlled by the RCS Group). RCS is also present in the on-line segment with the news information website "corriere.it" and the sports portal "gazzetta.it". The RCS Group manages advertising space, mainly for its own titles, through RCS Pubblicità and its subsidiaries. In addition, the associated company IGP Decaux is leader in the outdoor advertising sector. The Group has a 45% interest in M-dis, a joint venture with De Agostini and Hachette which is a leading distributor to the newsstand channel. The acquisition of effective control of the DADA group from November 2005 has strengthened the Group's presence in the internet segment. Lastly, RCS has had a presence in the television broadcasting sector since the second quarter of 2007 after acquiring Digicast, with a platform of 5 channels as well as related websites which are becoming increasingly integrated with television media.

The Group has a major presence abroad. In Spain, the Unidad Editorial group publishes El Mundo, the country's number two daily newspaper by circulation, elmundo.es, the world's leading Spanish language news information website, and owns the production house of El Mundo TV. In addition, following the acquisition of the Recoletos group in April 2007, it publishes the sports daily Marca and the business and financial daily Expansion, Spain's leading titles in their respective fields, as well as Telva, a women's magazine, and Actualidad Economica. The Unidad Editorial group has a presence in the radio broadcasting sector as the producer of Radio Marca, a digital broadcaster connected with the sports daily Marca, and one of Spain's leading digital broadcasters. Lastly, following the acquisition of the Recoletos group, Unidad Editorial has increased its interest in Veo Television, one of Spain's digital terrestrial license-holders, from 27.7% to 55.4%.

In France, the RCS Group owns the Flammarion group (a historic publishing house which mostly operates in the "Fiction and Non-fiction" segment). The RCS Group is also present in the United Kingdom, through GE Fabbri (the publisher of partworks in several international markets) and in the United States, through Rizzoli International.

The parent company is a public listed company on Italy's electronically-traded equities market, organized and run by Borsa Italiana S.p.A.. It is headquartered in Via San Marco 21, Milan, and has been listed as number 12086540155 in the Milan Company Register since March 6, 1997.

INFORMATION ABOUT THE SHARES

¾ SHARES 1

No. ordinary shares 732,669,457

No. savings shares 29,349,593

¾ CHANGE IN PRICES AND VOLUMES (ordinary shares)

2007 2006 Max. price (€) 4.33 4.64 Feb-8 Mar-23 Min. price (€) 2.98 3.48 Dec-21 Aug-24 December average price (€) 3.09 3.76

Average volumes (million) 1.17 1.67 Max. volumes (million) 12.22 15.81 Jan-25 Mar-17 Min. volumes (million) 0.17 0.17 Dec-7 Dec-8

Capitalization (€ /million) 2,250.3 2,872.6 (at December 31)

¾ SHAREHOLDER COMPOSITION (ordinary share capital) 1

Other shareholders Market 20.041%* 14.525%

Treasury RCS MediaGroup shares 0.625% Shareholder Voting and Consultation Syndicate 64.809%**

Position at March 14, 2008

* interests of more than 2%. 5.951% is bound under shareholder agreements between Pandette Finanziari S.r.l. (owned by Giuseppe Rotelli) and Banco Popolare Soc. Coop. relating to the exercise of voting rights. ** of which 465,441,489 (63.527%) bound under the Shareholder Syndicate.

1 Further information on shares can be found in the report on "Ownership Structure and Corporate Governance". 12 ¾ STOCK PERFORMANCE

Financial markets reported a general downturn in 2007, accentuated in the second half of the year by the subprime loans crisis. Italy's S&P MIB lost 8.2%, suffering more than other major European indexes from the banking crisis. The Media sector index responded to macroeconomic uncertainty even more dramatically, losing 28.2%. After a generally stable first half, the RCS MediaGroup stock closed the year 22.5% lower in tandem with the general downturn by the Media sector as a whole.

RCS MediaGroup performance vs.principal index (rebasing january 2, 07) RCS ord RCS sav S&P MIB DJ Euro Stoxx Media MIB MEDIA MIBTEL MIDEX 120

110

100

7 7 7 -07 -0 -07 0 -0 2-07 2-07 2 2 2 2- 0 -0 -0 -0 -0 -02-07 n- b r-02-07 r y-0 n-02-07 l p c-02 a a p a u Ju e J Fe M A M J Aug-02-07 S Oct Nov-02-07 De

Source: Bloomberg Min. price (December 21): €2.98 - Max. price (February 8): €4.33 - December average price: €3.09

Trading in RCS MediaGroup stock

14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0

Source: Bloomberg Min. volume (December 7): 0.17 million – Max. volume (January 25): 12.22 million – Average volume: 1.17 million

CONSOLIDATED FINANCIAL HIGHLIGHTS OF RCS MEDIAGROUP (1)

4th quarter Year ended 2007 2006 Dec-31-2007 Dec-31-2006 (€/millions)

INCOME STATEMENT

Net revenues 763.6 670.5 2,737.9 2,380.7 EBITDA (2) 141.9 123.3 360.3 286.7 EBIT 108.0 99.6 259.4 227.6 Earnings before tax and minority interests 97.2 130.0 288.2 303.3 Income taxes (41.4) (25.6) (61.5) (58.6) Net income (loss) from discontinuing and discontinued operations (3) 0.4 (3.2) 7.0 (10.1) Net income (loss) for the year 55.1 94.8 219.7 219.5

Basic earnings per share: continuing operations 0.29 0.31 Diluted earnings per share: continuing operations 0.29 0.31 Basic earnings per share: discontinuing and discontinued operations 0.01 ( 0.01) Diluted earnings per share: discontinuing and discontinued operations 0.01 ( 0.01)

Dec-31-2007 Dec-31-2006 BALANCE SHEET

Net capital employed 2,354.5 1,234.3 Net debt (cash) (4) 966.2 (5.7) Capital and reserves 1,388.3 1,240.1

Employees (average number) 6,628 5,179

(1) The Recoletos group and the Digicast group have been consolidated line-by-line in 2007, with their related impact on the income statement commencing from the second quarter of 2007. (2) Earnings before interest, tax, depreciation, amortization and impairment. (3) Refers to the businesses of RCS Broadcast and CNR, sold on July 26th, 2007 and December 17, 2007 respectively. (4) Indicator of financial structure, calculated as current financial payables less both cash and cash equivalents and current financial assets.

The Board of Directors approved the Draft Annual Report and Financial Statements on March 14, 2008.

14 DIRECTORS' REPORT ON GROUP OPERATIONS BY RCS MEDIAGROUP

The Italian economy showed signs of recovering in 2007. Gross domestic product grew by 1.9% in the third quarter relative to the corresponding period in 2006 and by 1.5% year-on-year. Investment sustained the growth (+4.5%), mainly thanks to increased spending on transport, while household consumption was also positive (+1.7%).

Advertising expenditure rose by 3.1% on the prior year (Nielsen figures). Press sector advertising grew by 3.0% in 2007, with investments in newspapers rising by 3.3% over the year, while magazines (excluding professional ones) reported progress of 2.7%. TV advertising grew by 1.2%. Internet advertising continued to forge ahead, climbing by 42.7% to €281 million. The advertising market in Spain is estimated to have grown by 6.9% in 2007.

Circulation of Italian daily newspapers was slightly lower. This decrease was reported across all sectors, except for regional newspapers and sports dailies, whose circulation was constant relative to the prior year. Magazine circulation was also worse than the prior year, both in the weeklies segment and the monthlies segment. The books market grew; RCS Libri increased its market share by one percentage point to 13.6%. In Spain the market grew both for news and sports dailies. In France the books market was generally stable relative to 2006. Given this market context, the RCS Group managed to boost its overall net revenues by 15% on 2006, also thanks to the consolidation of the Recoletos group and Digicast from April.

The Group's advertising revenues grew by 7.3% on a consistent comparative basis. This improvement was achieved thanks to revenues earned by the Italian papers Corriere della Sera, Gazzetta dello Sport and City. Advertising revenues from on-line activities increased at a much faster pace than last year, mainly thanks to business and classified ads. The best performers in the Magazines segment in terms of advertising revenues included A, Amica and Max, and the subsidiaries Editrice Abitare Segesta and Rizzoli Publishing. In Spain advertising revenues were up for all the Group's media, particularly for El Mundo, Expansión, the magazines and the website El Mundo.es.

Circulation revenues were down particularly as far as add-ons were concerned; although add-on sales slowed down as predicted, all other products managed to increase their sales, except for Corriere della Sera which, despite lower circulation, reported a clear reversal of trend relative to its direct competitor. Gazzetta dello Sport reported a slight increase in circulation revenue despite the absence of the particularly large benefit of the FIFA World Cup in 2006. Both dailies retained their market leadership. El Mundo increased its circulation, closing the gap still further on the market leader. Marca's circulation increased after being restyled in the second half of the year. The growth in revenues at RCS Libri reflects not only the consolidation of the Skirà group but also the success of titles such as La casta (The Caste) by Rizzo/Stella, Scusa ma ti chiamo amore (Sorry but I'm calling you darling) by F. Moccia and Gesù di Nazareth (Jesus of Nazareth) by Pope Benedict XVI. DADA continued to enlarge its business in the on-line segment, also thanks to its group's continued international expansion.

GROUP PERFORMANCE IN THE FOURTH QUARTER

(€/millions) Reference to 4th quarter 2007 % 4th quarter 2006 % Difference consolidated financial statements (6) ABA-B Net revenues (1) 763.6 100.0 670.5 100.0 93.2 Distribution revenues I 378.6 49.6 370.5 55.3 8.1 Advertising revenues (2) I 297.4 38.9 241.1 36.0 56.3 Other publishing revenues (3) I 87.6 11.5 58.9 (8.8) 28.7 Operating costs II (486.8) 63.7 (434.0) 64.7 (52.7) Payroll costs III (132.5) 17.4 (106.4) 15.9 (26.2) Impairment of receivables IV (0.2) 0.0 (1.0) 0.1 0.8 Increases in provisions for risks V (2.1) 0.3 (5.6) 0.8 3.5 EBITDA (4) 141.9 18.6 123.3 18.4 18.6 Amortization of intangible assets VI (15.4) 2.0 (8.8) 1.3 (6.6) Depreciation of property, plant and equipment VII (14.4) 1.9 (9.7) 1.4 (4.7) Impairment of fixed assets VIII (4.3) 0.6 (5.3) 0.8 1.0 EBIT 108.0 14.1 99.6 14.9 8.4 Net financial income (charges) IX (13.2) 1.7 (3.7) 0.5 (9.5) Income (charges) from financial assets/liabilities X (5.3) 0.7 28.7 4.3 (34.0) Share of income (losses) from investments valued XI using equity method 7.6 1.0 5.3 0.8 2.3 Earnings before tax 97.2 12.7 130.0 19.4 (32.8) Income taxes XII (41.4) 5.4 (25.6) 3.8 (15.8) Net income (loss) from continuing operations 55.8 7.3 104.4 15.6 (48.6) Net income (loss) from discontinuing and discontinued operations (5) XIII 0.4 0.0 (3.2) 0.5 3.6 Net income (loss) before minority interests 56.2 7.4 101.2 15.1 (45.0) Net (income) loss pertaining to minority interests XIV (1.1) 0.1 (6.4) 1.0 5.3 Net income (loss) pertaining to the group 55.1 7.2 94.8 14.1 (39.7)

(1) In 4th quarter 2006 the Flammarion group's revenues included €16.3 million in third-party publisher revenues inclusive of a margin of €1.2 million for the distribution service provided. As from 2007 only the margin on the distribution service is being reported in Flammarion's revenues. The adoption of this new presentation means that the Flammarion group's revenues in this regard are €15.1 million lower in 4th quarter 2007 than in the same quarter of 2006. (2) Advertising revenues in 4th quarter 2007 consist of €181.5 million earned through the group broker RCS Pubblicità (of which €116 million by Newspapers Italy, €55.5 million by Magazines and €10 million by selling the space of other publishers) and €115.9 million earned directly by the publishers themselves (of which €94.4 million by Newspapers Spain, €13.1 million by Blei, €9 million by Magazines, €1 million by DADA, €1 million by Digicast and €0.7 million by Newspapers Italy less €3.3 million in intragroup eliminations). Advertising revenues in 4th quarter 2006 comprised €169.1 million earned through the group broker RCS Pubblicità (of which €104.6 million by Newspapers Italy, €52.2 million by Magazines and €12.2 million by selling the space of other publishers) and €71.9 million earned directly by the publishers themselves (of which €48 million by Newspapers Spain, €13.4 million by Blei, €11.4 million by Magazines and €3.2 million by DADA less €4.1 million in intragroup eliminations). (3) Other publishing revenues mostly refer to the revenues of the DADA group, revenues from the sale of film rights by Unidad Editorial, revenues from the grant of royalties to third parties, revenues associated with sporting events, and revenues from the sale of customer lists and children's boxed sets by companies in the Sfera group. (4) Earnings before interest, tax, depreciation, amortization and impairment. (5) Refers to the operations of RCS Broadcast and CNR, sold on July 26, 2007 and December 17, 2007 respectively. (6) These references relate to the corresponding headings in the consolidated income statement.

Net revenues for the fourth quarter of 2007 amounted to €763.6 million compared with €670.5 million in the same period the year before. The increase of €93.2 million is mainly attributable to the first-time

16 consolidation of the Recoletos group (€88.1 million), the Digicast group (€6.8 million) and the Skirà group (€5 million). In addition, Flammarion's decision to report its revenues from distributing the products of third- party publishers as just the margin realized on the distribution service has caused revenues to fall by €15.1 million relative to the fourth quarter of 2006. On a consistent comparative basis, the Group's net revenues would have increased by €8.4 million, mainly due to higher advertising revenues in Italy and Spain and the growth in other revenues, particularly associated with the DADA group's international expansion. Distribution revenues were €8.1 million higher. On a consistent comparative basis, distribution revenues would have decreased by €14.6 million, mostly due to lower circulation revenues for Newspapers Italy, largely reflecting a decline in add-on sales.

EBITDA amounted to €141.9 million, an increase of €18.6 million on the fourth quarter of 2006. This reflects the first-time consolidation of the Recoletos group (€19.7 million), the Digicast group (€2.8 million) and the Skirà group (€1.1 million). It also reflects the recognition of non-recurring items, which had a net negative impact of €1.6 million on the fourth quarter of 2007. The fourth quarter of 2006 included €4.3 million in non-recurring income received by the subsidiary GFT USA in relation to the settlement of a dispute from prior years. On a consistent comparative basis and taking account of non-recurring income and charges, fourth-quarter EBITDA would have increased by €1 million on the same period the year before.

Fourth-quarter EBIT was €108 million compared with €99.6 million in the same quarter of last year. Fourth- quarter EBIT in 2007 also reflects €11.3 million in higher amortization and depreciation, of which €4.7 million attributable to the first-time consolidation of the Digicast group and €6.8 million attributable to Newspapers Spain following the first-time consolidation of the Recoletos group In addition, higher amortization and depreciation charges were reported by Corporate Functions, due to the purchase of software licences and the development of ICT projects, as offset by lower charges at the DADA group (€0.6 million).

Revenues, EBITDA and EBIT in the fourth quarters of 2007 and 2006 are reported below by business segment:

(€/millions) 4th quarter 2007 4th quarter 2006 % of % of % of Revenues EBITDA revenues EBIT revenues Revenues EBITDA revenues EBIT % of revenues Newspapers Italy 188.5 37.0 19.6% 32.4 17.2% 191.3 33.9 17.7% 28.8 15.0% Newspapers Spain (1) 195.5 48.1 24.6% 37.6 19.2% 105.8 29.5 27.9% 25.9 24.4% Books (2) 193.5 39.1 20.2% 35.6 18.4% 211.6 35.2 16.6% 27.8 13.2% Magazines 93.8 15.7 16.8% 15.4 16.4% 94.6 16.7 17.6% 16.1 17.0% Advertising 195.8 0.4 0.2% 0.4 0.2% 183.3 3.6 2.0% 3.4 1.9% Dada (3) 43.5 6.0 13.8% 3.7 8.6% 31.3 4.5 14.4% 1.7 5.4% Television (4) 7.1 2.8 39.4% 0.6 7.9% 0.0 0.0 0.0 Corporate Functions 16.8 (6.9) n.a (14.8) n.a 16.7 0.1 n.a (4.0) n.a Other and eliminations (170.8) (0.4) 0.2% (2.9) 1.7% (164.1) (0.1) 0.1% 0.0 0.0% Consolidated total 763.6 141.9 18.6% 108.0 14.1% 670.5 123.3 18.4% 99.6 14.9% Discontinuing and discontinued operations (Play Radio+CNR) (5) 4.5 0.8 0.9 5.8 (3.1) (4.7) Other and eliminations (2.1) 0.0 0.0 (5.3) 0.0 0.0 Total 766.0 142.7 108.9 671.1 120.2 94.9

(1) Following the acquisition of the Recoletos group, the amounts relating to Newspapers Spain have exceeded the materiality thresholds specified in IAS 14, meaning that Newspapers Spain is now a separately reportable segment. (2) In 4th quarter 2006 the Flammarion group's revenues included €16.3 million in third-party publisher revenues inclusive of a margin of €1.2 million for the distribution service provided. As from 2007 only the margin on the distribution service is being reported in Flammarion's revenues. The adoption of this new presentation means that the Flammarion group's revenues in this regard are €15.1 million lower in 4th quarter 2007 than in the same quarter of 2006. (3) The DADA group's EBIT includes €0.4 million in amortization of the goodwill arising on acquisition of control, which has been allocated to intangible assets. (4) Refers to the Digicast group acquired on April 2, 2007. (5) Refers to the operations of RCS Broadcast and CNR, sold on July 17, 2007 and December 17, 2007 respectively.

Net financial charges increased by €3.7 million to €13.2 million, reflecting the higher level of debt following acquisition of the Recoletos group. Net charges from financial assets and liabilities of €5.3 million in the fourth quarter of 2007 compare with corresponding net income of €28.7 million in the fourth quarter of 2006. This change reflects the fact that the fourth quarter of 2006 benefited from the capital gain realized on the sale 17 of some of the shares in Intesa Sanpaolo (€26.4 million). In addition, the fourth quarter of 2007 includes a writedown of €3.8 million against available-for-sale investments, while the same period of last year reported €1.9 million in revaluations of such assets. The share of income (losses) from investments valued using the equity method was €7.6 million compared with €5.3 million in the fourth quarter of 2006. The increase of €2.3 million reflects the results of associated companies, in particular that of €2.5 million by Inimm Due.

Fourth-quarter net income came to €55.1 million in 2007. The decrease of €39.7 million on the fourth quarter of last year reflects the factors described above as well as €15.8 million in higher income taxes, partly offset by lower charges for discontinuing and discontinued operations, after transferring RCS Broadcast to Gruppo Finelco at the end of July, with the related capital gain recognized in the third quarter of 2007.

GROUP PERFORMANCE IN 2007

The results of the Play Radio and CNR businesses have been classified separately in "Net income (loss) from discontinuing and discontinued operations", which also includes the capital gains realized upon transferring the Play Radio business to Gruppo Finelco and on selling CNR. The prior year revenues and costs of the operations sold have been reclassified accordingly. What is more, following the acquisition of the Recoletos group, consolidated line-by-line as from April 2007, and the subsequent merger of Recoletos SA and some of its direct subsidiaries into Unidad Editorial SA, the results achieved in 2007 are no longer immediately comparable with those of 2006. The Group's financial highlights and related comments are presented below.

Reference to Year ended Dec- Year ended Dec- (€/millions) consolidated 31-2007 % 31-2006 % Difference financial statements (6) ABA-B Net revenues (1) 2,737.9 100.0 2,380.7 100.0 357.2 Distribution revenues I 1,460.5 53.3 1,383.9 58.1 76.5 Advertising revenues (2) I 969.0 35.4 794.8 33.4 174.2 Other publishing revenues (3) I 308.5 11.3 201.9 8.5 106.6 Operating costs II (1,857.6) 67.8 (1,655.6) 69.5 (202.0) Payroll costs III (504.0) 18.4 (418.6) 17.6 (85.5) Impairment of receivables IV (10.2) 0.4 (12.2) 0.5 2.0 Increases in provisions for risks V (5.9) 0.2 (7.6) 0.3 1.7 EBITDA (4) 360.3 13.2 286.7 12.0 73.6 Amortization of intangible assets VI (48.8) 1.8 (20.2) 0.8 (28.6) Depreciation of property, plant and equipment VII (47.1) 1.7 (33.6) 1.4 (13.5) Impairment of fixed assets VIII (4.9) 0.2 (5.3) 0.2 0.4 EBIT 259.4 9.5 227.6 9.6 31.8 Net financial income (charges) IX (35.6) 1.3 2.0 0.1 (37.6) Income (charges) from financial assets/liabilities X 55.1 2.0 70.5 3.0 (15.4) Share of income (losses) from investments valued XI using equity method 9.30.33.20.16.0 Earnings before tax 288.2 10.5 303.3 12.7 (15.1) Income taxes XII (61.5) 2.2 (58.6) 2.5 (3.0) Net income (loss) from continuing operations 226.7 8.3 244.8 10.3 (18.1) Net income (loss) from discontinuing and discontinued operations (5) XIII 7.0 0.3 (10.1) 0.4 17.2 Net income (loss) before minority interests 233.7 8.5 234.6 9.9 (0.9) Net (income) loss pertaining to minority interests XIV (14.0) 0.5 (15.1) 0.6 1.1 Net income (loss) pertaining to the group 219.7 8.0 219.5 9.2 0.2

(1) In 2006 the Flammarion group's revenues included €43.5 million in third-party publisher revenues inclusive of a margin of €3.8 million for the distribution service provided. As from 2007 only the margin on the distribution service is being reported in Flammarion's revenues. The adoption of this new presentation means that the Flammarion group's revenues in this regard are €39.7 million lower in 2007 than in the prior year. (2) Advertising revenues in the year ended December 31, 2007 consist of €591.9 million earned through the group broker RCS Pubblicità (of which €392.34 million by Newspapers Italy, €165.8 million by Magazines, €0.1 million by Books and €33.7 million by selling the space of other publishers) and €377.1 million earned directly by the publishers themselves (of which €286.6 million by Newspapers Spain, €31.9 million by Magazines, €47.3 million by Blei, €13 million by DADA, €3 million by Digicast and €0.7 million by Newspapers Italy less €5.4 million in intragroup eliminations). Advertising revenues in the year ended December 31, 2006 included € 560.2 million earned through the group broker RCS Pubblicità (of which €366.9 million by Newspapers Italy, €151.7 million by Magazines, €0.1 million by Books and €41.4 million by selling the space of other publishers) and €234.5 million earned directly by the publishers themselves (of which €147.1 million by Newspapers Spain, €38 million by Magazines, €45.7 million by Blei, €7 million by DADA and €0.4 million by Books less €3.7 million in intragroup eliminations). (3) Other publishing revenues mostly refer to the revenues of the DADA group, revenues from the sale of film rights by Unidad Editorial, revenues from the grant of royalties to third parties, revenues associated with sporting events, and revenues from the sale of customer lists and children's boxed sets by companies in the Sfera group. (4) Earnings before interest, tax, depreciation, amortization and impairment. (5) Refers to the operations of RCS Broadcast and CNR, sold on July 17, 2007 and December 17, 2007 respectively. (6) These references relate to the corresponding headings in the consolidated income statement.

Net revenues amounted to €2,737.9 million in 2007, having increased by €357.2 million on the year before, of which €289 million due to the first-time consolidation on a line-by-line basis of the Recoletos group, the Skirà

19 group and the Digicast group. On a consistent comparative basis, there would nonetheless have been an increase of €68.2 million, mainly due to higher advertising revenues (€57.8 million) both for Newspapers and Magazines, and higher other publishing revenues (€48.6 million), only partially absorbed by the drop in distribution revenues.

Advertising revenues rose by €174.2 million (of which €113 million relating to Recoletos). On a consistent comparative basis, advertising revenues were €57.8 million higher, most of which attributable to Newspapers Italy (€25.7 million), which continued to outperform the market, and to strong performance by Newspapers Spain (€26.5 million like-for-like) and by the Magazines segment (€7.9 million). The DADA group boosted advertising revenues by €6 million, while Blei, the advertising space broker for foreign media, raised its revenues by €1.6 million. Advertising space sold on behalf of third parties fell (€5 million), as did radio advertising revenues after selling Play Radio and CNR. The increase of €106.5 million in other publishing revenues (of which €39.2 million relating to the Recoletos group and €18.3 million to the Digicast group) would have been €48.6 million on a consistent comparative basis, most of which due to expansion in the DADA group's business nationally and abroad (€39.8 million), to the growth in mobile services by Newspapers Italy (€2 million) and in copyright sales by the Books segment (€3.8 million), and to higher commissions earned by the Advertising segment from the contract with FIGC (Italy's football federation) relating to Italy's national football team (€2 million).

The increase of €76.5 million in distribution revenues reflects €99.2 million for the line-by-line consolidation of the Recoletos group and €15.2 million for consolidating the Skirà group, as partly offset by a decrease of €43.5 million in the Flammarion group's revenues, also reflecting its decision to adopt a different method of presenting its third-party publisher distribution revenues. On a consistent comparative basis and taking account of the change in classification method, distribution revenues increased by €5.5 million; the factors contributing to this trend were as follows:

• An increase of €41.6 million in distribution revenues by the Books segment, of which €19.1 million attributable to higher sales of Fiction and Non-Fiction in Italy and €14.6 million to higher revenues at Flammarion (on a like-for-like basis), thanks not only to the major success of certain new releases in Italy, such as La casta (The Caste) by Stella/Rizzo, Scusa, ma ti chiamo amore (Sorry but I'm calling you darling) by Moccia and Gesù di Nazareth (Jesus of Nazareth) by Pope Benedict XVI, but also to good results reported in France for new book launches and re-releases of bestsellers in paperback. The overall increase in Book segment distribution revenues also included €7.3 million in extra revenues from Partworks, thanks to sales by GE Fabbri in the British and East European markets, whose performance made up for the downturn in Italy and France. The remaining contribution of €0.6 million to the overall increase in distribution revenues mostly came from Rizzoli International Publications. • A like-for-like increase of €8.5 million in circulation revenues by Newspapers Spain, thanks to growth in sales and circulation of El Mundo, despite losing €4.2 million in revenues from add-ons, whose market is showing signs of saturation. • A decrease of €31.5 million in circulation revenues by Newspapers Italy, of which €30.2 million attributable to the drop in add-on sales, mostly referring to Corriere della Sera while add-on sales at Gazzetta dello Sport were generally stable. Circulation revenues reported by both Corriere della Sera and Gazzetta dello Sport confirmed their prior year level, maintaining their leadership of their respective market segments. • A decrease of €12.3 million in circulation revenues by the Magazines segment, primarily reflecting lower demand for add-ons in an adverse market. • A decrease of €0.6 million mainly due to AGR.

EBITDA amounted to €360.3 million, reporting an increase of €73.5 million on 2006. This increase was the product of opposing factors, the more important ones of which were: • The positive contribution of €4.7 million by some of the Group's businesses on a like-for-like basis and excluding non-recurring items. These included the increase in EBITDA by Unidad Editorial (on a like- for-like basis), the DADA group and, to a lesser degree, by the Books and Magazines segments. This improvement was only partly offset by the lower amount of EBITDA reported by Newspapers Italy and the Advertising segment. 20 • The line-by-line consolidation in 2007 of the Recoletos group (€59.8 million), the Digicast group (€7.3 million) and the Skirà group (€0.8 million), which contributed an overall total of €68 million to the Group's EBITDA. • The recognition of €0.3 million in net non-recurring income, compared with €0.6 million in net non- recurring charges in 2006.

The segments that most contributed to the improvement in EBITDA, net of non-recurring items and changes in the scope of consolidation, were principally Unidad Editorial and DADA. As regards Newspapers Spain, the improvement in like-for-like EBITDA was €8.6 million, attributable not only to the growth in advertising revenues from all the group's media, but also increased circulation by El Mundo, along with the price rise for its Sunday edition. The DADA group's EBITDA increased by €6.4 million on the prior year, mostly due to its international expansion strategy, especially into the Brazilian and Spanish markets, which more than absorbed the costs incurred in 2007 for enlarging and strengthening its user base.

EBIT was €31.8 million higher at €259.4 million. This result reflected not only the factors described above, but also €28.6 million in higher charges for amortization of intangible assets, of which €14.1 million relating to goodwill allocated to the intangible assets of the Recoletos group (€11.6 million) and the Digicast group (€2.5 million), as well as the amortization of television rights by the Digicast group (€6.3 million), of software user licenses purchased and ICT projects undertaken by Corporate Functions (€4 million) and by the Flammarion group (€1.4 million). Higher amortization was also reported by the Unidad Editorial group in relation to new television and film rights and new software licenses (€2.1 million), and by the DADA group (€0.7 million). Depreciation of property, plant and equipment was €13.5 million higher, of which €3 million resulting from the revision of the estimated useful life of production plant and machinery used at Gazzetta dello Sport, after starting work on this paper's full-color printing project, and €9.3 million relating to Newspapers Spain, after the full-color printing equipment at El Mundo entered service during the year and after the first-time consolidation of the Recoletos group. A total of €4.9 million in impairment losses were recognized in the year in relation to property, plant and equipment and intangible assets. Revenues, EBITDA and EBIT are reported below by business segment:

(€/millions) Year ended Dec-31-2007 Year ended Dec-31-2006

% of % of % of % of Revenues EBITDA revenues EBIT revenues Revenues EBITDA revenues EBIT revenues Newspapers Italy 734.6 121.0 16.5% 101.5 13.8% 737.8 128.3 17.4% 111.3 15.1% Newspapers Spain (1) 628.8 128.5 20.4% 95.0 15.1% 341.6 60.9 17.8% 49.9 14.6% Books (2) 730.8 67.4 9.2% 58.4 8.0% 721.4 64.2 8.9% 53.5 7.4% Magazines 330.6 25.7 7.8% 24.5 7.4% 335.0 26.3 7.8% 25.1 7.5% Advertising 643.0 5.6 0.9% 5.5 0.8% 608.1 8.5 1.4% 8.2 1.4% Dada (3) 158.5 21.2 13.4% 14.3 9.0% 111.4 14.8 13.3% 9.3 8.3% Television (4) 21.4 7.3 34.2% 0.8 4.0% Corporate Functions 65.4 (16.1) n.a (37.7) n.a 67.8 (16.2) n.a (29.7) n.a Other and eliminations (575.2) (0.4) 0.1% (2.9) 0.5% (542.4) (0.1) 0.0% 0.0 0.0% Consolidated total 2,737.9 360.3 13.2% 259.4 9.5% 2,380.7 286.7 12.0% 227.6 9.6% Discontinuing and discontinued operations (5) 17.4 (5.7) (6.5) 20.2 (8.3) (14.6) Other and eliminations (15.3) (21.2) Total 2,740.0 354.6 252.9 2,379.7 278.4 213.0

(1) Following the acquisition of the Recoletos group, the amounts relating to Newspapers Spain have exceeded the materiality thresholds specified in IAS 14, meaning that Newspapers Spain is now a separately reportable segment. (2) In 2006 the Flammarion group's revenues included €43.5 million in third-party publisher revenues inclusive of a margin of €3.8 million for the distribution service provided. As from 2007 only the margin on the distribution service is being reported in Flammarion's revenues. The adoption of this new presentation means that the Flammarion group's revenues in this regard are €39.7 million lower in 2007 than in the prior year. (3) The DADA group's EBIT includes €1.5 million in amortization of the goodwill arising on acquisition of control, which has been allocated to intangible assets. (4) Refers to the Digicast group acquired on April 2, 2007. (5) Play Radio and CNR have been reclassified to "Discontinuing and discontinued operations", while the activities of AGR have been classified in Corporate Functions.

21 Net financial charges amounted to €35.7 million compared with net financial income of €2 million in 2006. The change of €37.7 million includes €28 million in higher interest expense on bank loans and borrowings needed to fund the acquisition of the Recoletos group and €2 million in higher interest expense on finance leases taken out to fund investment in the newspaper full-color printing projects. In addition, the 2006 figure had benefited from €5 million in gains arising on the partial sale of units in the hedge funds managed by Duemme Sgr.

Net income from financial assets and liabilities amounted to €55.1 million in 2007, most of which reflecting €51.8 million in capital gains realized by the parent company on the sale of Intesa Sanpaolo shares, less €1.7 million in related costs, as well as €1.8 million in capital gains on the sale of the investment in 3 Italia. This net income also includes dividends from Intesa Sanpaolo (€11.2 million), Poligrafici Editoriale (€0.3 million) and Raisat (€0.1 million), and the impairment loss recognized on the investments in MB Venture Capital (€1.6 million) and Poligrafici Editoriale (€4.5 million) to adjust their carrying amount to fair value. The sale of Garamond gave rise to a capital loss of €0.9 million reported under this item. Net income from financial assets and liabilities amounted to €70.5 million at December 31, 2006, mostly comprising the capital gains realized on the sale of non-strategic investments (€61.8 million), dividend receipts (€10.1 million) and impairment losses recognized against the value of equity investments (€1.4 million). The share of income (losses) from investments valued using the equity method was a net gain of €9.3 million (€3.2 million in 2006) and mostly reflects the positive contributions of €4.1 million by IGPDecaux (€1.7 million in 2006), of €1.9 million by M-Dis (€2.7 million in 2006), of €2.1 million by Distrimedios and €2.5 million by Inimm Due. These positive results were partially absorbed by losses reported by some associates, principally Gruppo Finelco (€1.7 million). Income taxes for the year came to €61.5 million, compared with €58.6 million in 2006. They included €20.2 million in IRAP (Italy's regional business tax), €45.2 million in IRES (Italy's corporate income tax) and similar foreign taxes, while the remainder referred to the recognition and reversal of deferred tax assets and liabilities, also including adjustments for the new IRES and IRAP rates effective in Italy from 2008. The charges arising under the group tax election in Italy amounted to €15.8 million compared with €8.8 million the year before. Net income (loss) from "discontinuing and discontinued operations" reflects the capital gain realized on the transfer of RCS Broadcast to Gruppo Finelco (€14.3 million) and that realized on the disposal of CNR (€0.3 million), the related tax charge of €0.6 million and the overall loss of €7 million accruing up until the date of their transfer. The overall loss at December 31, 2006 was €10.1 million and included €2.2 million for the amortization of goodwill allocated to concessions and licenses, net of the related tax.

As a result of all the factors described above, net income for the year was virtually unchanged, going from €219.5 million in 2006 to €219.7 million in 2007.

Breakdown of the average number of employees by region

The average number of employees in 2007 was 6,611 compared with 5,149 in the prior year. The increase of 1,462 is mainly attributable to the Unidad Editorial group (+1,187) also as a result of acquiring the Recoletos group, and to the DADA group (+142), as a result of continued expansion of its business, especially internationally. New activities started by some of the smaller companies in the Newspapers Italy segment and by the Magazines and Advertising segments added 48 people to overall headcount; in addition, the Digicast group was acquired during the second quarter of 2007 (+50), while the Skirà group, consolidated since the start of the year, added 35 employees to the average headcount.

The breakdown of the average number of employees by region is as follows:

22 Italy Spain France Other countries Total Dec-31 Dec-31 Dec-31 Dec-31 Dec-31 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Newspapers 1,297 1,244 2,148 961 3,445 2,205 Books 419 377 674 694 65 61 1,158 1,132 Magazines 655 648 50 51 33 34 738 733 Advertising 293 286 293 286 Dada 314 285 52 12 85 12 451 309 Television 50 - 50 - Corporate Functions (1) 476 484 476 484

Consolidated total 3,504 3,324 2,250 1,024 674 694 183 107 6,611 5,149

Discontinuing and discontinued operations (1) Play Radio 13 26 13 26 CNR 4 4 44 Total 3,521 3,354 2,250 1,024 674 694 183 107 6,628 5,179 (1) Discontinuing and discontinued operations contain the average headcount of Playradio and CNR; the average headcount of AGR has been classified in Corporate Functions.

Highlights from the Group's balance sheet are reported below:

Reference to consolidated financial (€/millions) statements (1) Dec-31-2007 % Dec-31-2006 % Intangible assets XV 1,679.8 71.3 482.8 39.1 Property, plant and equipment XVI 478.1 20.3 370.0 30.0 Non-current financial assets XVII 304.6 12.9 397.2 32.2 Non-current assets 2,462.5 104.6 1,250.0 101.3 Inventories XVIII 175.4 7.4 162.1 13.1 Trade receivables XIX 845.6 35.9 680.8 55.2 Trade payables XX (779.9) (33.1) (620.8) (50.3) Other assets/liabilities XXI (29.8) (1.3) 10.9 0.9 Net working capital 211.4 9.0 233.0 18.9 Provisions for risks and charges XXII (63.7) (2.7) (71.0) (5.7) Deferred tax liabilities XXII (157.7) (6.7) (73.6) (6.0) Provisions for employee benefits XXIII (98.0) (4.2) (104.1) (8.4) Net capital employed 2,354.5 100.0 1,234.3 100.0 Capital and reserves XXIV 1,388.3 59.0 1,240.1 100.5 Non-current financial payables XXV 914.3 38.8 260.5 21.1 Current financial payables XXVI 162.1 6.9 61.1 5.0 Cash and cash equivalents and current financial receivables XXVII (110.2) (4.7) (327.3) (26.5) Net debt (cash) 966.2 41.0 (5.7) (0.5) Total sources of financing 2,354.5 100.0 1,234.3 100.0 (1) These references relate to the corresponding headings in the consolidated balance sheet.

The principal changes in the Group's balance sheet since December 31, 2006 will now be discussed. Net capital employed was €2,354.5 million at year end, having increased by €1,120.2 million since December 31, 2006. This increase is mostly due to first-time consolidations, principally the Recoletos group and partly the Digicast group and Namesco, purchased by the DADA group in July 2007. In addition, the investment in RCS Broadcast, consolidated line-by-line at December 31, 2006, has since been transferred to Gruppo Finelco.

The increase in non-current assets is mostly explained by the following changes: • Intangible assets increased by €1,197 million, chiefly following the recognition of €1,224 million in goodwill on business combinations, amongst which that relating to the Recoletos group (€690.2 million), the Digicast group (€15.2 million), Namesco in the DADA group (€34.6 million), Automobili.com (€3.5 million), as well as the allocation of part of purchase price to the Spanish group's principal titles (€464 million) and to intangible assets in the Digicast group to adjust them to fair value (€11.9 million). The changes in the scope of consolidation have entailed aggregating €25.4 million in intangible assets from the newly acquired companies. Additions came to €38.7 million, mostly for software user licenses and for ICT development by Corporate Functions, Flammarion and Unidad Editorial, the purchase of the HLLA catalogue by Rizzoli International Publications (USA) and Urban, a free press title, by 23 Newspapers Italy, as well as development costs incurred by the DADA group and the purchase of TV, film and publishing rights by the Spanish group and by the Digicast group. The disposal of Play Radio and CNR caused intangible assets to decrease by €33.5 million. The amortization charges and impairment losses recognized in the period amounted to €51.1 million. • Property, plant and equipment were €108.1 million higher than at December 31, 2006, reflecting €105.4 million in additions, €49.7 million in depreciation and impairment, €1.2 million in disposals and exchange differences and €54 million in increases due to changes in the scope of consolidation. Most of the investments related to progress in Unidad Editorial's business plan and full-color printing project for El Mundo (€36.5 million), as well as a total of €23.9 million in costs incurred by Newspapers Italy for the full-color printing project at Gazzetta dello Sport, and for adapting the printing presses at Corriere della Sera for the reduction in its format. The Spanish group also spent €11.8 million on improvng the premises of Unidad Editorial's new headquarters and television studio and €4 million on furniture, fittings and office equipment. Work was also carried out on installing adequate networks and furniture and fittings at the new premises in Via Rizzoli 8, Milan (€7.3 million), while other investments included continued refurbishment of the offices in Milan's Via Solferino (€4.1 million), other costs incurred by the DADA group (€5 million) and by Corporate Functions for hardware and office equipment (€4.1 million) and by Flammarion for plant and machinery serving the distribution network (€1.7 million). • Non-current financial assets went down by €92.6 million, largely reflecting the decrease of €115.2 million in equity investments, as partially offset by an increase of €25.9 million in other non-current assets. The decrease in equity investments is mainly due to the sale of shares in Intesa Sanpaolo and 3 Italia, with a fair value of €170.3 million and €15 million respectively at December 31, 2006, to the impairment loss of €4.5 million recognized against the investment in Poligrafici Editoriale, to the distribution of €6.2 million in dividends by equity-accounted companies, to €4.2 million in net decreases arising on changes in the method of consolidating certain associated companies in the Unidad Editorial group (particularly Veo Television) and to a number of smaller writedowns to available-for-sale equity investments. These decreases were partly offset by recognizing investments of 34.6% in Gruppo Finelco (€64.7 million), 23.4% in Dada Entertainment (€3.9 million), another interest in Mach 2 (€3.2 million), 14.1% in E-Box (€0.8 million), as well as €12.4 million in revaluations of investments in associated companies. The change in other non-current assets mainly reflects an increase of €27.4 million in deferred tax assets, most of which due to the Unidad Editorial group (€21.3 million), partly as a result of its acquisition of the Recoletos group and Veo Television. A total of €16.3 million in deferred tax assets have been recognized for carryforward tax losses useable by RCS Investimenti, partly offset by decreases relating to Newspapers Italy. Other non-current assets decreased by €4.7 million for sales of tax credits by RCS Investimenti to other group companies to settle advance and final payments of IRAP.

Net working capital was €211.4 million at year end (€233 million at December 31, 2006). In detail: • Inventories reported an increase of €13.3 million relative to December 31, 2006. This increase was mostly due to the growth of €11.3 million in inventories held by the Books segment, of which €7.3 million referred to Partworks due to be sold on international and Italian markets as part of the bigger new release program planned for January 2008, €2 million related to the Education sector and €1 million to the Fiction and Non-fiction sector. • Trade receivables were €164.8 million higher at €845.6 million, most of which attributable to Unidad Editorial (€101.6 million) - partly as a result of consolidating the Recoletos group (€64.9 million) and partly due to the increase in the Spanish group's fourth-quarter revenues -, to the line-by-line consolidation of the Digicast group (€8.3 million), and to the growth in trade receivables for the Advertising segment (€30.7 million), the DADA group (€14.7 million) and the Books segment (€13.4 million), largely reflecting higher fourth-quarter revenues than in the same period of 2006. • Trade payables were €159 million higher, mostly due to increases at the Unidad Editorial group (€119.4 million) following its significant enlargement, at the DADA group (€16.2 million) following the growth in its business, at the Magazines segment (€13.3 million) and the Advertising segment (€8.3 million), reflecting higher costs incurred towards the end of the year. The line-by-line consolidation of the Digicast group augmented trade payables by €10.3 million, largely offset by a decrease of €11.3 million following the disposal of RCS Broadcast. • Other assets and liabilities were €40.7 million lower, mostly due to the increase of €28 million in other non-current payables, in relation to recognition of put options exercisable by minority shareholders in

24 Digicast (€19.6 million), Automobili.com (€2.0 million) and Last Lap (€4.2 million), a member of the Recoletos group, and to the adjustment in the value of the put option exercisable by minority shareholders in Unidad Editorial (€3 million). These changes were partly offset by a decrease of €8.8 million in other current payables reflecting the settlement of the payable after minority shareholders of the subsidiary Blei exercised a put option (€25.2 million) and an increase in other payables at the Unidad Editorial group (€6.6 million) and in amounts due to personnel. Current tax payables increased by €8.1 million, while payables due to social security agencies and social security agencies and pension funds rose by €7.6 million, mainly due to employee termination indemnities accruing in the last month of the year which were paid over to pension funds the following month. Current tax assets decreased by €7 million following the settlement of advance and final IRAP payments during 2007.

Deferred tax liabilities went up by €84.1 million. The first-time consolidation of the Recoletos group resulted in an increase of €85.9 million, as offset by lower provisions for fair value adjustments to the Digicast group's assets and liabilities upon acquisition (€3.3 million). The disposal of RCS Broadcast caused these liabilities to go down by €5.6 million. Other provisions decreased by €13.4 million; in particular, provisions for employee benefits went down by €6.1 million, mainly for amounts paid to leavers during the year and taking account of the fact that as from January 1, 2007 most of the Group's Italian companies no longer provide for employee termination indemnities following the changes introduced by Decree 252/2005. Provisions for risks and charges were €7.3 million lower, reflecting €13 million in new provisions, €34.7 million in increases for the first-time consolidation of the Recoletos group and €55 million in utilizations, mostly as a result of progress in the reorganization process, particularly at Newspapers Spain and Italy. The financial position reported €966.2 million in net debt at December 31, 2007 having increased by €971.9 million since the end of 2006. The investments in the period were the major source of cash absorption. These included the purchase of the Recoletos group (€1,124.1 million), the purchase of Namesco by the DADA group (€36.4 million), the purchase of 49% of Blei (€25.2 million), the purchase of 12.86% of Gruppo Finelco (of which RCS owns 34.6% after transferring RCS Broadcast) for €20.8 million, the purchase of Digicast (€15.9 million) and the purchase of additional interests in the DADA group (€10.8 million) and in Mach 2 (€3.2 million). Investments in property, plant and equipment and intangible assets involved cash outlays of €107.4 million in the course of 2007 (€76.7 million in 2006). In addition a total of €22.9 million in dividends were paid out to the parent company's shareholders and €3.3 million to minority shareholders in group subsidiaries, while €2 million in capital was returned to third parties. The resulting increase in net debt was only partly offset by the cash generated by operating activities, by the sale of shares in Intesa Sanpaolo (€160 million) and in 3 Italia (€16.8 million), and by dividend receipts totaling €18.1 million, of which €2.8 million received from M-dis, a company carried at equity.

The main cash flows are summarized below:

(€/millions) Dec-31-2007 Dec-31-2006

A) Total cash and cash equivalents generated (absorbed) by operating activities 244.2 162.5 B) Total cash and cash equivalents generated (absorbed) by investing activities (1,155.9) 14.7 C) Total cash and cash equivalents generated (absorbed) by financing activities 694.5 (45.4) Net increase (decrease) in cash and cash equivalents (A+B+C) (217.2) 131.7 Opening cash and cash equivalents 251.6 119.9 Closing cash and cash equivalents 34.3 251.6 Increase (decrease) for the year (217.2) 131.7 The main changes are described in more detail in the explanatory notes.

25 The following table reconciles the parent company's equity and net income with the corresponding consolidated amounts:

Dec-31-2007 Dec-31-2006 Equity Net income Equity Net income Parent company equity and net income 1,274.2 96.9 1,258.2 166.2 Deferred taxes on consolidation adjustments (28.1) 2.0 (32.3) 1.5 Elimination of carrying amount of consolidated equity investments 273.0 223.7 65.8 51.1 Elimination of effects of transactions between consolidated companies (227.0) (102.8) (124.8) 0.7 Group equity and net income 1,292.1 219.7 1,166.9 219.5 Minority interests in equity and net income 96.1 14.0 73.2 15.1 Consolidated equity and net income 1,388.2 233.7 1,240.1 234.6

SEGMENT PERFORMANCE

NEWSPAPERS ITALY

Segment profile

The Newspapers Italy segment comprises the editing, production and marketing of publications relating to the titles Corriere della Sera, Gazzetta dello Sport, City and Urban. Corriere della Sera is the leading national news and information daily and comprises a structured, integrated system of paper and digital information media, including the national daily, a network of local titles, special inserts and general interest and specialized supplements, as well as the website corriere.it. Gazzetta dello Sport is the leading national sports daily and comprises a structured, integrated platform of information media, including the national daily, local editions, special inserts and specialized supplements and the website gazzetta.it. City is a free press daily with a national distribution and local editions in Italy's major cities. Urban is a free press monthly periodical with national distribution and local inserts for Italy's major cities. This segment also includes RCS Sport - which organizes and runs the Giro d'Italia and other cycling races and sporting events - and RCS Digital, which manages development of the titles on digital media, and its subsidiary RCS DBGames, which manages the on-line gaming site of Fueps.

Financial highlights

4th quarter Year ended Year ended Dec- (€/millions) 2007 4th quarter 2006 % change Dec-31-2007 31-2006 % change

Circulation revenues 87.0 99.9 (12.9) 378.9 407.0 (6.9)

Advertising revenues 100.5 89.2 12.6 334.1 311.0 7.4

Other publishing revenues 1.0 2.1 (52.4) 21.6 19.7 9.6

Total revenues from sales and services (1) 188.5 191.3 (1.5) 734.6 737.8 (0.4)

(1) of which add-on product sales: 36.2 52.6 148.6 178.8

4th quarter Year ended Year ended Dec- 2007 4th quarter 2006 % change Dec-31-2007 31-2006 % change EBITDA 37.0 33.9 9.1 121.0 128.3 (5.7)

Market trend

Circulation of daily newspapers in Italy was 0.8% lower than in 2006. This decline occurred in all sectors except for regional and sports dailies, which maintained a constant level of circulation relative to the prior year. The sectors with the biggest reductions were political newspapers (-7.9%) and multi-region newspapers (- 1.6%). Even the national dailies experienced a downturn (-1.1%), while sports dailies were stable, a particularly impressive result considering that the prior year comparative period boasted a rich calendar of sporting events, like the FIFA World Cup in June 2006. Gazzetta dello Sport continued to be Italy's most widely read paper in 2007, according to the latest Audipress figures. The free press market is being monitored since 2007 by Audipress, which started its reporting in autumn 2006. This segment had a total of 6 million readers at the last count (autumn 2007), reporting a 12% increase on the same period in 2006. As regards the advertising market, advertising in paid newspapers grew by 3.3% on the prior year; both local and national business advertising were higher.

RCS performance

Segment revenues were 0.4% lower than the year before at €734.6 million. This reflects two differing trends: on the one hand, a lower contribution by add-ons, in a market featuring ever more new releases but ever smaller average volumes, and on the other hand, a growth in advertising revenues at higher-than-market rates. Circulation revenues at Corriere della Sera and Gazzetta dello Sport maintained their prior year level.

Both titles retained their leadership in their respective markets. Corriere della Sera posted an average daily circulation of 654,000 copies, 2.8% lower than in 2006; while Gazzetta dello Sport had average daily circulation of 385,000 copies, 0.3% higher than in 2006 which had nonetheless benefited from record sales at the time of Italy's FIFA World Cup win. Corriere della Sera completed its restyling during the second half of the year, involving all the products forming part of this communication platform. As far as the newspaper was concerned, it got a new layout and its contents were redefined, giving greater emphasis to the information quality of articles. Corriere Magazine was also restyled as from November 8, with a new layout and content structure. At the same time Vivimilano adopted a new smaller, easier-to-consult format in full color, targeted at a younger readership. During December, the new Corriere Motori insert, devoted to the motoring and motorcycle sector, was launched, transforming an occasional supplement into a proper monthly publication. Gazzetta dello Sport enhanced its leadership not only by launching the Giovani e Dilettanti supplement, a special weekly publication devoted to local football championships in Milan and its province, on newsstands since March 12, 2007, but also by developing local editions, with the creation of a Rome edition of Gazzetta dello Sport, an 8-page insert devoted to sport in Rome and Lazio, on newsstands since September 29, 2007.

Add-on products sold together with the two newspapers performed well as far as individual releases were concerned but failed to maintain prior year sales (€148.6 million in 2007 versus €178.8 million in 2006), meaning that margins also suffered. Advertising revenues from titles in the Newspapers segment grew at a particularly good rate, with nearly all the segment's media outperforming last year's already good results. In fact, advertising revenues grew by 7.4%, which was well above the market average of +3.3%. In the case of Corriere della Sera publications (including supplements, local editions and the internet), advertising revenues climbed by 5.9%, while increasing by 7.3% in the case of Gazzetta dello Sport publications. City boosted its advertising revenues by over 27%, thanks to growth in national advertising and good results for local advertising.

The On-line sector continued to expand its business, thanks to the development of new commercial offers and constant investment in improving websites. corriere.it and gazzetta.it completed their restyling during the year, while a travel channel was developed in partnership with Dove magazine and the new portal trovolavoro.it was launched. The corriere.it and gazzetta.it websites managed to boost their readership by 35% and 64% respectively in 2007. The corriere.it website grew steadily during 2007, reaching a total of 9.2 individual users in the month of December 2007 (+51%) who had viewed a total of 280 million pages. The gazzetta.it website, which confirmed its leadership among the sports new websites, reached 5.7 million individual users in December 2007 (+74%), who had viewed a total of 198 million pages. Mobile Value Added Services (VAS) also continued to grow strongly, with over 284,000 active paying subscribers, representing an increase of 45% on 2006. On-line advertising revenues soared by over 50% on the prior year, particularly thanks to business and classified ads. During 2007 the number of websites was expanded with the addition of Fueps.com, an on-line games website developed in partnership with Digital Bros, and the acquisition of automobili.com, resulting in the development of auto.corriere.it.

EBITDA was down on the prior year at €121.0 million. The decrease of €7.3 million (or 5.7%) on 2006 is mainly attributable to the costs of launching Corriere di Bologna at the end of January, the lower contribution of add-on sales due to steady, albeit partly predicted, market saturation, higher costs for stock options waived by employees, and the absence of the government grant towards the cost of paper, which amounted to €3.6 million in 2006.

29 Fourth-quarter performance in 2007 was better than in the same prior year period. Advertising revenues rose by 12.6% in the fourth quarter, which was better than the overall increase for the year of 7.4%, primarily reflecting good performance by the websites of corriere.it and gazzetta.it. However, fourth-quarter circulation revenues were 12.9% down on 2006, due to lower add-on sales. Fourth-quarter EBITDA amounted to €37.0 million, having increased by 9.3% on 2006. This improvement was mainly due to higher advertising revenues and a reduction in marketing costs, as part of steps to rationalize add-on launch costs in order to match the expected drop in sales.

NEWSPAPERS SPAIN

Segment profile

Unidad Editorial operates in Spain in the daily and periodic publication of newspapers, in book publishing and in the production of audiovisual material and digital content for the web. The company publishes El Mundo del Siglo XXI, Spain's number two daily newspaper by circulation, and a number of specialized periodicals (Arte, Historia, Siete Leguas and OKS); it is also a leading internet operator with elmundo.es, its news information website; it has a presence in book publishing with the publishing houses of La Esfera de los Libros and A Esfera dos Livros (Portugal) and in the production of news and entertainment programs for television through the production house of El Mundo TV. In April 2007 Unidad Editorial acquired Recoletos Grupo de Comunicacion, parent company of the eponymous publishing group, one of the leading operators in this sector with interests in printed media, radio and the internet, as well as being a license-holder for digital terrestrial television in Spain. The Recoletos group is a leading provider of sports and business news through the newspapers Marca and Expansión and their related websites, marca.com and expansion.com. It is also present in the magazines market with Telva, a women's magazine, and several specialist magazines (Marca Motor, NBA, Actualidad Económica, XBOX, Golf Digest) it also operates in the radio sector with Radio Marca, linked to the sports daily Marca and one of Spain's principal digital broadcasters. The Recoletos acquisition has also enabled Unidad Editorial to raise its interest in Veo TV from 27.675% to 55.36%. This company owns the license to a multiplex for digital television transmission. From the second quarter of 2007 Unidad Editorial embarked on a structured program for integrating the Recoletos group, largely completed in 2007, with a view to achieving its complete integration not only in terms of corporate structure but also organizationally in order to maximize operational synergies. Recoletos Grupo de comunicacion (and all its wholly-owned subsidiaries) was merged into Unidad Editorial effective from September 1, 2007.

Financial highlights

4th quarter 4th quarter Year ended Dec- Year ended Dec- (€/millions) 2007 2006 % change 31-2007 31-2006 % change

Circulation revenues 80.8 49.3 n.s. 277.4 169.7 n.s. of which Recoletos group 31.8 99.2

Advertising revenues 94.4 48.0 n.s. 286.6 147.1 n.s. of which Recoletos group 42.4 113.0

Other publishing revenues 20.3 8.5 n.s. 64.8 24.8 n.s. of which Recoletos group 13.7 39.2

Total revenues from sales and services (1) 195.5 105.8 n.s. 628.8 341.6 n.s.

of which Recoletos group 88.0 0.0 251.5 0.0

(1) of which add-on product sales: 19.8 18.1 67.9 59.2

4th quarter 4th quarter Year ended Dec- Year ended Dec- 2007 2006 % change 31-2007 31-2006 % change EBITDA 48.1 29.5 n.s. 128.5 60.9 n.s. of which Recoletos group 19.6 59.8

31 Market trend

The Spanish market for news information dailies grew by 3.1% in 2007. El Mundo boosted its sales by 1.5% to 336,000 copies, reaching its highest circulation since its launch. Newsstand sales of El Mundo grew by 1.8%. In the sports dailies market, which grew by 1.3% in 2007, Marca confirmed its leadership by increasing its circulation by 2.5% to 317,000 copies. Expansión confirmed its absolute leadership in the business dailies market with circulation of 50,000 copies and a 2.1% increase in newsstand sales, inclusive of individual subscriptions.

RCS performance

The Newspapers Spain segment reported strong results in all sectors of its operations during 2007. Both the circulation of its main titles and advertising in its principal media were above market trend. Only the business of add-ons continued to show signs of difficulty after years of particularly strong sales and results.

Advertising revenues were 94.9% higher at a consolidated level and 18.0% on a consistent comparative basis. All the group's media enjoyed this growth, particularly the portfolio's most important titles. El mundo reported an increase of 13.3% and Expansion of 13.1%. In contrast, Marca posted a small drop of 3.6% on 2006, having enjoyed the benefit of important sporting events in the prior year. Internet advertising was 53.9% higher than in 2006, thanks to excellent performance by Elmundo.es, the world's top Spanish language news website, and by Marca.com and Expansion.com. As regards magazines, the El Mundo supplements, Magazine and Yo Dona, did particularly well in terms of advertising, as did Telva.

As for circulation figures, El mundo reported average daily circulation of 336,000 copies, up 1.5% on the prior year. The daily has therefore confirmed itself as the number two national newspaper, closing the gap even further on the market leader. Circulation of the supplements was generally stable, maintaining a very high level; in particular, Magazine sold an average of 408,000 copies. In addition to El Mundo, circulation of Marca, the sports daily, improved considerably, thanks to its new management, and regained most of the ground lost in previous years to the competition; it therefore regained its leadership in the more important local markets. Average daily circulation of Marca was around 317,000 copies, reporting an increase of 8,000 copies in newsstand sales and paying subscriptions relative to the prior year (+2.5%). The business dailies market saw a new entrant in 2007, El Economista, which explains the 5.4% growth in this sector. Circulation of Expansion was stable relative to the prior year.

The add-ons business experienced growing difficulties over the course of the year due to the larger number of products being offered on this market and the exhaustion of the effect produced by the encyclopedia collections characterizing sales in recent years. Both factors led to an increase in the number of new releases, reducing their effectiveness and profitability. Unidad Editorial managed to take advantage of its larger portfolio of dailies to market add-ons profitably.

Circulation figures for magazines were in line with last year; more specifically, Telva, the most important title in the portfolio, reported average circulation of 174,000 copies.

Elmundo.es confirmed its leadership among the Spanish-language news information websites, both nationally and globally. Visitor numbers reached the record level of 11.0 million individual users in November. The figures for the year reported a total of 303.1 million in pages viewed, 47.0 million visitors and an average of 9.7 million individual users. Marca.com is Spain's number one sports new website with an average of 5.7 million individual users in 2007; the number of pages viewed reached 341.4 million in the year, while visitors climbed by 40% to 54.2 million. Expansión.com also reported a positive trend in these statistics during 2007. In fact, its average of 2.3 million visitors for 2007 was 49% higher than in 2006. The new website of the women's monthly magazine Telva went live in September.

32 The Audiovisual sector continued to perform well, increasing both its revenues and margins relative to 2006. The development of the business is reflected not only in the number of programs made, which went up from 807 to 1,094, but also in the number of broadcasting hours, which increased from 804 to 1,050.

Book publishing activities did well in both Spain and Portugal. Esfera published 89 new titles in Spain and 43 in Portugal in 2007. Of particular note in Spain was the success of Jesús de Nazaret (Jesus of Nazareth), the first book published by Pope Benedict XVI, which sold more than 200,000 copies. Good sales were also reported by Los que le llamabamos Adolfo, Secretos y mentiras de la Familia Real, Años de hierro, La Comunera de Castilla and Una vida con Karol.

Lastly, circulation of Diario Economico, the Portuguese daily published by the subsidiary Economica SGPS, was in line with market trend, confirming its position as leader of its particular segment.

The subsidiary Veo Television, owner of a multiplex for digital television broadcasting, is going through its technological start-up phase in preparation for the time when all national television finally converts from analogical to digital broadcasting. Veo TV currently broadcasts three television channels, of which VEO is a generalist channel under direct management, one is rented to SONY Entertainment TV, and La tienda en Casa is a telesales channel jointly managed with El Corte Inglés.

In terms of the consolidated results, which include Recoletos and Veo as from April, the Newspapers Spain segment reported €628.8 million in revenues and €128.5 million in EBITDA, with a like-for-like margin of 20.4% compared with 17.8% in 2006 for Unidad Editorial on its own. Fourth-quarter revenues were €195.5 million, while EBITDA came to €48.1 million with a margin of 24.6%.

On a consistent comparative basis, Unidad Editorial's revenues were €35.7 million higher at €377.3 million, reporting an increase of 10.4% on 2006. The increase in revenues is largely attributable to the growth in advertising revenues, which climbed €26.5 million to €173.6 million (+18.0%). The rest of the increase is due to higher publishing revenues (+€8.5 million, or +5.0%), mainly thanks to increased circulation of El Mundo and the price rise for its Sunday edition. EBITDA was €68.7 million, reporting an increase of €7.8 million on the prior year, with a margin of 18.2%, up from 17.8% in 2006. Fourth-quarter revenues, stated on a consistent comparative basis, increased by €1.7 million (+1.6%), while EBITDA was €1.1 million lower at €29.5 million.

BOOKS

Segment profile

The Books segment comprises the RCS Group's activities in the book publishing sector in Italy (Fabbri, Bompiani, Rizzoli, BUR, Sonzogno, Marsilio, Coccinella, Adelphi, R.L. in joint venture with the Mauri Spagnol group in the "cut price" segment), in France (Flammarion group including Editions Flammarion, J'Ai Lu, Casterman) and the United States (Rizzoli and Universe); in Italy's art books sector (Skirà); in the textbook and professional publishing sector (Fabbri, Etas, La Nuova Italia, Sansoni, Tramontana, Oxford, Calderini, Edagricole, Markes, Educazione & Scuola, Edizioni del Quadrifoglio); in the legal, university and professional publishing sector (Etas and La Tribuna); in the reference sector (Rizzoli-Larousse); and in the partworks sector (in Italy and abroad, mainly via Fabbri).

Financial highlights

4th quarter 4th quarter Year ended Dec-Year ended Dec- (€/millions) 2007 2006 % change 31-2007 31-2006 % change Fiction and non-fiction - Italy 52.2 41.9 24.5 172.8 137.7 25.5 Flammarion (1) 61.9 76.6 (19.2) 198.1 226.9 (12.7) Partworks 50.3 65.0 (22.6) 237.1 234.6 1.1 Education 19.6 19.9 (1.5) 99.6 99.4 0.2 Rizzoli Int.l Publications 9.4 8.0 17.5 22.9 21.9 4.6 Other revenues 0.0 0.1 n.s. 0.3 0.8 n.s.

Total revenues from sales and services 193.5 211.5 (8.5) 730.8 721.3 1.3

EBITDA 39.1 35.2 11 67.4 64.2 5.0

The segment's total revenues came to €730.8 million in 2007, an increase of €9.4 million on 2006 (+1.3%). Nearly all the sectors contributed to this positive performance. The drop of €28.8 million in revenues at the Flammarion group is partly due to the different treatment of third-party publisher distribution revenues, adoption of which has not had any impact on the group's profitability. Assuming the same treatment of third- party publisher revenues, the Flammarion group would have reported an increase of €10.9 million in revenues, reflecting the excellent results of book sales, particularly those published by Flammarion. The overall increase in Book segment revenues also reflects a total of €18.6 million for the first-time consolidation of the Skirà group (from the start of 2007). The increase in revenues reported by the Italian Fiction and Non-Fiction division - €16.5 million on a consistent comparative basis - reflects the excellent performance of new books published in 2007, the development of third-party publisher distribution and the growth in revenues from copyright sales, while revenues from add-on sales were down. The Education sector's results were in line with the prior year despite the difficulties presented by the social and economic environment and the fierce media campaign against the high price of books. The growth in revenues in the Partworks division is basically due to expansion into Eastern Europe (particularly Russia and Ukraine), which more than made up for poor sales performance in Italy and France. Lastly, Rizzoli International Publications performed well, even more so in local currency terms (ie. dollars). EBITDA was €67.4 million, having increased by €3.2 million on 2006, due to higher turnover and constant control of costs, despite the influence of not particularly positive exogenous macroeconomic variables throughout most of the year. Fourth-quarter revenues were €193.5 million, down 8.5% on the same period in 2006; this decrease is mainly due to the different presentation of third-party publisher revenues at the Flammarion group and partly to lower revenues from Partworks.

34 Fourth-quarter EBITDA amounted to €39.1 million in 2007, up by €3.9 million on the same period in 2006 for the reasons described above.

Fiction and Non-Fiction - Italy

Market trend Following the decision to switch market research company, changing over from Demoskopea to Nielsen Bookscan with effect from January 2007, the figures for the two periods being compared are not entirely comparable. Having made this clear, the data for 2007 reveals that Fiction accounted for 35.2% of the market (up from 33.5% in 2006), Children's books for 12.7% (up from 10.6%) and Non-fiction for 52% (down from 55.9%). The overall market grew by 2.5% in 2007. RCS managed to raise its market share in such a context, from 12.6% to 13.6%, thanks to successes reported by RCS Libri.

RCS performance The division's revenues increased by 25.5% to €172.8 million. This increase reflects a total of €18.6 million for the first-time consolidation of the Skirà group, and the 16% growth in revenues from RCS published books, thanks to the success of titles such as Scusa ma ti chiamo amore (Sorry but I'm calling you darling) by Moccia, Gesù di Nazareth (Jesus of Nazareth) by Pope Benedict XVI, La strega di Portobello (The witch of Portobello) by Coelho and above all La Casta (The Caste) by Rizzo/Stella. Revenues from distributing books produced by third-party publishers and from selling copyrights did very well, while there was a large contraction in the production and sale of add-ons particularly those sold in conjunction with Corriere della Sera.

Fiction and Non-Fiction - France

Market trend The size of the French book market was generally the same as in 2006. The opening of out-of-town book superstores and internet sales basically made up for lower sales through hypermarkets and traditional book shops. Flammarion was the only one of the market's top five publishers to increase its market share, raising it to 5.1% and confirming itself in a stable number four position.

RCS performance The Flammarion group's revenues amounted to €198.1 million, nominally 12.7% lower than in 2006 which also included the sales invoiced on behalf of third-party publishers, as mentioned earlier. Ignoring the change in the treatment of these revenues, the group's revenues would have increased by €10.9 million. Successful new publications included La sorcière de Portobello (The witch of Portobello) by P.Coelho, Le parfum d’Adam (The smell of Adam) by J.Rufin, Jésus de Nazareth (Jesus of Nazareth) by Pope Benedict XVI, L’aube, le soir ou la nuit (Dawn, evening or night) by Y.Reza, Le disparus (The departed) by D.Mendelsohn for Flammarion, Le chat (The cat) by Geluck, Le Soleil naît derrière le Louvre (The sun rises behind the Louvre) by Malet and Moynot and the small format Tintin series for Casterman and La Tragédie du Président (Tragedy of the President) by F.Giesbert for J’Ai Lu.

Partworks

Market trend The Italian partworks market reported a 3.2% decline in value in 2007 and a 7.9% drop in volumes. The French market, worth €280 million in 2006, shrunk to around €230 million in 2007, with the overall number of new releases declining from 81 to 65; this decrease was almost equally divided between films and DVDs. The UK market was generally stable in terms of the overall number of new releases and in terms of value. The markets in Russia and Ukraine both expanded, the Japanese market was stable, and the Chinese market was problematic, reflecting low purchasing power and the absence of television coverage.

RCS performance The sector reported total revenues of €237.1 million in Italy and abroad, representing an increase of some 1.1% on 2006. This growth reflects the large number of new releases and the higher average sale price for

35 individual collectible series in the markets served by GE Fabbri, making up for poor sales performance in Italy and France. The most successful releases in the year included: in Italy Fiabe sonore (Fairytales on audio) and Il grande dinosauro (The great dinosaur) for children, Teneri gattini (Sweet little kittens) and Targhe americane (American plaques) in the collector's range, Il grande cinema di Renato Pozzetto (Renato Pozzetto film greats) on DVD, Pirandello a teatro (At theatre with Pirandello) on DVD and Il grande cinema di Totò (Totò film greats) in the books & show business segment; in the UK James Bond Cars and Felicity Wishes Gift Collection; Sabrina in Russia and Ukraine, and Tendres Chatons (Sweet little kittens) in France.

Education

Market trend Following the fierce press campaign against the high price of textbooks and the loss of purchasing power by average Italian families, the schoolbooks market in 2007 reported a deterioration in adoption versus sales; there was a renewed negative trend, after the more positive signs of recent periods. The reasons for this include reduced household purchasing power and a general climate in which the value of education, hence also that of the textbook, is not viewed as an essential part of either cultural or personal improvement. Given this situation, the overall textbooks market reported €536 million in revenues, 1.5% more than in 2006. In relation to the investigation by Italy's Antitrust Authority into AIE (Italy's publishing industry association) and extended to RCS Libri and other textbook publishers, in February 2008 RCS presented two types of undertaking, without acknowledging the violations alleged by the Antitrust Authority: i) to develop, publish and sell innovative, digital content, particularly by introducing and maintaining, for the three-year period 2008-2010, at least 8 innovative, stand-alone digital products, relating to basic secondary school education; ii) to develop, publish and sell new publications in compliance with ministerial guidelines relating to secondary school education at a significantly lower price than corresponding editions currently sold.

RCS performance Given the market situation described above, RCS revenues from the Education division (textbooks, professional and reference books) was largely the same as in 2006 at €99.6 million. Net revenues from adopted textbooks alone came to €86.6 million (+ 1% on 2006). Sales of near-textbooks also grew, reaching a figure of more than €5.2 million. The results of new adoptions reflect the prime position held by Fabbri-Bompiani-Sansoni in the lower secondary school segment, and further enhancement of the leadership enjoyed by the Oxford University Press catalogue for English-language teaching, like for Tramontana in the economics and law segment. Oxford University Press increased its share of the primary schools segment, while Fabbri maintained its position. Overall, RCS is number three in the market with a 12.5% share of primary school adoptions, after Zanichelli (14%) and Edumond (13.5%).

Rizzoli International Publications

Market trend The "Adult Hard Cover" segment, which includes illustrated books, grew by 10.7% in value to the end of November 2007 (source AAP).

RCS performance Consolidated revenues were about 4.4% higher in 2007 than in the prior year. Those of the publishing house on its own climbed by 13.5%, while those of the Bookstore went down by 3%. This success is the result of a combination of very strong new titles, particularly "Ralph Lauren" which accounted for 10% alone of total annual sales, good performance by the catalogue and a lower percentage of returns than in the past.

MAGAZINES

Segment profile

The Magazines segment comprises 31 weekly and monthly titles, published by RCS Periodici, Sfera Editore, Rizzoli Publishing and Editrice Abitare Segesta.

Financial highlights

Year ended Year ended Dec- (€/millions) 4th quarter 2007 4th quarter 2006 % change Dec-31-2007 31-2006 % change Circulation revenues 27.6 29.3 (5.8) 123.6 136.1 (9.2) Advertising revenues (1) 56.8 56.1 1.2 174.6 167.9 4.0 Other revenues 9.5 9.2 3.3 32.4 31.0 4.5

Total revenues from sales and services 93.9 94.6 (0.7) 330.6 334.9 (1.3)

EBITDA 15.7 16.7 (5.9) 25.7 26.3 (2.2)

(1) Advertising revenues in the year ended December 31, 2007 consist of €142.8 million earned through RCS Pubblicità (€129.9 million at December 31, 2006), €1.7 million earned through PRS (€10.1 million at December 31, 2006) and €30.2 million earned directly (€27.9 million at December 31, 2006).

Market trend

The magazines market reported a 4.1% decline in volumes in 2007 and an 8.9% drop in value relative to the prior year. The absolute size of the market went from 957 million copies in 2006 to 920 million in 2007. This decline related to both weeklies (-3.0%) and monthlies (-9.1%). In terms of weeklies, the only ones actually reporting growth were women's celebrity magazines and popular family magazines; instead, weekly gossip, business and financial and family magazines as well as women's supplements all performed worse, while weekly women's fashion magazines and news magazines were largely stable. In terms of monthlies, both interior design and men's magazines improved, while motoring, science and health/wellness magazines all lost ground; tourism and fashion magazines also declined but by less than the others, while the childhood sector was stable.

Magazine advertising grew by 3.1% as a whole in 2007; non-professional magazines reported an increase of 2.7%.

RCS performance

Segment revenues were €4.4 million lower than in 2006 (-1.3%). These results reflected the negative impact of circulation, particularly where add-on sales were concerned which caused circulation revenues to go down by over €12.0 million, and the positive impact of advertising, which added €6.7 million in extra revenues (+4.0%), doing better than the market. The growth in advertising particularly related to A, Amica and Max and the subsidiaries Editrice Abitare Segesta and Rizzoli Publishing.

Circulation figures for RCS titles were 2.5% lower than the year before, although they were not down by as much as the market as a whole (-4.1%).

Among the weeklies, the family magazine Oggi lost around 8% of its circulation, in line with its market segment, due to a reduction in the number of promotional copies distributed with local newspapers and RCS products, and to fewer sales of add-ons, whose market declined by over 20% in volume and value relative to 2006; the gossip magazine Novella 2000 managed to limit its decline to 7% in a segment that contracted by more than 25%. Instead, Visto improved its circulation revenues by 6.8% on the prior year, in keeping with its segment trend. In the area of women's weeklies, IO Donna performed in line with 2006, continuing to be 37 market leader in its segment. A made considerable progress, improving its circulation by 4.5% on the prior year, thanks to steady, ongoing consolidation of position. Il Mondo suffered the general trend in its sector, with circulation falling by over 11%.

In the area of monthly magazines, Amica continued to head the field in the fashion sector even though its circulation was 1.6% lower than in 2006, mainly due to negative performance by its summer add-ons. Max was in line with 2006, even though its promotions failed to deliver the expected results. Publication of Newton was suspended with the December 2007 edition following the serious problems experienced by its market segment during 2007. In the interior design segment both Casa Amica and Brava Casa maintained their 2006 level of circulation, helping RCS retain its top position on this market, also thanks to Abitare and Case da Abitare, both published by the subsidiary Editrice Abitare Segesta and both restyled during 2007. Brava Casa also strengthened its international presence by obtaining two new licenses in Croatia and Georgia as well as signing a joint venture agreement with a Chinese partner to start up Rizzoli Beijing Advertising Co. Ltd in the first half of 2008.

Other events during 2007 included the launch of Io cucino, a monthly supplement to the weekly Oggi, and the restyling of Io Donna and Amica in September, of Oggi and Il Mondo in October and of Brava Casa in November.

RCS also confirmed its leadership in the tourism and lifestyle segments, not only thanks to excellent performance by Dove and Style Magazine, but also thanks to consolidation of the monthly I Viaggi del Sole, launched at the end of 2006, and the launch of Yacht & Sail, a sailing magazine first published in July 2007, followed in October, during the Genoa boat show, by the launch of the RCS Group's first multimedia platform integrating the periodical with the website and television channel, in collaboration with Digicast.

A New Media Magazines division has been set up, confirming the Magazines segment's move into multimedia, with the goal of developing the digital, internet and mobile business of the titles owned.

Lastly, it was decided in December to transfer the "RCS Periodici" subscriptions business to the subsidiary RCS Direct, with the goal of creating a specialist direct marketing unit targeting both private customers (B2C) and businesses (B2B). The new unit has been up and running since February 2008.

The trends described above allowed the Magazines segment to report a positive EBITDA of €25.7 million in 2007, down €0.6 million on the year before, which had also benefited from €2.2 million in paper grants while having to absorb the launch costs for A.

Fourth-quarter revenues were 0.8% down in 2007, entirely due to circulation revenues which were €1.7 million lower (-5.9%) than the year before as a result of fewer add-on sales. Instead, advertising revenues performed well, especially in women's magazines; in fact, the 1.2% increase in advertising helped counter the impact on EBITDA of lower circulation revenues, allowing the Magazines segment to close the quarter €1.0 million down on the same period in 2006.

ADVERTISING

Segment profile

RCS Pubblicità manages advertising space for the Group's publications and controls Blei (an advertising broker for foreign media) and CNR, a company on which the CNR network was conferred by its previous owner RCS Broadcast. CNR represents a network of 40 regional broadcasters, spread throughout the country, who simultaneously broadcast news and advertising with over 5 million listeners on an average day (source: Audiradio 2006 g.m.i.). In December RCS Pubblicità reached an agreement to sell CNR, meaning that CNR has been classified under discontinuing operations (in the income statement) and assets held for sale (in the balance sheet) and therefore deconsolidated from the advertising segment. The sale generated a net capital gain of €0.3 million for RCS Pubblicità. The Advertising segment also manages the interest in the IGPDecaux Group, leader in the outdoor advertising sector, which has been consolidated using the equity method since it is jointly controlled with other shareholders. The segment's revenues do not include (i) those from the childhood segment in which the publisher Sfera operates directly, (ii) those of certain magazines whose advertising placement is handled by PRS and (iii) the advertising revenues of the Newspapers Spain segment since these are managed directly by the publishers themselves.

Financial highlights

4th quarter 4th quarter Year ended Year ended (€/millions) 2007 2006 % change Dec-31-2007 Dec-31-2006 % change RCS Pubblicità S.p.A. 182.6 169.6 7.7 595.6 562.1 6.0 Blei S.p.A. 13.1 13.7 (4.4) 47.3 46.0 2.8

Total revenues from sales and services (1) 195.7 183.3 6.8 642.9 608.1 5.7

EBITDA 0.4 3.6 (88.9) 5.6 8.5 (34.1)

(1) The Group's advertising revenues of €969 million in the year ended December 31, 2007 include €377 million in revenues earned directly by the publishers themselves (of which €286.6 million by Newspapers Spain, €0.7 million by Newspapers Italy, €47.3 million by Blei, €31.8 million by Magazines, €13 million by DADA, €3.0 million by Digicast less €5.4 million in intragroup eliminations). The Group's advertising revenues of €794.7 million in the year ended December 31, 2006 included €234.5 million in revenues earned directly by the publishers themselves (of which €147.1 million by Newspapers Spain, €45.7 million by Blei, €38 million by Magazines, €7 million by DADA, €0.4 million by Books less €3.7 million in intragroup eliminations).

Market trend

The advertising market grew by 3.1% in 2007, with a rise in the last quarter particularly for television and radio. TV advertising was 1.2% higher, thanks to the Mediaset networks and specialist TV stations, with signs of recovery reported at year end. Print media grew by 3.1% as a whole, with a major increase in the months of October and November. Advertising in paid newspapers grew by 3.3%, with good performances reported by local, classified and service advertising, while space sales of national business advertising increased but suffered from a slight reduction in average revenue. Advertising in non-professional magazines increased by 2.7%, largely thanks to higher average prices. Radio advertising increased by 8%, chiefly thanks to commercial stations. Billboard advertising recovered relative to the start of the year (+1.9%), while cinema advertising continued to be in trouble, reporting a significant decrease on the prior year (-8.4%). Internet advertising had another excellent year (+42.7%). As far as the different types of investor were concerned, the following sectors performed well: telecommunications, apparel and finance/insurance; the motoring sector continued to recover, closing

39 slightly up on the year before, while the groceries, soft/alcoholic beverages and media/publishing sectors all spent less on advertising.

RCS performance

The segment's advertising revenues were 5.7% higher (+€34.9 million) than in the year before. RCS Pubblicità improved by 6% (+€33.5 million), with the fourth quarter (+7.7%) better than the preceding quarters, thanks to good results for national business advertising in Corriere and Gazzetta and a big increase in advertising for free press, on-line and sporting events. Blei reported an annual increase of 2.9%, with a downturn in the fourth quarter due to a year-end reclassification of agency commission, causing net revenues to reduce by €2.5 million; ignoring this inconsistency, revenues would have increased by 8.4% thanks to a big recovery in the year's last four months (+13.7%), which featured a concentration of TV advertising campaigns by certain large clients.

Advertising growth in Newspaper media outpaced the general market, with an upswing in the last four months of the year. National business advertising was higher in both Corriere della Sera and Gazzetta dello Sport, even though in the latter's case this was a year without any major sporting events. Advertising revenues from Magazine media improved thanks to good results particularly for A and Style Magazine, but also for Sportweek, Max, Amica, Novella and Dove. Oggi and Magazine both did worse although the latter reported a fourth-quarter recovery after being restyled in November. The last quarter of the year reported a general slowdown for all titles, except Io Donna, whose sharp turnaround allowed it to close the year at the same level as the year before.

As far as Other Media are concerned, revenues from the radio sector were down (-12.5%, -€2.7 million) after Play Radio left the portfolio. On-line media enjoyed excellent results throughout the year, also thanks to an enlarged offer (teleselling for real estate and personnel search); Events (-4.6%) suffered from the loss of the contract with Inter, partly offset, especially in the last part of the year, by the contract with the FIGC (Italy's football federation) relating to the national team, whose full benefits will be felt in 2008.

EBITDA came to €5.6 million in 2007, which was down on the prior year due to new commercial ventures by RCS Pubblicità in the on-line sector and related organizational investments concentrated towards year end, and to lower profitability at Blei that was not offset by the segment's higher revenues.

IGP

IGPDecaux is leader in the billboard, street furniture and transport advertising market. It was created from the partnership between RCS and the JCDecaux Group of France. IGP closed the year with €192.2 million in revenues, up €5.9 million (+3.2%) on the prior year. The transport sector grew by 7.1% on the prior year, thanks to the contribution of "high impact" transport advertising. After the major drop in 2006, "classic transport" advertising stabilized in 2007, closing with a 3.0% increase on the year before. The subways and airports sector also performed well; the latter particularly benefited from campaigns by investment funds (Alliance) and the banking sector (bank mergers). The street furniture sector also improved (+4.7%), thanks to good returns on contracts in Turin, Pescara and Naples and the management of bus shelters in Milan. The billboards sector was in decline (-22%), mainly because of the fact that in 2006 there were several extraordinary events, like the general election and Olympic games; the loss of certain contracts (Modena, Treviso, Reggio Emilia and the Viacom diapasons in Milan) also contributed to this reduction, while the steady decline in the use of third-party space in favor of the company's own space helped improve profitability and quality of service. EBITDA was €16.5 million, €2.6 million more than in 2006, reflecting the higher amount of revenues. Fourth-quarter revenues increased by 3.2% on the same period the year before (+€1.8 million).

DADA

Segment profile

DADA S.p.A. is one of the most important net companies in Italy. It is listed on the Italian Stock Exchange and heads up a group that is entirely dedicated to developing on-line business and services by managing a network of websites open to the public and a company which registers internet domain names and provides hosting services. The DADA group has been reorganized into the following divisions since the start of this year: DADA.net, DADA.Adv and DADA Pro. The principal organizational change refers to the creation of the DADA.Adv division, which deals with the acceptance, purchase and sale of internet and mobile advertising for the entire group, and also includes the revenue sources from the former Business Division. The DADA.net division's main activities involve offering end users a package of community and entertainment products and services for payment that can be accessed by personal computer and mobile phones both in Italy and abroad. DADA Pro manages activities relating to the business solutions market and the self-provisioning domains and hosting market, on which Namesco, acquired in July 2007, also operates. On July 16, 2007 it was announced that DADA and SONY BMG MUSIC ENTERTAINMENT were creating a joint venture known as "Dada Entertainment LLC", to develop a new range of entertainment services accessed via the internet and mobile phones. Dada USA will hold 50% of Dada Entertainment LLC, while the other 50% will be held by Sony BMG Music Entertainment.

Financial highlights

4th quarter 4th quarter Year ended Year ended (€/millions) 2007 2006 % change Dec-31-2007 Dec-31-2006 % change

Other publishing revenues 42.4 28.1 50.9 145.5 104.4 39.4

Advertising revenues 1.0 3.2 (69) 13 7.0 85.7 Total revenues from sales and services 43.4 31.3 38.7 158.5 111.4 42.3

EBITDA 6.0 4.5 33.4 21.2 14.8 43.3

Market trend

DADA continued in 2007 to consolidate its leadership in Italy in the market of community and entertainment products/services for the web and mobile phones, while also increasing its international market share in the same sector. DADA is now present in 30 countries with the multimedia community DADA.net (www.DADA.net), with the addition of an average of 40,000 new users every day, of whom half are paying and originating primarily from Brazil, Italy, the USA and Spain. The success of the strategy of expanding services abroad has caused the proportion of international revenues to increase. In particular, the year saw a major expansion in the Dada.net product range, which includes Community, Social Networking, Video, Audio, Blogging and Mobile Entertainment services in a single integrated environment, accessible both via the internet and mobile phones. "friend$", a community advertising program was also launched in the year; this program, developed in partnership with Google, allows users to share advertising revenues generated by their personal pages and contents, creating a strong incentive for conducting business in the community and for inviting friends, with the generation of "viral" (self-feeding) traffic. In the web advertising sector, Dada.Adv presents itself as a partner capable of directing internet users to sites or business portals, which can consequently increase their income. Dada.Adv offers different kinds of package for campaign development, through its technological platform and the support of sales networks. Dada.Adv is one of the biggest players in this sector, working alongside the major search engines and advertising networks like Google, Yahoo and MSN. 41 Dada.Adv has an exclusive on managing all the properties of 3 Italia, Italy's top UMTS operator. The products offered are profiled SMSs, visual MMSs, banners and advertising space on the Pianeta3 site; these products are directed at the 6.8 million UMTS customers subscribing to 3 Italia services. In the professional services area, July 2007 saw the acquisition of Namesco Ltd. The growth already enjoyed in 2006 got stronger during 2007, driven not only by domain name registrations and renewals but also by an increase in sales of email upselling and hosting products. The three local brands in Italy, Spain and the United Kingdom operated at optimum level, registering over 60,000 new domains and managing over 800,000 domains at group level. What is more, activities were started in the UK for acquiring small local customer bases, which added over 20,000 users to the customer portfolio in the last two months of 2007 alone. The number of active, paying customers therefore climbed to more than 230,000 throughout Europe.

RCS performance

The DADA group's consolidated revenues amounted to €158.5 million in 2007, having increased by 42% on the corresponding figure of €111.4 million reported the year before. Consolidated revenues reported a similar level of growth each quarter, with the fourth quarter posting €43.4 million in consolidated revenues, up 39% on €31.3 million in the corresponding period of 2006.

The scope of consolidation underwent a major change in 2007 involving the sale of the investment in Softec, the acquisition of the UK company Namesco and the transfer of the VAS business in the USA to Dada Entertainment LLC, the joint venture with Sony BMG. The Dada.net division accounted for €111 million of consolidated revenues in 2007, 23% more than in 2006. This division generated 67% of the group's revenues, down from 80% the year before, reflecting not only the change in the scope of consolidation of the Dada.pro division, which benefited from the revenues of Namesco Ltd and from the transfer of the VAS mobile business from the US subsidiary Dada USA to the joint venture with Sony BMG. The Dada.Adv division accounted for €30.2 million (or 18%) of consolidated revenues, compared with €11 million (10%) in 2006, therefore reporting a 174% increase. The Dada.pro division generated €24 million (or 15%) of consolidated revenues, compared with €11.2 million (10%) in 2006, therefore reporting a 118% increase.

The breakdown of consolidated revenues by geographical area in 2007 shows an increase in the international component, which grew by 21% from 39% to 47% of the total. Growth on the Brazilian and Spanish markets was particularly significant, also reflecting changes in the scope of consolidation.

The DADA group's consolidated EBITDA for 2007 was €21.2 million, up from €14.8 million the year before. EBITDA was €6 million in the fourth quarter alone, compared with €4.5 million in the same quarter of 2006. EBITDA benefited from an extra €1.7 million for changes in the scope of consolidation, of which €0.8 million in the fourth quarter of 2007.

TELEVISION

Segment profile

This segment comprises the Digicast group, acquired in April 2007. Digicast S.p.A. operates through its subsidiaries Canali Digitali S.r.l., Seasons S.r.l., Sailing Channel S.p.A. and Digital Factory S.r.l. in the television broadcasting sector with 5 channels available through SKY with Jimmy (channel 140) in the SKY "World" package, the Sailing channel (channel 214) in the SKY Sport package, Caccia e pesca (Hunting and fishing) (channel 235) and Moto TV (Motorcycle TV) (channel 237) in the SKY Options package, and through European platforms with Sailing Channel International. With a view to development, the channels all have their own websites which are increasingly integrated with the RCS Group's television media and magazines.

Financial highlights

4th quarter 4th quarter Year ended Year ended (€/millions) 2007 2006 (1) % change Dec-31-2007 (2) Dec-31-2006 (2) % change Subscribers 6.0 5.6 7.1 18.3 16.3 n.s Advertising 1.0 1.4 (28.6) 3.0 2.7 n.s Other 0.5 n.s. 0.9 n.s 7.1 7.5 (5.3) 21.4 19.9 n.s Total revenues from sales and services EBITDA 2.8 4.0 (30.0) 7.3 7.3 0.0 (1) The Digicast group has been consolidated since April 2007, contributing to consolidated revenues and EBITDA only from the second quarter of 2007. The fourth-quarter figures for 2006 are presented only for the purposes of appreciating the current period's results. (2) Comprises the figures for the last three quarters of 2007 and 2006.

Market trend

Recent years have seen the birth of new partnerships in the media sector between traditional players in the TV sector and operators from converging sectors. The continued migration of generalist audience from all the media (TV, magazines and newspapers) to specialist products is forcing television companies in Italy and abroad to follow the demands of end users, by creating multi-platform convergent systems capable of providing the market with increasingly specific, niche products in place of generic ones. The pay-tv sector in Italy is increasingly becoming the principal engine of growth, with the short/medium- term scenario proving dynamic and displaying opportunities for significant development.

RCS performance

The Digicast group's consolidated revenues came to €21.4 million in the period April - December 2007, some €1.5 million higher than in the same period of 2006. EBITDA was €7.3 million, unchanged on the same period in 2006. The "Caccia e Pesca" channel has 2.74% penetration of the SKY World package and 4.44% penetration with reference to the SPORT package. Sailing Channel S.p.A. has been charged with developing the experimental "Nautical System" model, a convergent media product between television, the magazine and website. Sailing Channel International reported a small increase in the number of subscribers in its various distribution platforms, along with an increase in fees by the German platforms, also because the channel has been broadcast in the German language since 2007. MotoTV (Motorcycle TV), a SKY Option, was launched in April 2007 and had 8,552 subscribers at December 31, 2007.

CORPORATE FUNCTIONS

Segment profile

Corporate functions involve the provision of services to group companies. They are primarily concentrated in the parent company RCS MediaGroup and the centralized units of RCS Quotidiani. The segment also includes RCS Factor, a provider of factoring services, RCS Investimenti, GFT Net (in liquidation), and, as from June 1, 2007 AGR, a news agency specializing in the production of news services for the radio, television and new multimedia channels. The parent company RCS Mediagroup also holds the interests in M-dis S.p.A., the company which handles newsstand distribution of the RCS Group's publications and those of third-party publishers, and in Gruppo Finelco, the broadcaster of Radio Montecarlo and Radio 105, to which the interest in RCS Broadcast was transferred and subsequently renamed Virgin Radio Italy.

Financial highlights

Year ended Year ended (€/millions) 4th quarter 2007 4th quarter 2006 % change Dec-31-2007 Dec-31-2006 % change Centralized Units 14.0 13.3 5.3 53.0 53.2 (0.4) AGR (1) 2.0 2.1 (4.8) 8.1 8.9 (9.0) RCS Mediagroup 0.7 1.1 (36.4) 3.6 4.9 (26.5) RCS Factor 0.2 0.1 n.s. 0.7 0.7 n.s.

Total revenues from sales and services 16.9 16.6 1.8 65.4 67.7 (3.4)

EBITDA (6.9) 0.1 n.s. (16.1) (16.2) 0.6 (1) The figures for 2006 did not include AGR, the newco to which the eponymous business previously owned by RCS Broadcast was transferred and whose results were previously reported in the Broadcasting segment.

Revenues from the recharge of services by the Centralized Units to other group companies amounted to €53 million, staying largely in line with the prior year. These services refer to ITC, accounting and administration, treasury and other functions such as procurement, personnel administration, property and facility management and general services. As far as AGR is concerned, the drop in revenues is partly due to the general crisis in Italy's private radio and television sector and partly to the absence of news services sold to Play Radio (now Virgin Radio) from July on. The contraction in revenues for RCS MediaGroup is due to the smaller amount of central services recharged, as a result of policies to limit overhead costs.

The segment reported a negative EBITDA of €16.1 million, basically in line with the prior year figure.

Other relevant information for the parent company

Some of RCS MediaGroup S.p.A.'s more significant financial results for 2007 are discussed below:

4th quarter 4th quarter Year ended Dec-Year ended Dec- (€/millions) 2007 2006 % change 31-2007 31-2006 % change Net financial income (charges) (4.1) 2.9 n.s. (5.9) 15.7 n.s. Income/(charges) from financial assets/liabilities (2.2) 28.3 n.s. 125.1 154.6 (19.1) Income taxes 4.6 (0.4) n.s. 14.9 25.0 (40.2) Net income (loss) from discontinued operations (1.4) (3.5) n.s. (16.1) (6.4) n.s.

• Financial income and charges went from a net positive figure of €15.7 million in 2006 to a net negative figure of €5.9 million in 2007. This change is due to the increase in debt taken on to fund the acquisition of the Recoletos group. What is more, financial income in 2006 had benefited from €5 million in capital gains on the partial sale of units in the hedge funds managed by Duemme Sgr

44 and €1.8 million for the fair value adjustment of these units, compared with €0.3 million in gains realized on the sale of the remaining units in 2007. There were also €0.9 million in higher financial revenues from derivatives.

• Net financial income from financial assets of €125.1 million includes €81.3 million in dividends from group companies, €51.8 million in capital gains on the sale of shares in Intesa Sanpaolo with related costs of €1.7 million, €1.8 million in capital gains on the sale of shares in 3 Italia, as well as impairment losses recognized on the investments in AGR (€3.6 million) and Poligrafici Editoriale (€4.5 million) to adjust their carrying amount to fair value.

• Income taxes reported €14.9 million in income, recognized as a result of making a group tax election in Italy, and referring to the period's tax losses that were offset or offsettable against taxable income of companies that have made the group tax election.

• Net income (loss) from discontinued operations includes the capital loss of €16.1 million arising on the transfer of the interest in RCS Broadcast to Gruppo Finelco. In keeping with the requirements of IFRS 5, the writedown of €6.4 million to the interest in RCS Broadcast recorded in 2006 to align carrying amount to fair value has been reclassified in this line.

M-DIS DISTRIBUZIONE MEDIA

M-dis Distribuzione Media S.p.A. distributes publishing and non-publishing products (phone cards and on- line mobile phone recharge cards) to the newsstand channel and to other authorized resellers. The company's portfolio includes not only the products of its shareholders (RCS, De Agostini, Hachette-Rusconi) but also those of numerous third-party publishers, as well as the addition in 2006 of the newspapers La Stampa and Il Sole 24 Ore, from whom the business unit dealing with distribution was acquired. The company relies on its subsidiaries Milano Press S.r.l. for distribution in Milan and its hinterland, ge-dis S.r.l. for distribution in the Genoa area (in joint venture with S.E.P, the publisher of the newspaper II Secolo XIX) and to-dis S.r.l. for distribution in the Turin area (in joint venture with L'Editrice La Stampa). M-dis also owns interests in Trento Press Service S.r.l. (30.4%) for distribution in the city and province of Trento, in Pieroni Distribuzione S.r.l. (30%), a national distributor of specialist publishing products and A.S.E. S.r.l. (30%), a supplier of logistics services to the publishing sector. The company's consolidated revenues came to €505.1 million at December 31, 2007 (€469.5 million in the prior year), while consolidated EBITDA amounted to around €5.9 million. Consolidated net income for the year was €4.3 million, of which the RCS share was some €1.9 million. The increase in revenues on the year before was attributable to the steady growth in non-publishing business, which continued to benefit from the development of on-line recharge cards using POS terminals. However, revenues from the distribution of publishing products were lower than the year before due to fewer sales of add-on products, magazines and picture cards. The newspapers segment performed better than the previous year thanks to sales of La Stampa and Il Sole 24 Ore, which M-dis started to distribute during 2006. Fourth-quarter sales in 2007 reported a big downturn in add-on sales and magazines relative to the same period in 2006.

GRUPPO FINELCO

RCS MediaGroup owns 34.64% of Gruppo Finelco after transferring its entire interest in RCS Broadcast in July 2007 and buying additional shares at the same time from MPS Venture SGR. Gruppo Finelco is the company which manages Radio Montecarlo and Radio 105, as well as Virgin Radio (formerly Play Radio) following the above transaction, and has contributed to the RCS Group's results as from August 2007.

Gruppo Finelco's consolidated revenues amounted to €71.2 million, reporting an increase of €6.3 million (+9.7%) on the prior year. This improvement reflects higher advertising revenues, mainly for the "105 Network" radio station, and the addition of the new station of Virgin Radio Italy S.p.A., following its transfer from the RCS Group.

45 EBITDA came to €1.9 million, reporting a decrease from last year's figure of €5.7 million. This was the product of higher administrative costs, and higher marketing and advertising costs needed to launch the new radio station Virgin Radio Italy S.p.A.. Amortization and depreciation were €2.2 million higher at €5.1 million (€2.9 million in 2006) due to recognition of goodwill arising on the new company's acquisition. Net financial charges were €0.6 million higher than the year before at €2 million, mainly due to interest rate rises that were only partly hedged by derivatives. The net post-tax result for the year was a loss of €5.9 million compared with net income of €0.4 million in 2006.

It is also reported that on August 13, 2007 Radio e Reti, the owner of 1% of RCS Broadcast (now called Virgin Radio Italy S.p.A.), served a summons on RCS, Gruppo Finelco and RCS Broadcast, claiming that RCS's transfer of its interest (of just under 99% of share capital) in RCS Broadcast to Gruppo Finelco was in breach of a pre-emption clause contained in the RCS Broadcast by-laws up until April 19, 2007, when the company's extraordinary shareholders' meeting voted to remove it. In particular, the plaintiff claims that it expressed several times during negotiations with RCS for the sale of its interest in RCS Broadcast, its intention of exercising this pre-emption option in order to carry out a plan to break up RCS Broadcast and transfer the related frequencies to other companies in which the plaintiff is a shareholder. Radio e Reti also claims that the circumstances already existed allowing exercise of pre-emption in December 2006 when RCS and Gruppo Finelco signed a letter of intent regarding this transfer. In view of this, Radio e Reti has requested that RCS be found in breach of the pre-emption clause and Gruppo Finelco be found as a third-party contributory to the breach and that they both be condemned to pay damages accordingly. RCS, Gruppo Finelco and RCS Broadcast have all responded, disputing the claims both on a de facto and de iure basis. After a further exchange of correspondence, in which the parties reiterated their respective positions, the plaintiff notified the defendants that it had applied for a court hearing, as a result of which the Court's President scheduled a hearing for April 3, 2008.

SIGNIFICANT EVENTS DURING THE YEAR

The more significant events during the year are discussed below:

• On January 30, 2007 Editoriale Corriere di Bologna S.r.l. started publishing Corriere di Bologna, a daily newspaper sold in conjunction with Corriere della Sera.

• On February 15, 2007 a partnership was formed between RCS Digital S.p.A. (controlled by RCS Quotidiani S.p.A.) as the majority shareholder with 51%, and Game Media Networks S.r.l., controlled by Digital Bros, a company listed on the TechStar segment of the Italian Stock Exchange, to develop publishing activities and the marketing of games via the internet, mobile phones and e-commerce. The new company formed for this purpose is called RCS DB Games S.p.A., which launched Italy's first website specializing in games and entertainment in September (Fueps).

• On April 2, 2007 RCS MediaGroup completed the acquisition of 51% of Digicast at a price of €16.7 million, inclusive of €0.4 million in related charges.

• On April 3, 2007 in execution of commitments made in 2001, RCS Pubblicità S.p.A. completed on the purchase of 49% of Blei S.p.A. for €25.2 million, giving it sole ownership of this company.

• On April 12, 2007, RCS MediaGroup completed, through its indirect subsidiary Unidad Editorial, the purchase of all the share capital of Recoletos Grupo de Comunicacion, the unlisted holding company of the eponymous Spanish publishing group with interests in the sectors of print, radio, television and the internet. For the purposes of funding this deal, Unidad Editorial received a loan of €200 million from RCS MediaGroup and one of €920 million from RCS Investimenti S.p.A., of which €20 million from the latter's own resources while the remaining €900 million was provided by RCS MediaGroup in the form of a capital contribution. When this loan matured on June 11, the final financial structure was put in place with RCS Investimenti granting Unidad Editorial a long-term subordinated loan for €720 million with an ultimate maturity of June 20, 2015, while the remaining funds were raised directly by Unidad Editorial on the Spanish banking market. RCS MediaGroup obtained the financial resources needed for this acquisition mainly by using long-term revolving credit facilities already available and not specifically opened for this deal. The extraordinary shareholders' meeting of Unidad Editorial held on June 29, 2007 resolved to increase capital by around €200 million, by issuing 22,424,244 new shares at a price of €9 each, of which €8.4 by way of share premium, that both RCS International Newspapers, controlled by RCS Quotidiani, and RCS Investimenti - both shareholders in Unidad Editorial at this date with 70.68% and 25.42% respectively - subsequently subscribed. On the same date the Unidad Editorial extraordinary shareholders' meeting approved the proposal to merge Recoletos Grupo de Comunicacion and some of its wholly-owned subsidiaries into Unidad Editorial; the merger became effective from September 1, 2007. On June 27, 2007 Unidad Editorial received clearance from the competent offices of Spain's Ministry of Industry, Tourism and Trade (Secreteria de Estrado de Telecominicaciones y para la Societad de la Informacìon) relating to the use of licenses for the radio and television broadcasting activities performed by certain companies in the group and by Veo Television, a digital television operator.

• On April 19, 2007 a partnership agreement was signed with the publishing house of Bamboo M. to develop a publishing business in China in the field of architecture and interior design. This publishing house is a member of the China Art & Design Publishing Alliance, which brings together the most authoritative publishing houses in China to publish magazines and books on art and design. The agreement entails setting up a joint venture based in Peking, launching three titles, including Abitare and Costruire, as well as carrying out other related initiatives on the internet and in China's trade fair sector. The partnership arrangement also involves creating a centre of excellence for supporting Italian design and furniture companies wanting to start marketing their products in China.

• On April 27, 2007 RCS MediaGroup shareholders voted in ordinary meeting: − to approve the financial statements for 2006 and to distribute a dividend of €0.03 to each of the outstanding ordinary shares and €0.05 to each of the savings shares (for a total of €22,864,656.61); − to grant shareholders a bonus of 14,851,777 ordinary shares in RCS MediaGroup, currently held by the same, in the ratio of two ordinary shares for every 100 ordinary and/or savings shares owned; − to appoint as directors until the end of the current Board's term in office: Claudio De Conto, Antonio Perricone and Virginio Rognoni (independent director), all of whom already co-opted to the Board during 2006; − to renew the authorization for the Board of Directors to buy and sell treasury shares .

• The shareholders of RCS MediaGroup also met in extraordinary session on April 27, 2007 and: - granted the Board of Directors authority for a period of five years: (i) to increase share capital on a bonus basis and/or for cash, on one or more occasions, including in a divisible manner and with a possible premium, by a maximum total amount of €200 million at par through the issue of ordinary and/or saving shares in the company to be granted and/or reserved under option to those so entitled; (ii) to issue, on one or more occasions, bonds convertible into ordinary and/or savings shares in the company, to be reserved under option to those so entitled, for a maximum total amount of €800 million, provided the individual issues do not exceed legal limits, and with the power to approve the corresponding increase in share capital servicing the conversion and/or exercise of warrants by a maximum total amount of €200 million at par; the maximum total amount of the capital increases for cash (including any premium) and the bond issues may not exceed €800 million. - approved a number of amendments to the company's by-laws, basically in order to comply with the contents of Law 262/2005 (known as the Investor Protection Law) as amended by Decree 303/2006 (furthermore, on June 26, 2007, as allowed by article 17 of the by-laws, the Board of Directors approved further changes to the by-laws to make them compliant with the law as regards the appointment by list voting of the Board of Directors and the Board of Statutory Auditors further to the issue of certain practical guidelines by Consob on May 3, 2007).

• The company's Board of Directors convened at the end of the shareholders' meeting:

- confirmed Antonio Perricone as the Chief Executive Officer and member of the company's Executive Committee; - resolved, at the recommendation of the Group Compensation Committee, to offer each employee of the parent company and its subsidiaries that received stock options on November 11, 2005 (under the 2005- 2013 Stock Option Plan approved by the Board on the same date in execution of the shareholders' resolution dated April 29, 2005) the choice of taking part, subject to waiving their respective options, in a cash-based incentive scheme reserved specially for them. The 56 such beneficiaries owning approximately 10 million options to subscribe to a corresponding number of the company's ordinary shares, corresponding to around 1.3% of ordinary share capital, all subsequently took up this offer. The incentive scheme involves paying a fixed cash amount of €0.80 per option, calculated using the "binomial model" to value the options already granted. The receipt of this amount, scheduled for June 30, 2008, is subject to achievement of the same performance goals for the Group that applied to the stock options waived. The plan, costing a total of some €8 million, does not involve recognizing any extra costs in the consolidated income statement on top of those already booked under IFRS for the stock options that have now been waived.

- approved the master agreement between RCS MediaGroup and the shareholders of Gruppo Finelco S.p.A., a company which runs the national radio stations of Radio 105 Network and Radio Monte Carlo. This agreement was made on April 27, 2007.

• During the first half of the year, RCS MediaGroup completed the process of disposing of its investment in Intesa Sanpaolo, viewed as being "non core" business, by selling 29,443,120 shares for €160 million, generating a capital gain of €51.8 million less €1.7 million in related costs, after having received €11.2 million in dividends.

48 • In execution of the agreement reached on May 10, 2007, on May 29, 2007 RCS MediaGroup sold its 0.506% interest in the company 3 Italia (owner of 100% of the shares in the multimedia mobile operator H3G S.p.A.) to the Hutchison Whampoa group, the majority shareholder of 3 Italia, for consideration of approximately €16.8 million, plus a potential additional sum of €2 million which will be due if the Hutchison Whampoa group fails to retain effective control, as defined in the contract, of 3 Italia eighteen months from the date of May 11, 2007. This sale generated a capital gain of €1.8 million for RCS.

• On July 13, 2007 the RCS MediaGroup Board of Directors approved the business plan for 2008-2010, whose key points are as follows:

− integration between the various areas of business and the different media, both nationally and abroad, also with the goal of strengthening the core business activities;

− further development of multimediality thanks to the reputation and authority of the group's brands and its constant attention to maintaining product quality;

− international expansion through consolidation in Spain, France and Portugal and monitoring of opportunities for possible entry into emerging markets - like Latin America, Eastern Europe, China and India - including through licenses and joint ventures.

• On July 18, 2007 the DADA subsidiary Register.it acquired 100% of the share capital in Namesco Ltd, one of the United Kingdom's leading providers of domain name registration and hosting services, paying consideration of GBP 24.5 million (approximately €36.7 million). This company, founded in 1996, is the number four provider of professional internet services in the United Kingdom and one of the top 50 companies in this market in the world.

• On July 26, 2007, having obtained the necessary clearance from the relevant authorities, RCS MediaGroup executed the master agreement signed on April 27, 2007 between itself and the shareholders of Gruppo Finelco S.p.A., by (i) transferring, after demerging the AGR and CNR sectors, its interest in RCS Broadcast (subsequently renamed Virgin Radio Italy), the company which owns the national radio broadcasting concession for the Play Radio station (now called Virgin Radio), to Gruppo Finelco, effective, like the corresponding capital increase, upon completion of the related legal formalities, and (ii) purchasing the interest in Gruppo Finelco held by MPS Venture SGR S.p.A. - in the name of and on the behalf of the closed-end investment funds MPS Venture 1 and Ducato Venture - (thereby taking RCS MediaGroup's interest in Gruppo Finelco to 34.6%), and (iii) signing the required shareholder syndicate agreement. The five-year shareholder syndicate agreement between RCS MediaGroup and the other shareholders of Gruppo Finelco assigns editorial management to Alberto Hazan, contains rules of governance to safeguard RCS, put options for the other shareholders of Gruppo Finelco during the fourth year after the shareholder agreement comes into effect, and put and call options in the event of stalemate, to be exercised during the fifth year if no accord can be reached on renewing the shareholder agreement itself. The value of the investment in the event of exercising the options shall be determined at the time of exercise by a leading merchant bank, which will act as an independent arbitrator.

• With regard to the investment in DADA S.p.A.: - on July 27, 2007 RCS MediaGroup and the DADA shareholders, also managers of the same and signatories to the related shareholder syndicate agreement made on November 11, 2005, agreed a number of amendments to the latter allowing the possibility of appointing more than one chief executive officer and of designating members of DADA's remuneration and internal control committees, as well as containing a number of provisions for implementing the agreement itself; - on July 30, 2007 and August 6, 2007 RCS MediaGroup conferred on the above shareholder syndicate 234,500 and 122,445 ordinary DADA shares respectively (of which 200,000 and 121,395 respectively already placed in the syndicate by other participants and sold to RCS MediaGroup on the same respective dates); as a result, by August 6, 2007 RCS MediaGroup held approximately 46.1% of DADA's share capital, 78.8% of which it had placed in the syndicate (which controls 58.5% of total shares); - between then and August 31, 2007 RCS MediaGroup then purchased another 124,588 ordinary shares in DADA S.p.A. on the market, raising its interest in the latter to approximately 46.87% of share capital; 49 - the overall investment relating to all the above share purchases was around €10.8 million.

• On September 12, 2007, in execution of the agreement reached and announced on July 16, 2007, Sony Bmg Music Entertainment and DADA completed the creation of the joint venture known as DADA Entertainment LLC, whose mission is to offer an innovative range of quality entertainment services over both the internet and mobile phones.

SIGNIFICANT SUBSEQUENT EVENTS

• The RCS New Media division was set up on January 24, 2008 as part of RCS Periodici. The idea is to develop the Group's multimedia integration with the goal of creating original, new products for RCS Periodici over the web and mobile phones (working with RCS Mobile and in partnership with DADA, the leading provider of mobile entertainment services in 40 countries), and through digital television, in partnership with Digicast. The principal projects on which the New Media division will work are the Abitare website; the women's portal; further enhancement of the Max website; lastly, the travel channel of www.corriere.it, which is being created in partnership with RCS Digital. Other strategic initiatives will be developed on digital TV as well as on the web, and will follow the formula of the recent launch of the multimedia Yacht&Sail system, which has already become a classic in sailing circles with its unique integration of a website, a monthly magazine and a digital TV channel. The New Media division will use not only content supplied by the Group's titles, but also specially developed content ensuring multimedia integration. Atcasa, the new interior design portal, was launched at the start of March, forming part of www.corriere.it.

• February 6th, 2008 was the third and final end date for subscribing to shares under the DADA group employee stock option plan, approved by the DADA S.p.A. Board of Directors on June 20, 2005, in execution of the shareholders' resolution dated April 28, 2005. This was also the second end date for subscribing to shares under the DADA group employee stock option plan, approved by the DADA S.p.A. Board of Directors on March 16, 2006, again in execution of the shareholders' resolution dated April 28, 2005. DADA group employees exercised 112,990 options out of a possible total of 144,800, resulting in the issue of 112,990 new ordinary DADA S.p.A. shares. The dilution caused by the capital increase means that the RCS interest in DADA is now about 46.54%.

• As part of its strategic development in satellite and digital television markets, on February 7, 2008 the RCSMediaGroup Board of Directors approved agreements for: - the acquisition by the subsidiary Unidad Editorial of all shares belonging to minority shareholders in VEO Television, corresponding to 44.6% of share capital (Unidad already owns the other 55.4%), for €88.5 million, payable as follows: one-third on the acquisition date, one-third six months later and the balance twelve months after acquisition. The RCS Group intends to fund this acquisition, whose impact was not included in the 2010 target financial position presented to the market last July as part of the business plan, using credit facilities that are already at its disposal. Unidad Editorial completed this acquisition on March 12, 2008. - the direct acquisition of the remaining 49% interest in Digicast from its only minority shareholder Digifin S.p.A. (RCS already owns the other 51% directly) for €16.2 million, thereby exercising early and discharging the existing call and put options relating to this investment (press release dated November 13, 2006).

• Also on February 7, 2008 the RCS MediaGroup Board of Directors approved the making of one or more agreements with a leading financial intermediary in a period of forty-five consecutive or non-consecutive trading days (but not later than May 15, 2008), relating to call options for RCS MediaGroup, and corresponding put options for the counterparty on a maximum of 320,000 DADA S.p.A. ordinary shares (currently corresponding to around 1.97% of share capital) and not to be exercised before August 11, 2008. The options will conform to ISDA standards and will be settled either via physical delivery, ie. with ownership of the underlying shares being transferred to RCS MediaGroup, or, at RCS MediaGroup's discretion, in cash. No agreements will be made between RCS MediaGroup and the intermediary

50 regarding the exercise of administrative or economic rights over any shares purchased by the intermediary itself for hedging purposes.

• Corriere Fiorentino was launched on February 26, 2008 and is available from newsstands together with Corriere della Sera at no extra cost. This is the latest move in the strategy adopted over ten years ago by RCS Quotidiani with the goal of firmly entrenching Corriere della Sera in Italy's local regions. Corriere Fiorentino is on sale seven days a week and has an on-line edition www.CorriereFiorentino.it providing the latest news, services and extra features of interest. The website also has forums and blogs by famous names, and events listings plus lots of useful local information. Corriere Fiorentino is published by Editoriale Fiorentina Srl. In keeping with the successful formula already adopted by RCS Quotidiani for all the local newspapers sold with Corriere della Sera, the company's share capital has been opened up to a group of leading local Florentine businessmen who own the other 49.9% in equal shares, the remaining 50.1% being held by RCS.

• On March 7, 2008 RCS MediaGroup transferred to the DADA shareholder syndicate another 124,588 shares held at December 31, 2007 that had not yet been bestowed (so that the shares now bestowed on the shareholder syndicate by all its participants now account for 58.9% of the total).

OUTLOOK FOR THE CURRENT YEAR

Newspaper circulation revenues have been in line with forecast in the first few months of the year. Gazzetta dello Sport managed to increase circulation revenues relative to the same period in 2007.

In a saturated market, add-on sales are confirming the difficulties expected, particularly on the Italian market; new releases in Spain have enjoyed satisfactory results.

Advertising revenues are in line with forecast, reporting a good start to the year especially by Gazzetta dello Sport and the Magazines segment. The full-color edition of Gazzetta dello Sport is scheduled to debut at the start of April, accompanied by a massive advertising campaign.

Revenues in the Books segment are doing well, improving their performance on last year and on forecast; Flammarion in particular was able to benefit from two major publishing successes, released in January; a large number of new partworks products were launched in Italy and abroad, with results in line with forecast; the publishing plan for the year involves a particular concentration of new releases at the start of the year but an overall smaller number of new releases in the year than in the past.

The results of on-line activities in both Italy and Spain continue to grow. The DADA group is confirming its forecast development plans.

Based on the information currently available and provided there are no presently unforeseeable events, we expect this year's operating results to be in line with forecast, even if uncertainties on the advertising market as well as the macroeconomic situation advise caution.

51 TREASURY SHARES

Details of the movements in treasury shares can be found in the report on operations by the parent company RCS MediaGroup S.p.A..

TRANSACTIONS WITH RELATED PARTIES

Details of related-party transactions can be found in the notes to the financial statements.

MANAGEMENT OF FINANCIAL RISKS

The Group's objectives and policies regarding financial risk management, including its hedging policy and exposure to credit, price, liquidity and cash flow risks, are discussed in detail in the notes to the financial statements.

PERSONAL DATA PROTECTION PLAN

In compliance with the provisions of Decree 196/2003 ( the "Personal data protection code"), it is reported that the RCS Group has drawn up a Personal Data Protection Plan, which was updated within the legal term (of March 31, 2008.)

52 OWNERSHIP STRUCTURE AND CORPORATE GOVERNANCE

This chapter contains the report by the Board of Directors for 2007 on Ownership Structure and Corporate Governance.

SECTION 1 - OWNERSHIP STRUCTURE

INTRODUCTION

This Section contains information on the Ownership Structure of RCS MediaGroup S.p.A. (the "Company"), also taking account of the requirements of art. 123.-bis of Decree 58/1998 and containing appropriate references to information and documents that can be consulted on or through the Company's website (www.rcsmediagroup.it). The information has been updated to the date of this report's approval.

I. SHARE CAPITAL / AUTHORITY TO INCREASE SHARE CAPITAL

Share capital is €762,019,050, split into 732,669,457 ordinary shares (96.15% of total share capital) and 29,349,593 savings shares (3.85% of total share capital), all with a par value of €1 each.

The extraordinary Shareholders' Meeting of April 29, 2005 granted the Board of Directors, for a period of five years from this date, the power, under art. 2443 of the Italian Civil Code, to increase share capital for cash payment, on one or more occasions, in a divisible manner for a maximum amount of €25,740,704 at par, by issuing up to 25,740,704 ordinary shares of par value €1 each, with normal dividend rights, to be offered in subscription to employees of the Company and its subsidiaries, as identified by the Board of Directors, including by its members so delegated, with reference to the strategic importance of their position within the Group, and under the terms and conditions established by the Board of Directors; such rights to subscribe to new-issue shares must be personal and transferable between living persons while the resolutions adopted by the Board of Directors in execution of this authority must also establish that, if the capital increase approved under this authority is not subscribed by the deadline set on each occasion (in any case, no later than June 30, 2013), share capital will be increased by an amount corresponding to the subscriptions received by such deadline (the minutes of this Shareholders' Meeting can be viewed on the Company's website in the section entitled "Governance/Shareholders' Meetings"). The extraordinary Shareholders' Meeting of April 27, 2007 granted the Board of Directors, for a period of five years from this date, the power: (i) under art. 2443 of the Italian Civil Code, to increase share capital on a bonus basis and/or for cash, on one or more occasions, in a divisible manner and with a possible premium, by a maximum total amount of €200 million at par through the issue of ordinary and/or saving shares in the Company to be granted and/or reserved under option to those so entitled and (ii) under art. 2420-ter of the Italian Civil Code, to issue, on one or more occasions, bonds convertible into and/or with warrants to subscribe to ordinary and/or savings shares in the Company, to be reserved under option to those so entitled, for a total amount of €800 million, provided the individual issues do not exceed legal limits, and with the power to approve the corresponding increase in share capital servicing the conversion and/or exercise of warrants by a maximum total amount of €200 million at par; all this with every power and authority to determine the related terms and conditions in compliance with applicable laws, stating that the overall amount of share capital for payment (including any share premium) and the bonds issued under the aforesaid authority must not exceed the total sum of €800 million (the minutes of this Shareholders' Meeting can be viewed on the Company's website in the section entitled "Governance/Shareholders' Meetings"). To date, the Board of Directors has not exercised the above authority. The first authority relates to a stock option plan for employees of the Company and its subsidiaries, whose terms are contained in the Information Circular issued in accordance with art. 84-bis of the Issuer Regulations, and details of which can also be found in the annual report and financial statements for 2007 (both documents can be consulted on the 53 Company's website: the former in the section entitled "Governance/Info documents" and the latter, after being published in the form and term required by law, in the sections entitled "Investor Relations/Financial reports" and "Governance/Shareholders' Meetings"). No other authority exists to issue equity instruments.

II. SHARE CLASS RIGHTS

The rights of the different classes of share are described in articles 5, 6, 7, 8, 24 and 25 of the By-laws (which can be consulted in the Governance section of the Company's website), the relevant contents of which are presented below.

The legal provisions relating to representation, legitimization and circulation of financial instruments traded on regulated markets apply to the shares making up share capital, which may be registered shares, or, when so allowed in law, bearer shares.

The right to participate and be represented in Shareholders' Meetings is governed by law; in the former case, the certificate confirming share ownership, issued in accordance with law by authorized intermediaries belonging to the centralized system for managing dematerialized shares, must reach the Company's registered office at least two business days before the date of the Shareholders' Meeting.

The right to withdraw from the Company only applies in the cases envisaged by applicable laws with no exception allowed; in particular, shareholders who do not vote for resolutions to extend the Company's duration, or to introduce or remove by-laws restrictions on the circulation of the Company's shares shall not be entitled to withdraw.

Savings shares are bearer shares, unless otherwise established by law and unless otherwise requested by the shareholder. Owners of savings shares are not entitled to request the convocation of ordinary or extraordinary Shareholders' Meetings, nor are they entitled to take part or vote in such meetings. If savings or ordinary shares are suspended from trading, the saving shares shall retain their rights and characteristics, unless resolved otherwise by the Shareholders' Meeting. For the purposes of ensuring that the common representative has adequate information about transactions that might affect the price of shares in this class, the Company's legal representative or other such persons delegated by the Board of Directors must promptly inform the common representative about such transactions.

After deducting the amount that must be allocated to the legal reserve, up to 5% of the par value of savings shares must be distributed to these shares from net income reported in the financial statements approved by shareholders. The shareholders then vote to distribute the remaining earnings to all the shares in such a way that the savings shares earn a dividend that is higher than that paid to the ordinary shares by an amount corresponding to 2% of their par value. If in any one year the savings shares are paid a lower dividend than that indicated above, the difference is added to the dividends payable in the two subsequent years. If reserves are distributed, savings shares shall have the same rights as the other shares. The par value of savings shares shall not be reduced when share capital is reduced for losses, unless part of the loss exceeds the total par value of the other shares. Without prejudice to legal provisions concerning the reinstatement of relationships between share classes, resolutions relating to the reduction and reinstatement of share capital must ensure, through regroupings or splits, that the par value of shares remains the same. If the Company is wound up, savings shareholders shall have priority in being repaid the entire par value of their capital.

As stated by art. 26 of the By-laws, reference shall be made to law for any matters not explicitly covered in the By-laws.

54 III. RESTRICTIONS ON TRANSFER OF SHARES AND ON VOTING RIGHTS – SPECIAL RIGHTS OF CONTROL - EXERCISE OF VOTING RIGHTS UNDER EMPLOYEE SHARE OWNERSHIP SCHEMES

There are no restrictions on transferring shares or on voting rights (although shareholders can only attend Shareholders' Meeting if the Company has received a prior certificate confirming share ownership, as outlined above) nor are there any securities carrying special rights of control, or employee share ownership schemes, such as those envisaged by art. 2349 of the Italian Civil Code, involving specific mechanisms for the exercise of voting rights.

IV. SIGNIFICANT SHAREHOLDINGS IN ORDINARY CAPITAL

Based on notifications received under art. 120 of Decree 58/1998, the following parties directly or indirectly hold more than 2% of subscribed share capital representing voting shares:

Ownership % of voting % of DECLARANT DIRECT SHAREHOLDER title share ordinary capital share capital

DIEGO DELLA VALLE DORINT HOLDING SA Owner 5.499 5.499 Total 5.499 5.499 INTESA SANPAOLO SPA BANCO DI NAPOLI SPA Pledge 0.009 0.009 BANCA IMI SPA Owner 0.005 0.005 INTESA SANPAOLO SPA Pledge 0.029 0.029 Owner 5.022 5.022 Total 5.051 5.051 Total 5.065 5.065 SINPAR SOCIETA' DI SINPAR SOCIETA' DI Owner 2.060 2.060 INVESTIMENTI E INVESTIMENTI E PARTECIPAZIONI SPA PARTECIPAZIONI SPA Total 2.060 2.060 FRANCESCO MERLONI MERLONI INVEST SPA Owner 2.090 2.090 Total 2.090 2.090 GIUSEPPE ROTELLI PANDETTE FINANZIARIA SRL Owner 3.949 3.949 Total 3.949 3.949 EFIPARIND BV FRANCO TOSI SRL Owner 5.133 5.133 SOCIETE' DE PARTICIPATION Owner FINANCIERE ITALMOBILIARE SA 0.283 0.283 ITALCEMENTI SPA FABBRICHE Owner 2.332 2.332 RIUNITE CEMENTO Total 7.748 7.748 PIRELLI & C. SPA PIRELLI & C. SPA Owner 5.166 5.166 Total 5.166 5.166 BANCO POPOLARE SOC. COOP. (*) BANCO POPOLARE SOCIETA' Owner 5.951 5.951 COOPERATIVA Total 5.951 5.951 PREMAFIN FINANZIARIA SPA SASA VITA S.P.A. Owner 0.001 0.001 SASA ASSICURAZIONI E Owner 0.006 0.006 RIASSICURAZIONI SPA SAINTERNATIONAL SA Owner 1.406 1.406 PO VITA COMPAGNIA DI Owner 0.035 0.035 ASSICURAZIONI SPA SIAT SOCIETA' ITALIANA Owner ASSICURAZIONI E 0.007 0.007 RIASSICURAZIONI SPA MILANO ASSICURAZIONI SPA Owner 1.706 1.706 SAIFIN SAI FINANZIARIA SPA Owner 0.094 0.094 FONDIARIA - SAI SPA Owner 2.036 2.036 Total 5.291 5.291 ASSICURAZIONI GENERALI SPA TORO ASSICURAZIONI SPA Owner 0.019 0.019 GENERALI VIE SA Owner 3.700 3.700 BSI SA Owner 0.001 0.001 INA ASSITALIA SPA Owner 0.042 0.042 Total 3.762 3.762 SI.TO. FINANCIERE SA PARTECIPAZIONI EDITORIALI Owner 5.140 5.140 SRL Total 5.140 5.140 RAGIONE SOCIETA' IN EDIZIONE HOLDING SPA Owner 5.001 5.001 ACCOMANDITA PER AZIONI DI GILBERTO BENETTON & C. Total 5.001 5.001 MEDIOBANCA SPA MEDIOBANCA SPA Owner 14.209 14.209 Total 14.209 14.209 GIOVANNI AGNELLI & C. SAPA FIAT PARTECIPAZIONI SPA Owner 10.291 10.291 Total 10.291 10.291 (*) Holding in the name of the nominee UBS Fiduciaria S.p.A., which has declared that it is an owner on behalf of third parties.

56 Significant shareholdings, as defined by the above law, can be consulted through the Company's website in the section entitled "Group/Shareholders' structure/Significant shareholdings (Consob website)", and also directly on the Consob website at www.consob.it.

V TREASURY SHARES

The Company holds 4,578,448 ordinary treasury shares, corresponding to around 0.60% of total share capital and about 0.62% of ordinary share capital with voting rights; this holding is the result of purchases made under shareholder authorizations granted on June 1, 1999, May 9, 2000, May 11, 2001, May 2, 2002 and April 15, 2003 and subsequent bonus grants to shareholders of 7,352,365 and 14,851,777 treasury shares under shareholder resolutions dated April 29, 2005 and April 27, 2007 respectively.

The Shareholders' Meeting of April 27, 2007 also adopted a resolution authorizing the Board of Directors to buy the Company's ordinary and/or savings shares in the following manner:

- purchases may be made, on one or more occasions, within 18 months of the date of the resolution within the limits of unrestricted reserves and distributable earnings reported in the most recently approved financial statements and are accounted for in compliance with the law and applicable accounting standards; - the purchase price per share must not be more than 10% above or below the average official price reported on the Italian Stock Exchange in the two trading sessions immediately prior to each individual transaction; - the maximum number of shares purchased, including those already held, may not exceed 10% of total share capital; - purchases must be made in compliance with applicable laws and regulations and in such a way as to ensure the equal treatment of shareholders referred to in art. 132 of Decree 58/1998, solely and on more than one occasion in the following manner:

a) through cash or exchange tender offers, and/or b) on regulated markets organized and managed by Borsa Italiana S.p.A. according to the trading rules established by the same which do not allow direct matching of buy orders with predetermined sell orders, and/or c) by buying and selling derivatives traded on the related regulated market organized and managed by Borsa Italiana S.p.A. whose settlement is the same as that established by art. 144-bis para.1c) of the Regulations adopted under Consob resolution 11971/1999.

The minutes of this Shareholders' Meeting can be viewed on the Company's website in the section entitled "Governance/Shareholders' Meetings".

The Board of Directors also resolved, on the date of approving this report, to request the shareholders to renew the authorization to buy ordinary and/or savings treasury shares within the legally permitted limits, such that the par value of such shares may not exceed a maximum of 10% of share capital. Like the existing authorization, the proposal states that purchases may be made, on one or more occasions, within 18 months of the date of the shareholders' authorization, at a price that may not be more than 10% above or below the average official price reported on the stockmarket in the two trading sessions immediately prior to each individual transaction: through cash or exchange tender offers; on regulated markets organized and managed by Borsa Italiana S.p.A. according to the trading rules established by the same which do not allow direct matching of buy orders with predetermined sell orders; by buying and selling derivatives traded on the related market regulated by Borsa Italiana S.p.A. whose settlement is the same as that established by art. 144-bis para.1c) of the Regulations adopted under Consob resolution 11971/1999 and subsequent amendments and additions (the "Issuer Regulations"). It is also proposed to renew the authorization to dispose of shares at a price that may not be more than 10% below the average carrying price at the time of the transaction; such disposals may take place on more than one occasion, also before having exhausted the buyback authority, through sale on the stockmarket, in blocks, through tender offers or by way of consideration for buying equity investments and through grant to shareholders. At the same time it is proposed to revoke the authorization granted by the shareholders on April 27, 2007 to buy and dispose of ordinary and/or savings treasury shares (the related report by the Board of Directors on this proposal will be

57 published by the legally required deadline after which it will be available on the Company's website in the section entitled "Governance/Shareholders' Meetings").

VI. SHAREHOLDER AGREEMENTS

A) Based on the Company's knowledge (updated with the press release issued - on the same date but before approving this report - on behalf of the members of the RCS MediaGroup Consultation and Lock-up Shareholder Agreement, attached hereto and viewable on the Company's website in the section entitled "Group/Shareholders' structure/Related areas") there is currently, within the meaning of art. 122 of Decree 58/1998:

- a shareholder agreement, originally made on January 31, 1997 and most recently renewed on today's date, known as the "RCS MediaGroup Consultation and Lock-up Shareholder Agreement" which covers 63.527% of ordinary share capital and whose members and related shares pledged to the agreement are as follows:

% total ordinary shares % of pledged No. ordinary shares issued shares

MEDIOBANCA S.p.A. 100,371,477 13.699 21.565

FIAT PARTECIPAZIONI S.p.A. 75,399,635 10.291 16.200

ITALMOBILIARE GROUP: 54,356,633 7.419 11.679

of which: Franco Tosi S.r.l.. 37,606,889 5.133 8.080

of which: ITALCEMENTI S.p.A. 16,749,744 2.286 3.599

DORINT HOLDING S.A. (Diego Della Valle) 39,583,284 5.403 8.504

FONDIARIA-SAI S.p.A. (Fondiaria - SAI Group) 38,514,334 (*) 5.257 8.275

PIRELLI & C. S.p.A. 38,383,284 5.239 8.247

INTESA SANPAOLO S.p.A. 36,097,668 4.927 7.756

ASSICURAZIONI GENERALI S.p.A.: through GENERALI VIE S.A. 27,203,420 3.713 5.845

SINPAR S.p.A. 14,933,093 2.038 3.208

MERLONI INVEST S.p.A. (Francesco Merloni) 14,554,528 1.987 3.127

MITTEL Partecipazioni Stabili S.r.l. 9,392,543 1.282 2.018

ER. FIN. – ERIDANO FINANZIARIA S.p.A. 8,997,866 1.228 1.933

EDISON S.p.A. 7,653,724 1.045 1.644

TOTAL RESTRICTED SHARES 465,441,489 63.527(**) 100.000 (**)

(*)also via subsidiaries. (**) individual percentages have not been rounded up or down. By virtue of an agreement between the Members of the Shareholder Agreement, Intesa Sanpaolo S.p.A. has the option to increase its percentage share of the ordinary shares pledged to the Shareholder Agreement to 5.209%, while Er. Fin. - Eridano Finanziaria S.p.A. and Merloni Invest SpA have the option to increase their percentage shares of the ordinary shares pledged to the Agreement to 2%.

- an agreement dated November 29, 2006 between Pandette Finanziaria S.r.l., indirectly controlled by Giuseppe Rotelli, and Banca Popolare Popolare Italiana Soc. Coop. whose place was taken - from July 1, 2007 following the merger between Banca Popolare Italiana Soc. Coop. and Banco Popolare di Verona e Novara S.c.a.r.l.- by Banco Popolare Soc. Coop. ("BP"), relating to the exercise of voting rights over 25,300,000 of the Company's ordinary shares, corresponding to 3.453% of ordinary share capital, owned by BP and by virtue of which the latter has the obligation to exercise such rights in accordance with the instructions of Pandette Finanziaria, through a nominee company. This agreement, published in accordance with art. 122 of Decree 58/1998, serves and is associated with an option agreement made on the same date between the same parties involving a call option for Pandette Finanziaria and

58 a corresponding put option for BP over these shares; although not qualifying as a shareholder agreement under the above law, the parties have made it public in accordance with the terms of art. 122 of Decree 58/1998;

- another agreement dated April 19, 2007 between Pandette Finanziaria S.r.l. and Banca Popolare Italiana Soc, Coop., replaced from July 1, 2007 by Banco Popolare Soc. Coop. ("BP"), relating to the exercise of voting rights over 18,300,000 of the Company's ordinary shares, corresponding to 2.498% of ordinary share capital, owned by BP, and by virtue of which the latter has the obligation to exercise such rights in accordance with the instructions of Pandette Finanziaria, through a nominee company. This agreement serves and is closely associated with an option agreement made on the same date between the same parties involving a call option for Pandette Finanziaria and a corresponding put option for BP over these shares; although not qualifying as a shareholder agreement under the above law, the parties have made it public in accordance with the terms of art. 122 of Decree 58/1998.

B) There is also a separate agreement between the Company's (direct and/or indirect) shareholders who are members of the "RCS MediaGroup Consultation and Lock-up Shareholder Agreement"; this agreement refers to the same interests in share capital as those pledged to this shareholder agreement. This agreement relates to the members' conduct in the event of a takeover bid for the Company's shares. It was originally made on June 5, 2005 and renewed on today's date (as reported in the press release referred to in A) and has been made public by its members, on a precautionary basis, in accordance art. 122 of Decree 58/1998.

The most recent full versions of these agreements published can be consulted through the Company's website in the section entitled "Governance/Shareholders' agreements (Consob website)" or directly on the Consob website itself (www.consob.it). The section of the Company's website entitled "Governance/Announcements" also contains extracts from these agreements which have been published in the press from 2003.

VII. RULES APPLYING TO BY-LAWS AMENDMENT

Resolutions to amend the By-laws are governed by provisions laid down in law. However, as permitted by art. 2365.2 of the Italian Civil Code, art. 17 of the By-laws (which can be found in the Governance section of the Company's website) not only specifies which Directors shall represent the Company legally but also gives the Board of Directors the authority, without prejudice to art. 2436 of the Italian Civil Code, to pass resolutions on: - mergers in cases specified in art. 2505 and art. 2505-bis of the Italian Civil Code and demergers when such provisions apply; - the possible reduction in share capital if one or more shareholders withdraws; - revision of the By-laws to comply with the law; - transfer of the Company's registered office to another place within Italy.

VIII. RULES APPLYING TO APPOINTMENT AND REPLACEMENT OF DIRECTORS

The appointment and replacement of Directors is governed by articles 11 and 12 of the By-laws respectively (which can be found in the Governance section of the Company's website), most of whose contents are reproduced below, also indicating the current Consob rules on minimum ordinary share ownership required to present candidate lists and referring to the current publicity rules regarding such lists and related information.

The Board of Directors may have between three and twenty-one members, who remain in office for three financial years, ending on the date of the Shareholders' Meeting convened to approve the financial statements for the last financial year of their office; such directors must satisfy the requirements established by prevailing laws and by the By-laws and are eligible for re-election. In addition, a certain number of Directors, in any case not less than the minimum specified in law, must qualify as independent, as defined by art. 148.3 of Decree 58/1998.

59 The Board of Directors is appointed by the Shareholders' Meeting, which previously determines its size, on the basis of lists in which the candidates appear in a sequential numbered order. Candidates may appear on only one list, otherwise they will be disqualified. Each list must contain at least the minimum number of candidates established by prevailing law who qualify as independent within the meaning of art. 148.3 of Decree 58/1998; such candidate(s) must be identified as such. Lists may be submitted by shareholders who, alone or together with other shareholders, own at least 2.5% (two point five percent) of the subscribed share capital with voting rights at ordinary Shareholders' Meetings at the date of presenting the lists, or such lower percentage established by compulsory legal or regulatory provisions (such lower percentage has been determined by Consob to be 1.5%). No shareholder may present or take part in the presentation of more than one list, nor may they vote directly or through another person or nominee for more than one list. Moreover, shareholders who: i) pursuant to art. 93 of Decree 58/1998 have a controlling relationship between them or are under common control, even when the controlling party is a natural person, or ii) are part of a shareholder agreement falling under art. 122 of Decree 58/1998, or iii) are part of such a shareholder agreement and legally control or are controlled by or are under common control by one of such participating shareholders, may not present or present with others more than one list or vote for different lists. Participation in presenting lists and votes cast in breach of this prohibition will not be allocated to any list. The lists must be filed at the Company's registered office at least 15 (fifteen) days before the date of the Shareholders' Meeting in first call and must be accompanied by the candidates' curricula vitae, containing their personal and professional details; the lists must be signed by the shareholders submitting them, or their proxy, indicating their own identity and aggregate percentage of shares held, confirmed in a copy of the certificate/s issued by an authorized intermediary. Each list must also be accompanied by statements in which the individual candidates accept their candidacy and certify, under their own responsibility: 1) that there are no reasons of ineligibility or incompatibility preventing them from holding office, and that they satisfy the requirements established by existing primary and secondary legislation; 2) whether they meet the independence qualifications required by art. 148.3 of Decree 58/1998; Lists for which the above provisions are not observed shall be treated as if they had not been submitted. The lists and related information shall be made available in the forms required by prevailing laws and regulations (art. 144-octies of the Issuer Regulations requires that they be made available at the Company's registered office, at the market management company and on the Company's website at least ten days prior to the date of the Shareholders' Meeting). The Directors shall be elected as follows: a) all the Directors, based on the size of the Board established by the Shareholders' Meeting, except for the minimum number reserved by law to the minority list, shall be taken from the list obtaining the majority of votes, in the sequential number order in which the candidates appear therein; b) the minimum number of directors reserved by law to the minority list shall be elected, in sequential number order, from the list which obtained the second highest number of votes and which is not connected, either directly or indirectly, with the list in a) or with the shareholders who submitted or voted for the list in a). However, for the above purposes, any lists which fail to obtain a percentage of votes equal to at least half of the percentage required to submit such lists, will not be taken into account. If this list voting mechanism does not ensure the election of the minimum number of independent directors, as defined by art. 148.3 of Decree 58/1998, required by law, the non-independent candidate(s) elected last from the majority list in a) will be replaced by the first unelected independent candidate(s) in the same list in the sequential order of presentation or, if for whatever reason, this is not sufficient, from the lists which obtained the next highest number of votes, starting with the list in b) and so on in descending order. If this procedure does not achieve the desired result, the Shareholders' Meeting shall make the appointment with the legally required majority, after being presented with candidates in possession of the required qualifications. In two or more lists all obtain the highest number of votes, a second round of voting will be held. If only one list is presented, the above procedure will not be followed; instead the Shareholders' Meeting will appoint all the Directors by majority vote, with the legally required majority. These Directors will be elected from this list in the sequential number order in which they appear until the number previously determined by the Shareholders' Meeting is reached, of whom at least the minimum number required by prevailing law must qualify as independent, as defined by art. 148.3 of Decree 58/1998.

60 In the absence of lists, and in the event the list voting mechanism fails to elect the minimum number of Directors established by the By-laws, the Board of Directors will be, respectively, appointed, or completed, by the Shareholders' Meeting which will vote with the legally required majority. Also in this case, the Shareholders' Meeting shall ensure that the Board has the minimum number of Directors required by prevailing law who qualify as independent, as defined by art. 148.3 of Decree 58/1998. These provisions shall apply, except for different and additional compulsory provisions established by laws or regulations.

If, during the course of the financial year, one or more Directors should leave office, the Board of Directors shall replace them by adopting resolutions, approved by the Board of Statutory Auditors, as follows: a) the Board of Directors will replace the outgoing Director with someone from the same list, with this appointment confirmed by majority vote of the Shareholders' Meeting; b) if this list contains no unelected candidates, or candidates with the required qualifications, or if, for whatever reason it is not possible to proceed in accordance with a), the Board of Directors shall make the replacement, which will be subsequently approved by the Shareholders' Meeting, voting with the legally required majority and without list voting. In any case, the Board of Directors and the Shareholders' Meeting shall make this appointment in such a way as to ensure that there is the legal minimum number of Directors satisfying the qualifications contained in art.148.3 of Decree 58/1998. Directors appointed in this way shall remain in office until the next Shareholders' Meeting and Directors appointed by the Shareholders' Meeting shall remain in office for the remaining term of the Directors they are replacing. If for whatever reason Directors appointed by resolution of the Shareholders' Meeting fail to be in the majority, the entire Board shall vacate office with effect from the subsequent reinstatement of such body. In this case, the Shareholders' Meeting called to appoint the entire Board shall be convened urgently by the Directors still in office.

IX. SIGNIFICANT AGREEMENTS CONTAINING CHANGE OF CONTROL CLAUSES AND THEIR EFFECTS

No party controls the Company within the meaning of art. 93 of Decree 58/1998 (or directs or co-ordinates it as defined by art. 2497 et seq. of the Italian Civil Code).

Notwithstanding the above, the following agreements contain clauses concerning the Company's possible change in ownership structure:

- certain loan agreements (for maximum credit facilities of €750 million) contain clauses that give the lender an immediate right to repayment of the amount contractually owed by the Company in the event of a change of ownership, considered only to be the case if a takeover bid for the majority of share capital is successful, excluding however the case in which such a bid is made by one or more members of the RCS MediaGroup Consultation and Lock-up Shareholders' Agreement and, in one case, also on condition that such parties form the controlling majority in the presumed new ownership structure;

- the rules of the current stock option plans for employees of the Company and its subsidiaries (see Part I of this Section, as well as the Company's website, the related Information Circular issued under art. 84-bis of the Issuer Regulations and the information contained in the financial statements) contain a provision whereby, if a tender offer for the Company's shares is made for cash or exchange, the option-holders are entitled to exercise all vested and exercisable options (or even those not yet vested and/or exercisable when the required vesting condition has not been satisfied and/or the vesting period is not yet complete) only in the exercise period (of at least ten business days) specifically announced by the Company, since, unless otherwise indicated by the Board of Directors, these option-holders will no longer be able to exercise such options; if the Board of Directors formally expresses a negative or critical opinion on the offer, it will nonetheless be able to not allow the option-holders to exercise the options as stated above, with vested options then being exercisable under the normal terms envisaged by the plan's rules;

61 - the current agreement relating to the joint venture m-dis Distribuzione Media S.p.A. (in which the Company has a 45% interest) provides that if there is a change in the Company's ownership resulting in its being controlled within the meaning of art. 93 of Decree 58/1998, as well as the existence of the same situation envisaged by this article in relation to several parties belonging to a shareholder agreement published in accordance with para. 1 and 5, art. 122 of Decree 58/1998 and within which over half of the syndicated shares belong to parties other than members of the RCS MediaGroup Consultation and Lock-up Agreement, then the other largest shareholder in m-dis will be entitled to request that m-dis be wound up or to exercise a call option over the Company's interest for an amount established using contractually agreed valuation criteria referring to the net assets and earnings of m-dis. In the latter case, the third remaining shareholder in m-dis will have the right, and obligation, to buy under the same terms a part of the shares owned by the Company in proportion to its own interest; if this shareholder fails to buy, then the shareholder who exercised the option will be entitled to buy all the shares owned by the Company.

X. AGREEMENTS BETWEEN THE COMPANY AND DIRECTORS INVOLVING COMPENSATION FOR LOSS OF OFFICE FOLLOWING A CHANGE IN OWNERSHIP

The existing agreement between the Company and the Chief Executive Officer & Chief Operating Officer, Antonio Perricone, does not contain provision for compensation in the event of resignation or termination/dismissal without cause following a takeover bid. However, it has been agreed that Mr. Perricone will receive compensation in the event of i) termination without cause (as defined in law) of his relationship as a senior manager of the Company or of his office and/or authority, or ii) his resignation as a senior manager of the Company or renouncement of office and authority with cause (as defined in law), also in the case when such resignation or renouncement takes place in the sixty days following the dissolution or substantial amendment (ie. novation as defined by CONSOB) of the RCS MediaGroup Consultation and Lock-up Shareholder Agreement. This compensation involves paying Mr. Perricone not only the legal employee termination indemnity and 7.41% of the overall emoluments of office paid during his term in office, but also an all-inclusive amount of 2.5 times the sum of his annual fixed and variable remuneration (the latter calculated as the average in the last three years or during his period in office, if shorter) as established by the agreement between the Company and Mr. Perricone.

As envisaged by the same agreement, another agreement has been made with Mr. Perricone for potential, separate additional emoluments for the office of Chief Executive Officer, involving a long-term incentive scheme, which entails paying a cash reward depending on the extent to which consolidated EBITDA has been achieved and on the consolidated net financial position in 2010 relative to the targets contained in the Strategic Plan 2008-2010 approved by the Board of Directors with payment due after the Company's group annual report for the last of these years is approved. This agreement establishes that if Mr. Perricone ceases to be Chief Executive Officer in the period between July 1, 2008 and June 30, 2011 due to: i) termination by the Company without cause, ii) renouncement by Mr. Perricone for cause or even in the event of dissolution or substantial amendment (ie. novation as defined by CONSOB) of the RCS MediaGroup Consultation and Lock-up Shareholder Agreement, Mr. Perricone will be entitled to receive the reward (which may not in any case be greater than €1.5 million) calculated and determined on the basis of predetermined value ranges for the above two parameters, in relation to the period over which he has effectively served as Chief Executive Officer.

For the sake of completeness, it is reported that the beneficiaries of the existing stock option plan for employees of the Company and its subsidiaries, referred to in Parts I and IX of this Section (and in relation to which reference should be made to the Information Circular issued under art. 84-bis of the Issuer Regulations and to the financial statements) include Mr. Antonio Perricone in his role as a senior manager acting as the Company's Chief Operating Officer; the rules of the stock option plan discussed in Part IX therefore apply to him as well as another provision whereby, in the event his employment relationship is terminated not for cause or if he resigns for cause, he may exercise only those options which have already vested at the termination date, provided exercised by the end date for the second exercise period (contained in the plan rules) following such termination. However, under these rules, the Board of Directors has the option not only

62 to allow a beneficiary to retain the rights arising under the plan even when they would otherwise cease but also to amend such rights.

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63 SECTION 2 - CORPORATE GOVERNANCE REPORT

INTRODUCTION

As required by art. 124-bis of Decree 58/1995 and art. 89-bis of the CONSOB Issuer Regulations approved in resolution 11971/1999 and subsequent amendments and additions thereto (the "Issuer Regulations") and Section IA.2.6 of the Instructions to the Regulations of Markets Organized and Managed by Borsa Italiana S.p.A., the following report provides a description of the rules adopted by the Board of Directors and, to the extent directly applicable, by the Board of Statutory Auditors of RCS MediaGroup S.p.A. (the "Company") in relation to its system of corporate governance and its compliance with the recommendations contained in the Corporate Governance Code approved in March 2006 by the Corporate Governance Committee set up by Borsa Italiana S.p.A. (the "Code"). The report will therefore refer to the principles and application guidelines adopted by the Company (specifying in brackets the references to the corresponding articles in the Code) in order to indicate, in compliance with the Code's disclosure recommendations, which of its recommendations have been adopted and were applied during 2007 and how, with details of the work performed during the year and up to the date of approving this report; any failure or partial adoption/application of the Code's recommendations has been reported along with the related reasons why. In addition, where considered useful or necessary, the report contains additional information to that required by the Code, providing appropriate references to documentation available on the Company's website at www.rcsmediagroup.it.

I. ROLE OF THE BOARD OF DIRECTORS

PRINCIPLES

1. (1.P.1.) The Company shall be governed by a Board of Directors that meets at regular intervals, and which organizes itself and operates in such a way as to ensure that its duties are conducted both effectively and efficiently.

2. (1.P.2.) The Directors shall behave and pass resolutions autonomously and in full knowledge of the facts, in pursuit of the priority goal of creating value for the shareholders. Consistent with this goal, the Directors shall also take account of the directives and policies defined for the group to which the Company belongs, if any, as well as the benefits arising from the membership of such group.

APPLICATION GUIDELINES i) (1.C.1.) In discharging its primary responsibility of determining and pursuing the strategic goals of the Company and Group it heads – without prejudice to the management autonomy of subsidiaries listed in Italy or abroad and not under the Company's direction and co-ordination – and in addition to those duties falling to it under the By-laws and those that nonetheless may not be legally delegated, the Board of Directors is also, if appropriate, by way of internal limitation relative to the delegated powers to be exercised in respect of third parties, the exclusive body which: a) examines and approves the Company's strategic, operational and financial plans and the corporate structure of the Group it heads; b) evaluates the adequacy of the organizational, administrative and accounting structure of the Company and its strategic subsidiaries, as established by the chief executive officers, particularly with regard to the internal control system and the management of conflicts of interest;

64 c) delegates and revokes powers to the Chief Executive Officer(s) and to the Executive Committee, if established, and to the Chief Operating Officer(s), specifying the limits on such powers and how they shall be exercised, in compliance with relevant laws and the Company's By-laws; it also determines the frequency, in any case at least once every three months, with which such delegated (or executive) bodies shall report to the Board on the activities performed in the exercise of the powers delegated to them; d) determines, after examining the proposals of the Group Compensation Committee and consulting the Board of Statutory Auditors, the remuneration of the chief executive officers and of those Directors who have been appointed to hold particular office and, if the Shareholders’ Meeting has not already done so, it allocates the Board's overall remuneration to its individual members; e) evaluates the Company's general performance, paying particular attention to the information received from the executive bodies, and periodically comparing the results achieved with those planned; f) examines and gives prior approval to transactions carried out by the Company and its subsidiaries that are of strategic significance or have a significant impact on the Company's operating performance, capital structure and financial position, paying particular attention to transactions in which one or more Directors has an interest on their own account or on account of third parties and, in more general terms, to transactions involving related parties; to this end, the Board establishes general guidelines for identifying those transactions which might have a significant impact; g) evaluates, at least once a year, the size, composition and performance of the Board of Directors and its sub-committees, possibly identifying new professional figures whose presence on the Board is thought to be desirable; h) provides information, also in the Corporate Governance Report, on the application of Article I of the Code and, in particular, on the number of meetings of the Board of Directors and of the Executive Committee, if any, held during the financial year, plus the related attendance record of each Director in percentage terms.

ii) (1.C.2.) The Directors shall accept the directorship when they believe that they can devote the necessary time to the diligent performance of their duties, also taking into account the number of other appointments as a director or statutory auditor (or membership of another supervisory body) held in other companies listed on regulated markets (in Italy or abroad) and in financial, banking, insurance or other large companies. On the basis of the information received from the Directors, the Board shall record on an annual basis the appointments as a director or statutory auditor (or membership of another supervisory body) held by the Directors in the aforementioned companies and disclose details thereof in the Corporate Governance Report.

iii) (1.C.3.) The Board shall issue guidelines regarding the maximum number of other appointments as a director or statutory auditor (or membership of another supervisory body) in those companies listed above which may be considered compatible with an effective performance of a director's duties. To this end, the Board shall establish general principles, distinguishing between the commitment entailed by each role (executive, non-executive or independent director), as well as the nature and size of the companies in which the appointments are held, plus whether or not such companies are members of the Group headed by the Company. iv) (1.C.4.) If, for organizational purposes, the Shareholders’ Meeting authorizes, on a general, upfront basis, exceptions to the non-compete provisions contained in art. 2390 of the Italian Civil Code, then the Board of Directors shall evaluate each such case, reporting any critical ones at the next Shareholders’ Meeting. To this end, each Director shall inform the Board, upon accepting his/her appointment, of any activities exercised in competition with the Company and its subsidiaries and of any subsequent significant changes in this status.

********** 65

When adopting these application guidelines, the general principle of management autonomy for subsidiaries listed on regulated markets was confirmed and not under the Company's direction and co-ordination; moreover, the Board of Directors has stated that:

- with reference to guideline i):

- a strategic subsidiary for these purposes shall be defined as any subsidiary in law - except those managed autonomously which are listed on regulated markets (in Italy or abroad) and are not under the Company's direction and co-ordination, or any of the companies under the control of such companies - which: (i) is directly controlled by the Company and has its main business in the publishing sector and/or the communications sector in general and is also under the obligation to have its financial statements audited pursuant to Decree 58/1998, or ii) has been identified as such by the Company's Chief Executive Officer by virtue of the materiality of its operating results, capital structure and financial position, or which, by virtue of its characteristics and type of business, plays an important role within the group headed by the Company; - regarding point f), the Board shall adopt internal procedures for the conduct and performance of significant transactions (as well as procedures for the conduct and performance of transactions with related parties or those in which a Director has an interest), which establish the general criteria for identifying them, details of which are given in the Corporate Governance Report; - when discharging their duties, the Directors shall examine the information received from the executive bodies, seeking all clarifications, explanations or additions from the same that are considered necessary or appropriate for the Board to make a full and fair assessment of the matters being brought before it. The Chairman of the Board of Directors shall endeavour to ensure that the information and documents needed for decision-making purposes are provided to members of the Board, in the most adequate and timely manner possible. The Board of Directors may request the senior managers of the Company and of companies belonging to the Group it heads to attend board meetings to provide due explanations of the matters being discussed.

- with reference to guideline iv):

- when evaluating of the existence of such circumstances, the Board of Directors shall take account of the information previously provided to the Shareholders’ Meeting at the time of adopting the resolution authorizing exceptions to the non-compete provision contained in art. 2390 of the Italian Civil Code and of the relevant situations subsequently arising or nonetheless regarded as not sufficiently known to shareholders.

**********

As regards implementation of the principles and related application guidelines set out above, the Board of Directors, through its resolutions adopted during and with reference to 2007:

- has examined and approved a three-year strategic plan for 2008-2010 and subsequently a budget for the Company and the Group for financial year 2008; - has renewed its approval, in some cases referring to and confirming resolutions already adopted in the past, for: i) the Company's overall system of governance, specifically involving the process of delegating powers and functions, including the establishment of board sub-committees, the relevant internal rules adopted in compliance with the Code, the instructions contained in internal procedures on significant transactions, transactions with related parties and those in which a Director has an interest (applicable regardless of the authority delegated to the Executive Committee or individual Directors); ii) the corporate structure of the Group headed by the Company (which carries out direction and co-ordination activities in respect of most of its subsidiaries); - has evaluated the adequacy of the organizational, administrative and general accounting structure of the Company and its strategic subsidiaries, as identified above (namely RCS Quotidiani S.p.A., RCS Periodici S.p.A., RCS Libri S.p.A., RCS Pubblicità S.p.A. and Unidad Editorial S.A.), with particular reference to the internal control system and management of conflicts of interest, and the measures taken by the Head of

66 Financial Reporting (appointed under art. 154-bis of Decree 58/1998) in relation to accounting and reporting, expressing a positive opinion on it and the organization of these structures; such a conclusion was reached not only with reference to the Group's Ethical Code and Organizational, Management and Control Model under Decree 231/2001 (also reviewed for the purposes of assessment and updating, as discussed in Part VIII of this Section), and the principal internal procedures (much of which draw directly from these general documents) directly approved by the same Board and distributed internally under the responsibility of the Chief Executive Officer & Chief Operating Officer, and also applied by the subsidiaries, but also on the basis of the evaluation of the internal control system carried out by the Internal Control Committee. The latter in turn expressed its opinion with reference to work performed by the Internal Control Officer and the system's administrators both within the Company and its strategic subsidiaries; - has delegated management powers and the Company's representation to the Chief Executive Officer, Antonio Perricone, after confirming him as a director at the Shareholders’ Meeting of April 27, 2007, confirming those powers requiring joint signature with the Board's Chairman or those to be exercised by the Chairman in the event that the Chief Executive Officer is absent or otherwise unable (more details can be found in Part II). The Board has also received reports once every three months on the activities carried out in the exercise of the powers delegated to these persons (under the existing By-laws the Board of Directors and the Board of Statutory Auditors must nonetheless receive a prompt report and at least once a quarter on the work of the Directors, on the Company's general performance and outlook and on the transactions carried out by the Company or its subsidiaries that are nonetheless regarded as significant by virtue of their size or characteristics, and particularly those in which any Director has an interest on his own account or that of third parties); - has determined, after examining proposals by the Group Compensation Committee and obtaining the consent of the Board of Statutory Auditors, the remuneration of the Chief Executive Officer, Antonio Perricone, in relation to his aforesaid confirmation in office (having already determined in 2006 the remuneration for the offices of Chief Executive Officer, Chief Operating Officer and Chairman of the Board of Directors, as well as the allocation of total emoluments voted to the Board by the shareholders at the time of its appointment); - has evaluated the general performance of the Company and the Group, paying particular attention to the information received from the executive bodies, and comparing actual results with forecast ones; - has examined and given prior approval to transactions that are of strategic importance carried out by the Company and its subsidiaries (except for those subsidiaries listed on regulated markets and not under the Company's direction and co-ordination or companies under the control of such listed subsidiaries), to those transactions with a significant impact on the Company's operating performance, capital structure and financial position, and to certain related-party transactions, paying particular attention to transactions in which one or more Directors has an interest on their own account or on account of third parties. To this end, the Board adopted new procedures in 2006 for the conduct and performance of such significant transactions, which contain general guidelines on how to identify them (these procedures may be consulted in the Governance section of the Company's website). These guidelines define significant transactions as those transactions to be carried out (including through the making of binding preliminary agreements or master agreements) by the Company or one of its subsidiaries with any party and which fall into the following categories: a) mergers or spin-offs in relation to which at least one of the following ratios, if applicable, is equal to or greater than 15%: - total assets of the company potentially to be absorbed (or merged) or the assets potentially being spun off/total assets of the Company (as reported in its latest consolidated financial statements) - earnings before tax and extraordinary items of the company potentially to be absorbed (or merged) or the assets potentially being spun off/earnings before tax and extraordinary items of the Company (as reported in its latest consolidated financial statements) - total equity of the company potentially being absorbed (or merged) or of the business unit potentially being spun off/total equity of the Company (as reported in its latest consolidated financial statements),

67 or in any case mergers between listed companies either through absorption or union of a listed company with an unlisted company;

b) disposals or acquisitions, in any form, of equity interests, businesses, business units, fixed and other assets, including real estate, if the total value of each transaction exceeds €100 million; c) investments in fixed assets if the total value of each transaction exceeds €100 million; d) property lets (or sub-lets) or rentals (or sub-rentals) of businesses or business units lasting for more than nine years or if the total value of each transaction exceeds €100 million; e) settlements of disputes, in or out of court, in excess of €50 million per transaction; f) grants of loans or guarantees in excess of €100 million per transaction, if in favour of or in the interest of the Company and/or in the interest and/or in the favour of companies (or other parties) directly or indirectly controlled by the Company, or grants of loans or guarantees in excess of €20 million per transaction, if in favour of or in the interest of third parties; g) acceptance of loans, mortgages or any debt security, in any form and so also against the issue of financial instruments, if the total amount of each transaction exceeds €100 million or is such that the overall amount of the Company's consolidated borrowing position will exceed the figure of €1 billion by more than 5% as a result of the new loans or debt; h) sale and purchase agreements or supply agreements, in any form, for movable assets or the performance of work or services, not relating to investments in fixed assets, if the amount of each transaction exceeds €100 million or if the agreement has a term of more than 5 years;

- has carried out during the last part of 2007 the annual evaluation of the size, composition and performance of the Board itself and its sub-committees. Based on the Board's guidelines and as recommended by the Internal Control Committee, the related process was initially overseen by the Independent Directors serving on this committee and was based on reviewing the questionnaires duly completed by the Directors (relating to the size of such bodies and the characteristics and professional experience of their members, the procedures and speed of such bodies, taking account of the Company's activities involved in exercising direction and co-ordination of its subsidiaries); this review was subsequently discussed by the Board itself. At the end of this process the Board was of a generally positive opinion as to its size, composition and operation and that of its sub-committees with regard to the various issues considered (including adequacy of the experience of its directors, completeness of information received and recording of minutes of meetings); even though the Board was generally satisfied, some of the Directors made the following observations: with regard to the Board's size and composition, observations on a possible reduction in the overall number of members and (even though satisfying the Code's guidelines) the presence of even more independent directors; with regard to the Board's operation, observations concerning a possible increase in the frequency with which editors of the Group's publications were invited to Board meetings and earlier transmission, except in exceptional cases, of documentation relating to the Board's agenda (the Chairman took note of these observations and gave his undertaking in this regard). The Board also confirmed that it did not currently see the need to adopt a policy on the presence of professional figures whose presence on the Board might be desirable; - has adopted, even though considering that the ultimate judgement can only be the responsibility of individual Directors, indicative guidance concerning the maximum number of appointments as a director or statutory auditor (or member of another supervisory body) in companies listed on regulated markets (in Italy or abroad) and in financial, banking, insurance or other large companies (to be treated as just one if a company falls into more than one of these categories) which may be considered compatible with an effective performance of a director's duties; this guidance contains general principles according to the nature of the role (in particular: executive or non-executive, also independent director) in relation to the nature and size of the companies in which the appointments are held, and their membership of the Group headed by the Company, establishing such maximum number as follows: a) in the case of an executive director: - executive directorships: 0 - non-executive or independent directorships or acting statutory auditorships (or membership of another supervisory body): 5 b) in the case of a non-executive director: - executive directorships: 5

68 - non-executive or independent directorships or acting statutory auditorships (or membership of another supervisory body): 10 specifying that an executive directorship in such companies means that individual executive powers have been delegated to the director; in any case: i) the calculation excludes appointments held in the Company or companies belonging to the Group it heads (ie. in the Company's direct or indirect subsidiaries or associates); ii) appointments held in companies with direct or indirect relationships of control between them or companies under common control, shall be treated like just one appointment unless they refer to companies listed on regulated markets (and unless otherwise explicitly reported by the director concerned); iii) financial companies are only counted for this purpose if they provide financial services to the general public; iv) appointments in companies listed on regulated markets may also include those in a "large" company, meaning those that are highly capitalized ie. listed on the S&P/MIB, except for other companies explicitly reported by the Director concerned. Exceptions to these limits are allowed – in the sense of increasing or decreasing the number – by justified resolution of the Board of Directors (taking account of the nature and size of the companies in which the appointments are held and the nature of such appointments), details of which must be provided in the Corporate Governance Report; - is of the opinion - being in the presence of a general, prior shareholder authorization of the exception to the non-compete provisions contained in art. 2390 of the Italian Civil Code adopted at the time of appointing the entire serving Board on April 27, 2006 and later when confirming individual directors on April 27, 2007 - that there are no circumstances requiring disclosure at the Shareholders’ Meeting. In addition, during board meetings Directors have examined the information received from the executive bodies, seeking all clarifications, explanations or additions that were considered necessary or appropriate. The Chairman of the Board of Directors has endeavoured to ensure that the information and documents needed for decision-making purposes have been provided to members of the Board in the most adequate and timely manner possible. At the Board's request or with its consent, senior managers of the Company, publication editors and senior managers of group companies have attended board meetings in order to provide due details on the matters being discussed and on the various sectors of business (as a result of the self-evaluation process described above the Chairman has nonetheless undertaken as far as possible to improve this aspect of the Board's work). The Board of Directors and Executive Committee met 9 and 5 times respectively in 2007, with an average attendance by their members in office at the time of the meeting of approximately 71% and 88% respectively. Board meetings lasted an average of two hours ten minutes, while Executive Committee meeting lasted an average of one hour forty minutes. At the end of 2007 (like at date of this report), the Board of Directors had the following members: Piergaetano Marchetti, Gabriele Galateri di Genola, Antonio Perricone, Raffaele Agrusti, Roberto Bertazzoni, Claudio De Conto, Diego Della Valle, John P. Elkann, Giorgio Fantoni, Franzo Grande Stevens (suspended from office from February 13 to April 7 and from December 5 until year end following an administrative penalty ordered by CONSOB under art. 187-quater of Decree 58/1998), Berardino Libonati, Jonella Ligresti, Paolo Merloni, Andrea Moltrasio, Corrado Passera, Renato Pagliaro, Alessandro Pedersoli, Carlo Pesenti and Virginio Rognoni, details of whose attendance at board and committee meetings can be found in the tables at the end of this report. These Directors were appointed for a three-year term (ie. up until the date of the Shareholders’ Meeting convened to approve the financial statements for 2008) by the Shareholders’ Meeting held on April 26, 2006. All these Directors were appointed on the basis of a list presented by shareholders belonging to the RCS MediaGroup Shareholder Lock-up and Consultation Agreement (being the only list presented), except for Antonio Perricone, Claudio De Conto and Virginio Rognoni, who were co-opted as Directors during 2006 under art. 2386.1 of the Italian Civil Code, and later confirmed, at the proposal of the same shareholders (the only proposal presented) in the Shareholders’ Meeting of April 27, 2007. Candidate personal and professional details, as presented to these Shareholders’ Meetings, can be viewed on the Company's website in the section "Governance/Shareholders’ Meetings". Part VIII of Section 1 (Ownership structure) provides details of the rules contained in the By-laws for the appointment and replacement of the Company's Directors.

Based on the information provided by the persons concerned and nonetheless taking account of available information, the Board has recorded the other appointments held by the Directors at the end of 2007 as a director or statutory auditor (or member of another supervisory body) in other companies listed on regulated markets (in Italy or abroad) and in financial, banking, insurance or other large companies. None of the

69 Directors has exceeded the maximum number of appointments on the basis of the Board’s general guidelines discussed earlier. These appointments along with those in the Company's direct or indirect subsidiaries or associates, as well as personal and professional details regarding each Director are reported below.

Piergaetano Marchetti, born in Milan in 1939. He is a graduate in Law from Milan University. He is a knight of the Grand Cross (one of Italy's highest orders of merit). After initially working as a reader in private law at Milan University, he became an industrial law lecturer at Bocconi University (1971-1981) and then from 1980 commercial law lecturer at Parma University and later at Milan's Bocconi University, where he currently holds the chair in commercial law and is pro-rector. He works as a professional notary in Milan. He held the following appointments at December 31, 2007: Chairman of the Board of Directors of RCS Quotidiani S.p.A., Director of Flammarion S.A., Director of Unidad Editorial S.A. and Director of Marsilio Editori S.p.A. (all direct or indirect subsidiaries of the Company);

Gabriele Galateri di Genola, born in Rome in 1947. He has a knighthood for services to industry. After graduating in Law, he obtained a Master of Business Administration from Columbia University's Business School and then started his career in 1971 at Banco di Roma, subsequently joining the Saint Gobain Group and then the Fiat Group. In 1986 he was appointed Chief Executive Officer of IFIL S.p.A. and in 1993, Chief Executive Officer and Chief Operating Officer of IFI S.p.A., offices which he held until June 2002 when he became Chief Executive Officer of FIAT S.p.A. He served as Chairman of the Board of Directors of Mediobanca S.p.A. from April 2003 until June 2007. He has been Chairman of the Board of Directors of Telecom Italia S.p.A. since July 2007. In addition to the latter appointment, he held the following other appointments at December 31, 2007: Deputy Chairman of the Board of Directors of Assicurazioni Generali S.p.A., Director of Banca Esperia S.p.A., Director of Banca CRS S.p.A., Director of Italmobiliare S.p.A., Member of the Supervisory Board (and Appointments Committee) of Accor S.A., Director of Pirelli & C. S.p.A., and Chairman of the Board of Directors of Istituto Europeo di Oncologia S.r.l.;

Antonio Perricone, born in Palermo in 1947. After graduating in Economics and Business from Palermo University, he became an officially registered professional accountant. In the course of his subsequent career, he held appointments as Chief Executive Officer and Chief Operating Officer at Maserati S.p.A., Sipra S.p.A. and Manzoni S.p.A. and, from December 2004 to September 2006, as Chief Executive Officer at Itedi S.p.A. and Editrice La Stampa S.p.A. as well as Chairman at Publikompass. He held the following appointments at December 31, 2007: Chief Executive Officer of RCS Quotidiani S.p.A., Chairman of the Board of Directors of RCS Periodici S.p.A., Director of Unidad Editorial S.A., Director of Flammarion S.A., Chairman of the Board of Directors of Editions d’Art Albert Skirà S.A., Director of m-dis S.p.A. (all direct or indirect subsidiaries or associates of the Company) and Director (and Member of the Executive Committee) of Istituto Europeo di Oncologia S.r.l. (in which the Company holds a minority interest);

Raffaele Agrusti, born in Casarsa della Delizia (Pordenone) in 1957. He is a graduate in Economics and a registered professional accountant and auditor. He has worked at Assicurazioni Generali S.p.A. since 1983, holding numerous positions of responsibility, and since October 2007 that of Chief Financial Officer (with responsibility for Consolidation and Control, Strategic Planning, Finance, Real Estate, Legal and Corporate Affairs and Privacy, Enterprise Risk Management, Investor Relations, Group Tax Planning). He held the following appointments at December 31, 2007: Director of Toro Assicurazioni S.p.A. as well as numerous other companies in the Assicurazioni Generali Group, including the position of Chairman of the Board of Directors of La Venezia Assicurazioni S.p.A., Chairman of the Board of Directors of Generali Investments Italy SGR S.p.A., Director of Generali Property Investments SGR S.p.A., Member of the Supervisory Board at Generali Investments S.p.A.; Director of Premuda S.p.A. and Member of the Supervisory Board at Uniqa Protezione S.p.A. (formerly Carnica Assicurazioni S.p.A.);

Roberto Bertazzoni, born in Guastalla (Reggio Emilia) in 1942. He is a graduate in Economics and Business and a professional businessman. He held the following appointments at December 31, 2007: Chairman of the Board of Directors of SMEG S.p.A., Chairman of the Board of Directors of ERFIN – Eridano Finanziaria S.p.A., Director (and Executive Committee member) of Unicredit Banca S.p.A., Member of the Supervisory Board at Mediobanca S.p.A.;

Claudio De Conto, born in Milan in 1962. He is a graduate in Business Administration from Bocconi

70 University, Milan. After an experience with Ernst & Whinney in the UK, he joined the Pirelli Group in 1988, initially in Group Treasury and later in Accounting, Finance and Control for the group's tyre subsidiaries in Brazil, Spain and Germany, serving as Chief Financial Officer at Pirelli Neumaticos S.A. (Spagna) and later at Pirelli Deutschland A.G. (Germany). He became Director of Accounting, Planning and Control of Pirelli S.p.A. in 2000 and its Chief Financial Officer in 2001, an office he continued to hold in the parent company Pirelli & C. S.p.A. after it absorbed Pirelli S.p.A. in August 2003. He has been Chief Operating Officer at Pirelli & C. S.p.A. since November 2006. He held the following appointments at December 31, 2007: Director of Pirelli Real Estate S.p.A. and other direct or indirect subsidiaries of Pirelli & C. S.p.A., including Director of Pirelli Tyre S.p.A., Pirelli Servizi Finanziari S.p.A. and Pirelli Broadband Solutions S.p.A.; Director of Efibanca Palladio Finanziaria SGR and Emittenti Titoli S.p.A.;

Diego Della Valle, born in S. Elpidio a Mare (Ascoli Piceno) in 1953. He has a knighthood for services to industry. After studying law in Bologna and working for a while in the United States, he joined the family business in 1975 where he initially learned about production methods, later becoming responsible for corporate strategy and marketing. He has been Chairman and Chief Executive Officer of Tod’s S.p.A. since October 2000; in the same year he received an honorary degree in Economics and Business from Ancona University. He has served on the Board of Directors of numerous companies, amongst which IRI S.p.A. and Banca Commerciale Italiana S.p.A. He held the following appointments at December 31, 2007: Chairman of the Board of Directors and Chief Executive Officer of Tod’s S.p.A., Director of Ferrari S.p.A., Director of Compagnia Immobiliare Azionaria S.p.A., Director of L.V.M.H. Moet Hennessy Louis Vuitton S.A., Director of Assicurazioni Generali S.p.A., Deputy Chairman of Marcolin S.p.A., Director of Le Monde Europe S.A., Unlimited Partner and Director of Diego Della Valle & C. S.a.p.a. and DI.VI. Finanziaria S.a.p.a. and Sole Director of DDV Partecipazioni S.r.l.;

John P. Elkann, born in New York (USA) in 1976. He is a graduate in Engineering from Turin's Polytechnic. During his time at university he already gained working experience in numerous Fiat Group companies: in Great Britain and Poland (in production) and in France (in sales and marketing), subsequently starting his career in 2001 at General Electric as a member of the Corporate Audit Staff with jobs in Asia, the United States and Europe. He joined IFIL Investments S.p.A. in 2003, where he worked on plans for turning around the Fiat Group. In February 2006 he was appointed as IFIL's Deputy Chairman and in April 2007 as Chairman of IFI – Istituto Finanziario Industriale S.p.A.. He held the following appointments at December 31, 2007: Deputy Chairman of the Board of Directors of FIAT S.p.A., Chairman of the Board of Directors of Itedi S.p.A., Deputy Vice Chairman of the Board of Directors of IFIL Investments S.p.A., Chairman of the Board of Directors of IFI S.p.A., Director of Editrice La Stampa S.p.A., Deputy Chairman of the Board of Directors of Giovanni Agnelli e C. S.a.p.a.z. and Director of Gruppo Banca Leonardo S.p.A.;

Giorgio Fantoni, born in Venice in 1926. He took over management of the family business, Fantoni Arte Grafica, from his father at the start of the 1950s. In the mid-1960s this business bought Electa, a publisher of art books which became Italy's leading publisher in this sector in the space of ten years. After further acquisitions during the 1970s, Electa purchased 70% of Einaudi, a publishing house that was subsequently turned around. Elemond was created in 1988 as the holding company for Electa, Einaudi and the textbooks and art books businesses of Mondadori. The group continued to develop thereafter becoming a market leader in Italy. In 1996 it took part in the acquisition of Skira, the historic international art publisher, one of the world leaders in this sector. Mr. Fantoni held no other appointments as a director or statutory auditor at December 31, 2007;

Franzo Grande Stevens, born in Naples in 1928. He is a professional lawyer in Turin. Apart from being Chairman of the Board of Directors of Compagnia di San Paolo, at December 31, 2007 he also served as Chairman of the Board of Directors of P. Ferrero & C. S.p.A. and as a Director of IFI – Istituto Finanziario Industriale S.p.A. and IFIL Investments S.p.A.;

Berardino Libonati, born in Rome in 1934. He is a professional lawyer in Rome. He has been a lecturer in commercial law at Rome's "La Sapienza" University since 1981. He is editor of "Rivista del diritto commerciale e del diritto generale delle obbligazioni", a law magazine. He is co-editor of "Concorrenza e Mercato". He has been a member of the management committee of the magazine "Rivista delle società" since November 1988. He is Chairman of the Board of Directors of Unidroit – Institut International pour

71 l’Unification du Droit Privé. He has held numerous appointments, amongst which statutory auditor at ENI S.p.A. from 1992 to 1995, Chairman of the Board of Directors at Banco di Sicilia S.p.A. from 1994 to 1997, Chairman of the Board of Directors at Telecom Italia S.p.A. and TIM Telecom Italia Mobile S.p.A. from 1998 to 1999, Director of Nomisma S.p.A. from 2003 to 2007, Director of Mediobanca S.p.A. from 2001 to 2007, Chairman of the Board of Directors at Swiss Re Italia S.p.A. from 1996 to June 2006, Chairman of the Board of Directors at Alitalia S.p.A. from February to July 2007, Chairman of the Board of Directors at Banca di Roma S.p.A. from 2002 to 2007. He held the following appointments at December 31, 2007: Director of Pirelli & C. S.p.A., Deputy Chairman of the Board of Directors of Unicredit S.p.A.;

Jonella Ligresti, born in Milan in 1967. After studying Economics and Business at Bergamo University and Milan's Bocconi University, he started working for the Ligresti Group which has interests in several sectors (insurance, finance, hotel and holiday properties). In 1990 he joined the Board of Directors of the group's holding company, Premafin Finanziaria HP S.p.A, becoming Deputy Chairman in 1998. He particularly follows the insurance side of the group, working from 1990 to 1996 in SAI-Società Assicuratrice Industriale S.p.A., becoming its Deputy Chairman in 1997, and in Nuova MAA Assicurazioni S.p.A., becoming its Chairman in 1999, with the latter being absorbed by Milano Assicurazioni S.p.A. in 2003. He has been Chairman of the Board of Directors of Fondiaria-SAI S.p.A. since 2001. He held the following appointments at December 31, 2007: Deputy Chairman of the Board of Directors of Premafin Finanziaria HP S.p.A., Chairman of the Board of Directors of SAI Holding Italia S.p.A. and Director of Finadin S.p.A., Chairman of the Board of Directors of Fondiaria-SAI S.p.A., Director of Milano Assicurazioni S.p.A., Member of the Supervisory Board of Mediobanca S.p.A., Deputy Chairman of the Board of Directors of Atahotels S.p.A. and Director of Gilli S.r.l.;

Paolo Merloni, born in Rome in 1968. He is a graduate in Business Administration from Bocconi University, Milan. He started his career as a business analyst with McKinsey in Madrid and Milan. He joined the MTS Group in 1995, working specifically on the latter's strategic redirection. At the same time, he held the following appointments in the MTS Group: from 1997 to 2004 he was manager for Central and Western Europe, manager for Italy, manager of the heating division and then Vice President in charge of acquisitions. He held the following appointments at December 31, 2007: Chief Executive Officer of Merloni Termosanitari S.p.A., Chief Executive Officer of Merloni Finanziaria S.p.A., Director of Merloni Finanziaria International S.p.A., Sole Director of Sorel S.r.l., Chairman of the Board of Directors of MTS Group Center S.A., Board Member of Compagnie Française de Materiel Thermique S.a.s. (C.F.M.T.), Director of Merloni Invest S.p.A.;

Andrea Moltrasio, born in Bergamo in 1956. After graduating in Chemical Engineering, he then obtained a Master of Business Administration (MBA) from the University of Santa Clara, California (USA). He is a professional businessman, and was Chairman of the Bergamo Area Business Association from 2001 to 2005, subsequently becoming a member of Confindustria's Presidential Committee with responsibility for Europe. He served as a Director of Banca Popolare di Bergamo S.p.A. from 2003 to March 2007, and was also Chairman of the Bergamo Area Business Association from 2001 to 2005 and a Member of the Bergamo Chamber of Commerce's Council from 2001 to 2002. He held the following appointments at December 31, 2007: Member of the Supervisory Board of Unione di Banche Italiane S.c.p.A. and Chairman of the Board of Directors of Icro Didoné S.p.A.;

Renato Pagliaro, born in Milan in 1957. He is a graduate in Business Administration from Bocconi University. He is registered professional accountant and auditor. He has been in Mediobanca since September 1981, where he became Central Manager in 1997, Deputy Chief Operating Officer in April 2002, Co-Chief Operating Officer and Board Secretary in April 2003, and Chairman of the Management Board in July 2007. In addition to the latter appointment, he held the following other appointments at December 31, 2007: Director of Telecom Italia S.p.A., Director of Burgo Group S.p.A., Director of Compass S.p.A., of Selmabipiemme Leasing S.p.A. and Cofactor S.p.A. and Acting auditor of Istituto Europeo di Oncologia S.r.l.;

Corrado Passera, born in Como in 1954. He is a graduate in Business Administration from Bocconi University, Milan. He also has a Master in Business Administration from Wharton School, Philadelphia. He began his career with McKinsey in 1980. He moved to CIR S.p.A. in 1985 where he served as Chief

72 Operating Officer until 1990. He then became Chief Operating Officer of Arnoldo Mondadori Editore S.p.A. and later Deputy Chairman and Chief Executive Officer of the Espresso-Repubblica Group. He joined the Olivetti Group in 1992 as Co-Chief Executive Officer. After serving as Deputy Chairman of Credito Romagnolo from 1988 to 1995, he was appointed Chief Executive Officer and Chief Operating Officer of Banco Ambrosiano Veneto in 1996. He served as Chief Executive Officer of Poste Italiane S.p.A. from 1998 to 2002. He became Chief Executive Officer of Banca Intesa S.p.A. in 2002 and of Intesa SanPaolo S.p.A. in 2007. He is also a member of the Board at Bocconi University and a member of the Advisory Board at the Scuola Normale in Pisa and of the International Advisory Board at the Wharton School in Philadelphia. At December 31, 2007 he held the office of Chief Executive Officer of Intesa SanPaolo S.p.A.;

Alessandro Pedersoli, born in Naples in 1929. He is a graduate in Law from Milan's Catholic University. He works as a professional civil lawyer in Milan, specializing in commercial and company law. He held the following appointments at December 31, 2007: Member of the Supervisory Board of Unione di Banche Italiane S.c.p.A., Director of EFFE 2005 Finanziaria Feltrinelli S.p.A. and Director of Assicurazioni Generali S.p.A.;

Carlo Pesenti, born in Milan in 1963. He is a graduate in Mechanical Engineering from the Polytechnic in Milan and also has a Masters in Economics and Management from Bocconi University in Milan. After graduating and spending a period studying and working abroad, he held several posts in the Italcementi Group, initially in technical services and then in Italcementi Ingegneria where he worked as project engineer and project manager, and later still in the group accounting and finance department. After serving as Co- Chief Operating Officer, he was appointed as Chief Executive Officer of Italcementi S.p.A. in May 2004. He has also been Deputy Chairman of Ciments Français S.A. since April 2007. He sits on the council of Confindustria (confederation of Italian industry). He held the following appointments at December 31, 2007: Director (and Executive Committee member, plus Chief Operating Officer) of Italmobiliare S.p.A., Chief Executive Officer (and Executive Committee member) of Italcementi S.p.A., Deputy Chairman of Board of Directors of Ciments Francais S.A., Member of the Supervisory Board of Mediobanca S.p.A., Director (and Compensation Committee member) of Unicredito Italiano S.p.A.;

Virginio Rognoni, born in Corsico (Milan) in 1924. He is a graduate in Law from Pavia University. He was a Fulbright scholar at Yale University (USA), 1949-1950. He was a reader, then lecturer and finally professor of trial law at Pavia University. He is a professional lawyer and has held a number of institutional appointments including: Member of the Chamber of Deputies for seven terms from 1968 to 1994, Minister of the Interior from 1978 to 1983, Christian Democrat Parliamentary Group Leader from 1983 to 1986, Minister of Justice from 1986 to 1987, Chairman of the Chamber of Deputies Justice Commission from 1988 to 1990, Minister of Defence from 1990 to 1992, Deputy Chairman of the Upper Council of the Magistrature from July 2002 to July 2006. He held no other appointments as a director or statutory auditor at December 31, 2007.

II. COMPOSITION OF THE BOARD OF DIRECTORS

PRINCIPLES

1. (2.P.1.) The Board of Directors shall be made up of executive and non-executive Directors.

2. (2.P.2.) Non-executive Directors shall bring their specific expertise to board discussions and contribute to the taking of balanced decisions paying particular attention to the areas where conflicts of interest may exist.

3. (3.P.3.) The number, expertise, authority and time availability of non-executive Directors shall be such as to ensure that their judgement may carry a significant weight in influencing the Board's decisions.

4. (4.P.4.) It is advisable to avoid the concentration of corporate offices in one single individual.

73 5. (5.P.5.) If the Board of Directors has delegated operational powers to its Chairman, it shall disclose adequate information in the Corporate Governance Report on the reasons for such an organizational decision.

APPLICATION GUIDELINES i) (2.C.1.) The following are treated as executive Directors: a) the Directors holding the office of chief executive officer in the Company or a strategic subsidiary, including the related chairmen if these have been granted individual operational powers or if they play a specific role in the definition of business strategies; b) the Directors vested with management duties in the Company or in one of its strategic subsidiaries, or in any parent company or other parent entity, when such position also concerns the Company; c) the Directors who are members of the Company's Executive Committee, if no Chief Executive Officer has been appointed or if the participation in the Executive Committee, taking into account the frequency of the meetings and the scope of the relevant resolutions, effectively entails the systematic involvement of its members in the Company's day-to-day management. ii) (2.C.2.) Directors are required to know the duties and responsibilities carried by their office. The Chairman of the Board of Directors shall organize the work of the Board of Directors and act as a liaison between the executive and non-executive Directors. In addition, if it is necessary to learn more about subjects presented to board meetings and its sub-committees, then the Chairman shall see that, for the purposes of performing their role effectively, Directors participate in initiatives aimed at increasing their knowledge of such matters and their impact on the business, also having regard to the relevant regulatory framework. iii) (2.C.3.) If the Chairman of the Board of Directors is the company's chief executive officer, or if the office of Chairman is covered by the person controlling the Company, the Board shall designate a lead independent director, who represents a point of reference and co-ordination for the requests and contributions of non- executive directors and, in particular, those who are independent as defined in Article III of the Code. The lead independent director shall carry out this function by working in collaboration with the Chairman of the Board of Directors.

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When adopting these application guidelines, the Board of Directors has also stated that:

- with reference to points a) and b) of guideline i):

- a strategic subsidiary for the purposes of these provisions is every company defined in accordance with the related criteria already specified in guideline i) of the Code's Article I, as well as any other subsidiary that is listed on regulated markets (in Italy or abroad); - the granting of powers only in urgent cases to directors not in possession of operational authority is not enough, on its own, to cause them to be classified as executive directors, unless such powers are actually exercised with considerable frequency; - shareholders are recommended, at the time of appointing the Board of Directors, to assess the number, experience and personal characteristics of the candidates relative to the size of the Company and the Group it heads and the complexity and specific features of its business sector, and the proposed size of the Board itself;

- with reference to guideline ii):

- for the purposes of avoiding a duplication of information and efforts in board and committee meetings, the Chairman shall decide the need for any additional information on the basis of that already received during such meetings:

74 - with reference to guideline iii):

- the lead independent director, if appointed, shall work with the Chairman of the Board of Directors in order to ensure that the Directors receive full and timely information and has the power, amongst others, to call, independently or at the request of other Directors, specific meetings of just the independent Directors to discuss the matters considered of interest regarding the operation of the Board of Directors or the Company itself.

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As regards implementation of the principles and related application guidelines set out above, taking into account the offices, powers and duties attributed within the Company and its strategic subsidiaries, as defined above, as well as the frequency of meetings of the Executive Committee and the subject of its related resolutions, the Board considers that: - the Chief Executive Officer (& Chief Operating Officer), Antonio Perricone, is the only executive Director; - the remaining Directors, including the Chairman and Deputy Chairman of the Board of Directors, Piergaetano Marchetti and Gabriele Galateri di Genola, are all non-executive.

For the sake of efficient, flexible management of the business, especially in terms of representing the Company before third parties, and nonetheless with internal observation of the rules of corporate governance as adopted by the Company, the Board of Directors has granted:

- the Chief Executive Officer & Chief Operating Officer with responsibility for the Company's overall management and for the direction and co-ordination of the relevant subsidiaries, wide powers for the conduct of the Company's management with limits on the size of financial commitments and/or risks that may be taken on for certain types of transaction. In particular, he has powers to enter, amend and terminate contracts: i) to buy, sell and exchange property, and to create and buy partial rights to use the same, for an amount or commitment of no more than €10 million per individual transaction; ii) to buy and/or sell business units for no more than €10,000,000 per individual transaction, or €20,000,000 if jointly signed by the Chairman of the Board of Directors, before any costs and/or liabilities; iii) to lease or sub-lease businesses, to let and/or sub-let property for no more than €10,000,000, or €20,000,000 if jointly signed by the Chairman of the Board of Directors, provided not lasting more than 9 years; none of these limits shall apply to transactions with the Company's direct or indirect subsidiaries; iv) to buy and sell shares and/or other equity instruments, including those giving a controlling or significant interest, in companies, associations and entities within the limit of €30,000,000 per transaction and with the joint signature of the Chairman of the Board of Directors above this amount up to a maximum of €50,000,000: again these limits shall not apply to transactions with the Company's direct or indirect subsidiaries;

- the Executive Committee all the powers of ordinary and extraordinary administration, except for those relating to the purchase and sale of majority equity investments in companies not controlled by the Company, and those reserved in law for the Board of Directors, nonetheless explicitly excluding, for internal purposes, those activities reserved by the Code, in the form adopted by the Company, and by the internal procedures governing the conduct and performance of significant transactions and/or transactions with related parties or in which a Director has an interest. The Executive Committee usually carries out examinations and reviews in preparation for subsequent presentation to the Board of Directors of actual financial results and balance sheets, budgets and long-term plans, significant transactions that the Committee's chairman or Chief Executive Officer decides to bring to the attention of the Committee itself, again in preparation for a subsequent board resolution.

The Board has charged its Chairman with the task of monitoring and co-ordinating the Company's governance and of working with the Chief Executive Officer on certain matters. It has also granted the Chairman the same powers as the Chief Executive Officer & Chief Operating Officer, to be exercised only when the latter is absent or otherwise unable, and, jointly with the Chief Executive Officer, only those powers, as indicated above, relating to the purchase or sale of equity investments or businesses and the

75 execution of business and property rental/lease agreements (lasting less than nine years). It is clear that the Chairman’s powers are solely for the purpose of dealing with situations of particular urgency or extreme need. In keeping with this purpose, the Chairman has limited himself to exercising these powers only in exceptional circumstances, of absolute necessity and urgency, when the other persons so empowered are irremediably absent or unable (specifying that the Board was nonetheless required to approve the purchase of equity investments and related agreements also when this was not necessary on the basis of the delegated powers and internal procedures mentioned earlier)

With regard to independent Directors, discussed in Part III below, the Board has decided not to appoint a lead independent director because the circumstances specified by the Code do not apply.

III. INDEPENDENT DIRECTORS

PRINCIPLES

1. (3.P.1.) An adequate number of non-executive Directors shall be independent, in the sense that they do not maintain, nor have recently maintained, directly or indirectly, any business relationships with the Company or persons linked to it, of such a significance as to influence their independence of judgement.

2. (3.P.2.) The Directors' independence shall be periodically assessed by the Board of Directors. The results of the Board's assessment shall be communicated to the market.

APPLICATION GUIDELINES i) (3.C.1./3.C.2.) The Board of Directors shall evaluate the independence of its non-executive members, placing more emphasis on substance rather than the form and bearing in mind that a Director is usually not regarded as being independent in the following circumstances: a) if he/she controls, directly or indirectly, the Company also through companies under their control, trustees or through a third party, or is able to exercise a significant influence over the Company, or participates in a shareholder agreement under which one or more persons may exercise control or significant influence over the Company or - bearing in the mind the scope and contents of this article, or the purpose of ensuring a sufficient number of directors without relationships that might influence their independence of judgement even potentially - in a shareholder agreement that, although not representing one of the above cases, carries consultation obligations and through which its participants, or their parent companies, directly or indirectly hold an interest in the Company's ordinary share capital that, if the agreement's obligations were to relate to voting rights at the Company's ordinary Shareholders’ Meetings, would allow them to have control or a significant influence over the Company in a legal sense (henceforth known as a "shareholder consultation agreement"); b) if he/she is, or has been in the preceding three financial years, a top representative of the Company, of a strategic subsidiary, as defined in Article II, or of a company under the same control as the Company, or of a company or entity which, including jointly with others through a shareholder agreement, controls the Company or is able to exercise over the same a significant influence in a legal sense, or which takes part in a "shareholder consultation agreement", or of a company controlled by such a company or entity; c) if he/she has, or had in the preceding financial year, directly or indirectly (e.g. through companies under their control or companies of which he/she is a top representative, or in the capacity as partner of a professional firm or of a consulting company) a significant commercial, financial or professional relationship or, in certain cases, other types of relationship (but not ones of courtesy): - with the Company, one of its subsidiaries, or any of its top representatives; - with a party who, jointly with others through a shareholder agreement, controls the Company, or exercises a significant influence over it or takes part in a "shareholder consultation agreement", or with a company controlled by such party, or - in the case of a company or an entity - with the related top representatives; or is, or has been in the preceding three financial years, an employee of one of the aforementioned parties;

76 d) if he/she receives, or has received in the preceding three financial years, from the Company or one of its subsidiaries or parent companies, or from a participant in a "shareholder consultation agreement", or from a company controlled by such a party, significant additional remuneration apart from the "fixed" fee as a non- executive Director of the Company, including participation in performance-related incentive schemes, including equity-settled ones; e) if he/she has been a Director of the Company for more than nine years in the last twelve years; f) if he/she is an executive Director of another company in which one of the Company's executive Directors is a director; g) if he/she is a shareholder or Director of a company or entity belonging to the same network as the firm appointed to audit the Company's financial statements; h) if he/she is a close relative of a person fitting the description contained in any of the above points.

The "top representatives" of a company or an entity mean: the chairman, the legal representative, the chairman of the board of directors, the executive directors and the top management of the company or entity concerned; ii) (3.C.3.) The number and experience of independent Directors shall be adequate in relation to the size of the Board and the Company's activity; moreover, their number must be such as to enable the creation of sub- committees within the Board, in accordance with the Code's recommendations. If the Company is subject to direction and co-ordination by third parties or is legally controlled by a party operating, directly or through other subsidiaries, in the same business sector or in related sectors, the composition of the Company's Board of Directors shall be such as to ensure adequate autonomy of management and, therefore, to pursue as a priority the goal of creating value for the Company's shareholders. iii) (3.C.4.) After the appointment of a Director who qualifies himself/herself as independent, the Board of Directors shall review at least once a year, on the basis of the information provided by the same Director or, nonetheless available to the Company, those relationships which could be or appear to be such as to jeopardize the independence of judgement of such Director. The Board of Directors shall notify the results of its evaluations, by issuing a press release to the market at the time of appointment and, subsequently in the Corporate Governance Report, specifying, with adequate reasons, whether any criteria have been adopted that differ from those contained in the Code unless, in the case of press releases regarding a newly-appointed director, the principles adopted by the Board and related reasons have already been published in the most recent Corporate Governance Report. iv) (3.C.5) The Board of Statutory Auditors shall verify, as part of its legally required duties, the correct application of the assessment criteria and procedures adopted by the Board of Directors for evaluating the independence of its members. The result of such controls shall be notified to the market in the Corporate Governance Report or in the report of the statutory auditors to the Shareholders’ Meeting. v) (3.C.6.) The independent Directors shall meet at least once a year without the presence of the other Directors.

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When adopting these application guidelines, the Board of Directors has also stated that:

- with reference to guideline i):

- the "network" of the firm appointed to audit the financial statements shall refer to the legal definition, or in its absence or as an adjunct, the definition contained in the document entitled "Independence principles for external auditors" issued by the Italian Accounting Profession;

- a "significant" commercial, financial or professional relationship or, in certain cases, other types of relationship (like in point g), means a relationship of a significance such as to influence the independence of judgement of a Director of the Company in discharging his/her duties; the evaluation in this regard takes account of both the related absolute amounts and the significance to

77 the general position, particularly the financial one, of the person concerned or those associated with him, without prejudice to the Board's option to lay down a specific definition of significance for the purposes of making such evaluation;

- a "close relative" (like in point h) means a parent, child, spouse unless legally separated, common- law spouse of the person concerned and other relatives who live together with the latter.

Furthermore, still in relation to the criteria contained in guideline i) above, the Board has established that, in addition to the cases contained in the Code, a Director is usually not regarded as independent in the event of participating, or having relationships with a participant, in a shareholder agreement under which one or more parties may not only exercise control or a significant influence over the Company but also in a shareholder agreement containing consultation obligations and through which its participants, or their controlling companies, directly or indirectly hold an interest in the Company's ordinary share capital that, if the agreement's obligations were to relate to voting rights at the Company's ordinary Shareholders’ Meetings, would allow them to have control or a significant influence over the Company in a legal sense;

- with reference to guideline ii):

- for the purposes envisaged herein and without prejudice to the provisions of law and the By-laws regarding the appointment, qualifications and replacement of directors, the Board invites shareholders to present proposals and adopt resolutions that allow the above criteria to be observed, as well as complying itself in the event of any resolutions that are adopted under art. 2386.1 of the Italian Civil Code;

With reference to guideline iii), it has been decided, in order to avoid duplicating information, that when the Board of Directors reports the results of its evaluation of the independence of a new Director, the required press release does not have to repeat the reasons for adopting criteria that differ from those specified in the Code if these have already been adopted by the Board of Directors and have already been made public in the most recent Corporate Governance Report.

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As regards implementation of the principles and related application guidelines set out above, the Board of Directors approved a set of procedures in 2006 on how to check the information needed to evaluate a Director's independence, based on the information provided by the persons concerned and available to the Company. The Board conducted the required periodic evaluation in 2007, as a result of which and of the principles and guidelines adopted (as well as the provisions of art. 148.3 of Decree 58/1998) the following Directors qualified as independent: Giorgio Fantoni, Andrea Moltrasio, Alessandro Pedersoli and Virginio Rognoni. The latter's independent status was disclosed in a press release issued when he was confirmed in office by the Shareholders’ Meeting held on April 27, 2007. In addition, when the names of proposed candidates for the office of Director were presented to the shareholders, all these candidates provided prior statements confirming their independence from the Company, as defined by both art. 148.3 of Decree 58/1998 and the Code (these statements can be viewed as part of the documentation presented together with the candidate details found on the Company's website in the section entitled “Governance/Shareholders’ Meetings”). The Board of Statutory Auditors has also carried out its required review, not reporting any matters in relation to the Board of Directors' decisions and assessments in this regard. Following the amendments made in 2007 to the Company's By-laws (which can be found in the Governance section of the Company's website), the By-laws now state that the number of Directors qualifying as independent under art. 148.3 of Decree 58/1998 must not be less than the minimum number established by relevant legal provisions, and that the candidate statements concerning the satisfaction of these requirements must be published in the manner envisaged by applicable laws and regulations (see the contents of Part VI below and Part VIII of Section 1 on Ownership Structure).

As planned, the first meeting of independent Directors without the presence of the other Directors was held during 2007. This meeting, held before the board meeting which discussed the self-evaluation of the size,

78 composition and operation of the Board and its sub-committees mentioned in Part I of this Section, examined the results of the questionnaires completed by the directors, reviewed the rules of governance adopted by the Board following adoption of the Corporate Governance Code in relation to the roles and characteristics of independent Directors, who must also be in the majority on the Internal Control Committee (particularly in relation to the latter's involvement, as established by internal procedures, in the event of significant transactions with related parties) and on the Group Compensation Committee, both board sub-committees. No particular matters emerged from this meeting needing to be reported to the Board of Directors and its Chairman, except for those already specified in relation to the self-evaluation process.

IV. MANAGEMENT OF CORPORATE INFORMATION

PRINCIPLES

1. (4.P.1.) The Directors and Statutory Auditors are required to treat the documents and information acquired in the performance of their duties as confidential and to comply with the procedures adopted by the Company for the internal management of such documents and information and their disclosure to third parties.

APPLICATION GUIDELINES i) (4.C.1.) The Chief Executive Officer, acting in agreement with the Chairman of the Board of Directors on the basis of the latter's role and functions, shall ensure that confidential information is correctly handled; to this end he shall propose to the Board of Directors that procedures be adopted for the internal management and disclosure to third parties of information concerning the Company and its subsidiaries, with special reference to price-sensitive information as defined in law; such procedures shall be designed, amongst others, to avoid the publication of information on a selective basis (meaning information that might be disclosed prematurely to certain parties, inappropriately, incompletely or inadequately).

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When adopting this principle and related application guideline, the Board has established that the correct handling of corporate information is ensured by the Chief Executive Officer, acting in agreement with the Chairman of the Board of Directors if, like at present, the latter has a duty to supervise and monitor the Company's corporate governance.

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As regards implementation of the principle and related application guideline set out above, the Board of Directors adopted a set of procedures in 2006 for managing and disclosing confidential and price-sensitive corporate information, which updated the existing rules. These procedures were updated in 2007 to revise their wording to reflect certain changes in the Company's organizational structure. These procedures comply with relevant legal requirements and define responsibilities, operating procedures and activities involving the management and disclosure of such information about the Company and the Group, with particular reference to "price-sensitive" information, whose publication must be previously authorized by the Company's Chief Executive Officer, acting in agreement with the Chairman of the Board of Directors.

In detail, these procedures, which concern Directors, Statutory Auditors and employees of the Company and of any company it controls (except for a listed subsidiary or its subsidiaries, in which case a similar procedure to that adopted shall apply), also place an obligation on all recipients of confidential information learned in the course of their duties, office or appointment: (i) not to publish it, with its only permitted use being for the purposes of the normal discharge of such duties, office or appointment and only allowed to be disclosed to others during such discharge if such recipients also give an undertaking of confidentiality and

79 (ii) in general, to treat the information in question by adopting every due precaution so that any disclosure of the same takes place without prejudice to its strictly confidential nature, until such time as this information enters the public domain in accordance with the same procedures. In compliance with the above principles, procedures have also been established for issuing press releases falling under the provisions of art. 114 of Decree 58/1998 and art. 66 of the Issuer Regulations and for other public statements such as those made during conferences, meetings with financial analysts or the press and during Shareholders’ Meetings or even on the Company's website and intranet.

In addition, insofar as these procedures are linked to the internal management of corporate information and disclosures to the market, the Board of Directors adopted, back in 2006, not only a set of procedures for the creation and maintenance of the register of persons with access to price-sensitive information, required by article 115-bis of Decree 58/1998 and related implementation instructions, but also rules on dealing in shares or related financial instruments issued by the Company or its subsidiaries, as required by article 114.7 of Decree 58/1998 and related implementation instructions (these rules were updated during 2007 to revise their wording to reflect changes in the Group's membership).

V. SUB-COMMITTEES OF THE BOARD OF DIRECTORS

PRINCIPLES

1. (5.P.1.) The Board of Directors shall establish from among its members one or more committees to act in an advisory and consultative capacity, as specified in Article VI, and if necessary, in Articles VII and VIII.

APPLICATION GUIDELINES i) (5.C.1.) The establishment and operation of such sub-committees of the Board of Directors shall meet the following criteria: a) committees shall be made up of at least three members, unless the Board of Directors itself has no more than five members, in which case committees may comprise just two Directors, provided that they are both independent, as defined by the Code in the form adopted by the Company; b) the duties of individual committees shall be established in the resolution that creates them and may be supplemented or amended by subsequent resolution of the Board of Directors; c) minutes shall be drafted for the meetings of each committee; d) in the performance of their duties and functions, the committees have the right to access the necessary company information and functions, and to use the services of external consultants, in accordance with the procedures established by the Board of Directors. The Company shall provide the committees with adequate financial resources for the performance of their duties, within the limits of the budget approved by the Board; e) persons who are not members of a committee may attend its meetings upon invitation of the same, with reference to individual items on the agenda, or on a permanent basis, based on the position held within the Company, with an obligation to leave such meetings if so requested; f) the Company shall provide adequate information, in the Corporate Governance Report, on the establishment and composition of committees, the mandate entrusted to them and the activity actually performed during the financial year, specifying the number of meetings held and the related attendance record of each member in percentage terms.

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When adopting this principle and related application guidelines, the Board of Directors has stated that:

- if the Board itself has no more than five members, committees may comprise just two Directors, provided that they are both independent, as defined in the Code in the form adopted by the Company; this is purely for 80 reasons of consistency, bearing in mind that the Company has adopted stricter independence criteria than those in the Code; - the extension of permanent invitations to non-committee members to partake in meetings and not just for individual items on the agenda (as envisaged by the related Code guideline) is compatible with the efficient conduct of such meetings, taking account of the position held by such persons within the Company and their obligation to leave such meetings if so requested; - it will not adopt the option allowed by the Code (in point c) of guideline 5.C.1) whereby functions can be distributed differently between committees, the number of which may be fewer than that envisaged by the Code.

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As regards implementation of the principle and related application guidelines set out above, back in 2006 the Board of Directors updated the rules of procedure for the Internal Control Committee and the Group Compensation Committee (the first consisting of three members and the second of five members), which contain details of their related duties and rules of operation. Amongst others, these rules of procedure require meetings to be minuted and allow each committee to access the company information and functions needed for them to discharge their duties and to use the services of outside consultants, if considered necessary and using the financial resources provided by the Board of Directors. Once again in 2007, the Board has determined such financial resources for each committee, although in cases of justified need or urgency the Chief Executive Officer, acting in agreement with the Chairman of the Board of Directors, is authorized to provide the resources. The Board has also allowed committees to use outside consultants, after informing the Chief Executive Officer and the Chairman of the Board of Directors, when it is considered inappropriate or not possible to use the structures of the Company or those belonging to its subsidiaries. During 2007 the Internal Control Committee's rules of procedure were updated following the establishment of the new position of Head of Financial Reporting; this person is entitled to have a permanent invitation to committee meetings when it discusses the matters falling under his responsibility, in order to establish a functional, productive exchange of information on the effective operation and reliability of the accounting and financial reporting processes.

Details of the composition and activities actually established by the Board of Directors for each committee can be found in Parts VII and VIII below.

VI. APPOINTMENT OF DIRECTORS

PRINCIPLES

1. (6.P.1.) The appointment of Directors shall take place on the basis of a transparent process. This process shall ensure, inter alia, timely adequate information on the personal characteristics and professional qualifications of the candidates.

2. (6.P.2.) Taking account of the Company's ownership structure and the persons previously proposed as independent Directors, the Board of Directors shall evaluate whether to establish from among its members an appointments committee consisting of a majority of independent Directors. Such a committee shall act in an advisory and consultative capacity in relation to nominations of new independent Directors and the evaluation of the size and composition of the Board itself and the presence therein of any professional figures that might be deemed appropriate.

APPLICATION GUIDELINES i) (6.C.1.) The lists of candidates for the office of Director, accompanied by comprehensive information on the personal details and professional qualifications of the candidates, accompanied by any statements of their eligibility to qualify as independent directors in the sense of the Code as adopted by the Company, shall be filed at the Company's registered office at least fifteen days before the date fixed for the Shareholders’

81 Meeting. The lists, accompanied by the candidates' details, shall be promptly published on the Company's website. ii) (6.C.2.) Without prejudice to the relevant provisions of law and the By-laws concerning the appointment, qualifications and replacement of directors, the Board Appointments Committee, when established, may be vested with one or more of the following functions: a) to present the Board of Directors with proposed candidates for the office of Director in the case envisaged by art. 2386.1 of the Italian Civil Code, in the event of having to replace an independent Director; b) to designate candidates for the office of independent Director for submission to the Company's shareholders, taking into account any recommendations in this regard received from shareholders; c) to express opinions to the Board of Directors as to the size and composition of the same as well as, possibly, the professional figures whose presence on the Board is deemed to be desirable. If the Board of Directors decides not to establish an Appointments Committee, again with the provisions mentioned above still holding good: a) the Chairman of the Board of Directors, provided he qualifies as a non-executive Director, shall be responsible for presenting the Board with the names of candidates for the office of Director, in the case of appointments falling under art. 2386.1 of the Italian Civil Code involving the replacement of an independent Director, and for presenting recommendations to the Board on its size and composition and possibly on the professional figures, whose presence on the Board is deemed to be appropriate, in both cases after the Chairman has carried out due evaluations and reviews, including through consultation with the serving independent Directors and b) the Board, acting in conjunction with its Chairman and in compliance with applicable provisions of law and the By-laws, shall draw up, if deemed appropriate, a list of candidates for the office of independent Director for presentation to the Shareholders’ Meeting, taking into account any recommendations received in this regard from shareholders.

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When adopting these principles and related application guidelines, the Board has decided in respect of Principle 2 that any duties of such a Committee shall be in line with those indicated in the Code, and has established general parameters on which to base the required evaluation by the Board itself of the need or otherwise to establish an Appointments Committee and, with regard to the application guideline in point ii) to establish general rules in the event that this evaluation results in a decision not to establish such a committee.

When adopting the application guideline in point i), the Board has stated that, while the provisions of law and the By-laws relating to the appointment of Directors still apply, it will refer, if necessary, to the above recommendations when calling Shareholders’ Meetings and with regard to the additional documentation to be presented before such meetings. As a result of revising the By-laws during 2007 to reflect the provisions of Law 262/2005 as amended by Decree 303/2006 and related instructions for implementation, the By-laws now establish that when reappointing the entire Board, candidate lists for the office of Director, accompanied by the respective curricula vitae containing personal and professional details and by the statement confirming that they qualify as independent or otherwise under art. 148.3 of Decree 58/1998, must be filed at the Company’s registered office at least fifteen days before the date set for the Shareholders’ Meeting in first call, and that such filing must be publicized in accordance with applicable laws and regulations, ie. the Issuer Regulations, by making this information publicly available at the registered office, at the market management company and on the Company's website at least ten days before the date of the Shareholders’ Meeting. The current CONSOB rules also require that the notice calling the Shareholders’ Meeting must indicate the share ownership percentage needed to present candidate lists (more details can be found in Part VIII of Section 1 - Ownership Structure).

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As regards implementation of the principles and related application guidelines set out above, the Board has once again in 2007 carried out the prescribed evaluation of whether or not to establish an Appointments Committee and has once again concluded that it is not necessary, based on the Company's current ownership structure and the persons already proposed as independent Directors in the past. What is more, the Board of Directors stated in its report on new Board appointments presented to the Shareholders’ Meeting of April 27,

82 2007 that one of the directors ending his term in office was independent and that - although it was not strictly necessary to appoint another independent director because the Board already had the minimum of two such directors established by para. 4, art. 147-ter of Decree 58/1998 for Boards with more than seven members, as well as the minimum of three such directors currently thought by the Board to be the optimum - it was desirable to retain the number of four independent Directors; this report did not however contain the names of specific candidates.

VII. REMUNERATION OF DIRECTORS AND TOP MANAGEMENT

PRINCIPLES

1. (7.P.1./7.P.2.) The Board acknowledges that the remuneration of Directors shall be set at a sufficient level to attract, retain and motivate Directors with the professional skills needed to manage the Company successfully and that the remuneration of executive Directors shall be structured in such a way as to align their interests with the pursuit of the priority goal of creating medium/long-term value for the shareholders.

2. (7.P.3./7.C.3) The Board of Directors shall establish a remuneration committee (known as the "Group Compensation Committee"), made up of non-executive Directors, the majority of whom are independent, which: – shall present the Board with proposals on the remuneration of the Chief Executive Officer(s) and other Directors holding particular office, monitoring application of the decisions adopted by the Board itself; - shall periodically evaluate the criteria adopted for the remuneration of managers with strategic or nonetheless significant responsibility; shall control their application on the basis of the information provided by the Chief Executive Officer(s) and submits general recommendations on this topic to the Board of Directors.

APPLICATION GUIDELINES i) (7.C.1) Although all relevant resolutions adopted by the Company's shareholders in this area shall still hold good, a significant part of the remuneration of executive directors and managers with strategic or nonetheless significant responsibility shall be linked to the Company's economic results and/or to the achievement of specific goals set in advance by the Board of Directors or, in the case of the aforementioned top managers, by the Chief Executive Officer. ii) (7.C.2.) Although all relevant resolutions adopted by the Company's shareholders shall still hold good, the Board shall acknowledge that the remuneration of non-executive directors is proportional to the commitment required of them, taking into account their possible membership of one or more committees. Their remuneration shall not - except for an insignificant portion thereof - be linked to the Company's economic results. Non-executive Directors shall not be beneficiaries of equity-based incentive schemes, unless this is justifiably decided by the Shareholders’ Meeting. iii) (7.C.3) No Director shall be present in meetings of the Group Compensation Committee when proposals concerning his/her own remuneration are being discussed and decided for submission to the Board of Directors.

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When adopting the Code's principles and application guidelines, the Board has formally adopted some of the Code's own provisions using the same wording contained therein, and has stated, for the sake of standardization and operational flexibility, that a Director must absent himself only from that part of each meeting of the Group Compensation Committee which discusses proposals concerning his own remuneration, and not the entire such meeting. It has also stated, in relation to this Committee, that, as part of its duties, it shall present the Board of Directors with proposals specifically regarding that part of remuneration linked to the Company's economic results, providing recommendations on the associated

83 targets and assessment criteria, in order to correctly align the remuneration of the Chief Executive Officer(s) and managers with strategic or nonetheless significant responsibility with the medium/long-term interests of shareholders and with the goals set for the Company and the Group by the Board of Directors. Average market remuneration for similar positions should also be considered when setting the level of remuneration, although without ignoring suitable parameters linked to the Company's performance. With particular reference to the use of stock options and other incentive schemes based on shares (or other financial instruments), the Group Compensation Committee shall present the Board with its recommendations on their use and all the relevant technical issues associated with their structuring and application. It shall present the Board with proposals on incentive schemes thought to be most appropriate and monitor the evolution and application over time of the plans approved by the competent governing bodies.

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In implementation of the principles and related application guidelines set out above, after the Board’s reappointment on April 27, 2006 it formed a new Group Compensation Committee, consisting of five non- executive Directors, the majority of whom independent, as defined by the Code's Article III, namely Piergaetano Marchetti, its chairman, Renato Pagliaro, and the independent directors Giorgio Fantoni, Andrea Moltrasio and Alessandro Pedersoli. The Board subsequently amended the Committee's duties to comply with the new recommendations contained in the Code, adopted by the Company as specified above. Also during 2006 the Board divided up the total annual remuneration set for the entire Board upon its appointment between individual Directors, in particular those not vested with special office, and decided the emoluments for the offices of Chief Executive Officer & Chief Operating Officer and of Chairman of the Board of Directors; it also allocated stock options - in accordance with the recommendations presented by the Group Compensation Committee and in execution of the plan already approved by the Board of Directors under the authority bestowed by the Shareholders’ Meeting held on April 29, 2005 - to key employees of the Company and its subsidiaries, including the Chief Executive Officer in his role as Chief Operating Officer (details of the stock option plan can be found in the related Information Circular published in accordance with art. 84- bis of the Issuer Regulations, along with the financial statements for 2007 on the Company's website: the former in the section entitled "Governance/Info documents" and the latter, after being published in the form and term required by law, in the sections entitled "Investor Relations/Financial reports" and "Governance/Shareholders’ Meetings").

In compliance with the above principles and application guidelines, during 2007 the Board of Directors:

- determined the remuneration of the Company's Chief Executive Officer, Antonio Perricone (through resolutions to apply what was already approved in 2006 and on the basis of his reappointment to this special office, and particularly through approval of a specific long-term incentive scheme solely for him), as recommended by the Group Compensation Committee whose meetings were attended, upon invitation, by members of the Board of Statutory Auditors, and having obtained the latter's positive opinion thereon; - after due review and recommendation by the Group Compensation Committee, evaluated the guidelines adopted for the remuneration of key management personnel, and approved a cash-based incentive scheme for key employees of the Company and its subsidiaries who had been granted stock options in 2005 and had now waived them; the purpose of this new scheme was to retain the original benefit of the incentive and associated retention factor. This plan, not relating to the Company's Chief Executive Officer & Chief Operating Officer, entails paying a cash sum, calculated with reference to a valuation of the stock options using the binomial method, which will depend on achieving the same targets as those established in the rules applying to the original stock options.

During 2007 the Group Compensation Committee:

- carried out the preparatory work resulting in the recommendations made above, with the Chief Executive Officer, who attends as a permanent invitee, absenting himself whenever the Committee discussed proposals concerning his emoluments for presentation to the Board of Directors; it also

84 monitored the decisions already adopted by the Board concerning the remuneration of the Chief Executive Officer, instructing and assessing the subsequent stages of application, again in the absence of the former and the presence of the members of the Board of Statutory Auditors; - periodically reviewed the general criteria adopted for the remuneration of top management of the Company and its subsidiaries, monitoring their application on the basis of information received from the Chief Executive Officer and presenting associated recommendations and proposals to the Board, mostly in relation to the use of stock options or alternative methods of remuneration and retention.

The attached tables contain details of the number of meetings held by the Group Compensation Committee in 2007 and of the attendance record of each of its members.

VIII. INTERNAL CONTROL SYSTEM

PRINCIPLES

1. (8.P.1.) The internal control system is the set of rules, procedures and organizational structures aimed at allowing the business to be run in a sound and correct fashion consistent with its established goals, by adequately identifying, measuring, managing and monitoring the principal risks.

2. (8.P.2.) An effective internal control system helps to safeguard the Company's assets, and to guarantee the efficiency and effectiveness of its business transactions, the reliability of its financial information, and its compliance with laws and regulations.

3. (8.P.3.) The Board of Directors shall evaluate the adequacy of the internal control system with respect to the business's characteristics.

4. (8.P.4.) The Board of Directors shall ensure that its evaluations and decisions relating to the internal control system, the approval of the annual and half-yearly financial reports and the relationships between the Company and the external auditing firm are supported by adequate preliminary activity. To this end, the Board of Directors shall establish an Internal Control Committee, made up of non-executive Directors, the majority of whom are independent. If the Company is controlled by another listed company, the Internal Control Committee shall be made up exclusively of independent Directors. At least one member of the Committee must have adequate experience of accounting and finance, to be assessed by the Board of Directors at the time of his/her appointment.

APPLICATION GUIDELINES i) (8.C.1.) The Board of Directors, with the assistance of the Internal Control Committee, shall: a) define the guidelines of the internal control system, so that the main risks facing the Company and its subsidiaries (without prejudice to the management autonomy of companies listed on regulated markets and not under the Company's direction and co-ordination) are correctly identified, as well as adequately measured, managed and monitored, determining, moreover, the criteria for determining whether such risks are compatible with sound and correct management of the business; b) identify an executive Director (usually, one of the chief executives) for supervising the functionality of the internal control system; c) evaluate, at least on an annual basis, the adequacy, effectiveness and actual functioning of the internal control system; d) describe, in the Corporate Governance Report, the essential features of the internal control system, expressing its opinion on the overall adequacy of the same. In addition, at the recommendation of the executive Director in charge of supervising the functionality of the internal control system and after consulting the Internal Control Committee, the Board of Directors shall appoint and revoke the appointment 85 of one or more persons to be responsible for internal control and define their remuneration in line with company policy. ii) (8.C.2.) The Board of Directors shall exercise its functions relating to the internal control system taking into due consideration benchmark models and best practices existing on national and international markets. Particular attention shall be devoted to the Organization, Management and Control Model adopted pursuant to Decree 231 of June 8, 2001. iii) (8.C.3.) The Internal Control Committee, which acts in a consultative and advisory capacity to the Board of Directors, shall also assist the Board in discharging the latter's duties set out in guideline i) above, and in detail it shall: a) evaluate together with the Head of Financial Reporting and the external auditors, the correct utilization of the accounting principles and their consistency for the purposes of preparing the consolidated financial statements; b) at the request of the executive Director so charged, it expresses opinions on specific matters relating to the identification of the principal business risks as well as the design, implementation and management of the internal control system; c) examine the work programme prepared by the Internal Control Officer as well as the periodic reports prepared by such person; d) evaluate the proposals submitted by the external auditing firm for obtaining the related appointment, as well as the work programme prepared for the audit and the results related in the report and any letter of recommendations; e) monitor the effectiveness of the audit of the accounts; f) discharge any additional duties that are assigned to it by the Board of Directors in relation to the performance of related-party transactions, as specified in Article IX of the Code; g) report to the Board of Directors, at least once every six months on the occasion of the approval of the annual and half-yearly financial reports, on the activities carried out and on the adequacy of the internal control system. In discharging the duties described in points d) and e) the Committee shall liaise and co- ordinate with the Board of Statutory Auditors, without prejudice to the latter's activities and prerogatives laid down in law. iv) (8.C.4.) The Chairman of the Board of Statutory Auditors or another statutory auditor designated by him shall attend meetings of the Internal Control Committee. v) (8.C.5.) The executive Director responsible for supervising the functionality of the internal control system, shall: a) identify the main business risks, taking into account the characteristics of the activities performed by the Company and its subsidiaries, and submit them periodically to the review of the Board of Directors; b) implement the guidelines defined by the Board of Directors, by designing, implementing and managing the internal control system, and monitoring its overall adequacy, effectiveness and efficiency; moreover, this Director shall oversee changes to such system to reflect changes in operating conditions and in the legislative and regulatory framework; c) present the Board of Directors with proposals on the appointment, revocation and remuneration of the Internal Control Officer. vi) (8.C.6.) The Internal Control Officer shall: a) ensure that the internal control system is always adequate, fully operating and effective; b) not be responsible for any operational areas of the business and shall not report hierarchically to any head of operational departments, including the administration and finance department; c) have direct access to all the information needed to discharge his/her duties; d) have adequate resources for performing the functions assigned; e) report on his/her work to the Internal Control Committee and the Board of Statutory Auditors, as well as to the executive Director responsible for supervising the functionality of the internal control system. In particular, he/she shall report on how risks are managed, as well as on the observance of plans defined for

86 their reduction, and express his/her opinion of the ability of the internal control system to achieve an acceptable level of overall risk. vii) (8.C.7.) The Company shall establish an Internal Audit department. The Internal Control Officer shall be in charge of this department.

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When adopting the above principles and application guidelines,

1. the Board of Directors - having already in 2006: (i) re-established the Internal Control Committee, following the Board's reappointment by the shareholders on April 27, 2006, consisting of three non- executive Directors, the majority of whom independent as required by the Code's Article III; (ii) amended the Committee's duties to comply with the new recommendations contained in the Code, adopted by the Company as specified above and decided that at least one of its three members (Raffaele Agrusti, as chairman, Andrea Moltrasio and Alessandro Pedersoli) has adequate experience of accounting and finance; (iii) identified the Chief Executive Officer (the sole executive Director) as the executive Director responsible for supervising the functionality of the internal control system; (iv) confirmed, at the recommendation of the Chief Executive Officer and having consulted the Internal Control Committee, the Head of the Company's Internal Audit Department as the Internal Control Officer, and also reviewed and confirmed the latter's remuneration in compliance with company policy; as required, this Officer is not responsible for any operational areas of the business, nor does he report hierarchically to any head of operational departments, including the administration and finance department; furthermore, he has direct access to all the information needed to discharge his duties and has adequate resources for performing the functions assigned - during 2007: - defined guidelines for the internal control system in 2008, also based on the results of the updated mapping of risks facing the Company and the Group carried out during the year, except for the subsidiary Unidad Editorial and its subsidiaries (occupied with integrating the Recoletos group acquired in April 2007) for which this process was completed after the year end; - considered that the limited levels of principal risks identified in the above mapping process should be viewed as indicative of the business's sound and proper management; - re-evaluated positively the overall adequacy, effectiveness and actual functioning of the Company's internal control system, whose key features are based, not only on the recommendations contained in the Code, but also on the requirements contained, provided or recalled in the Group's Ethical Code, which reflects recognized standards of conduct, and in the Organizational, Management and Control Model adopted in accordance with Decree 231/2001. This model, which was extensively revised early in 2006, entails identifying risks of offences being committed against the public administration and risks of corporate crimes associated with market abuse. It was once again reviewed for the purposes of updating it to reflect the new offences regarding workplace safety on top of those already covered by Decree 231/2001 (involving no changes in the internal procedures and directives already in force with reference to the other relevant offences). The Model calls for the establishment of an Oversight Board, consisting of one director from the Internal Control Committee (during 2007 and currently, Raffaele Agrusti), one acting auditor with the position of chairman (during 2007 and currently, Giorgio Silva) and the Company's Head of Internal Audit, Carlo Palazzesi. The Oversight Board has approved rules for its procedure and a work programme. It is also required to report periodically, or more often if urgent, to the Board of Directors, the Internal control Committee and the Board of Statutory Auditors on the results of its activities. The Oversight Board also appointed, with the approval of the Board of Statutory Auditors, the Company's Chief Financial Officer, Riccardo Stilli, as the Head of Financial Reporting pursuant to art. 154-bis of Decree 58/1998, and granted him adequate powers and resources for carrying out the duties required of him by law, including the preparation of procedures and the related review (with the support of the Company's Internal Audit department) of the accounting and reporting structure forming part of the internal control system. This appointment took place in compliance with art. 20 of the By-laws (which can be viewed in the Governance section of the Company's website), which also requires that the senior manager appointed has at least three years of experience in managing reporting/accounting and/or

87 finance and/or control functions within the Company and/or its subsidiaries and/or other public limited companies;

2. the Internal Control Committee - which in 2006 had evaluated the proposal for extending the external auditing firm's engagement approved by the shareholders on April 26, 2006, and the work programme for the audit of the accounts, and (ii) examined the new procedures for significant transactions, transactions with related parties and those in which a director has an interest, as discussed in Part IX - acted during 2007 in a consultative and advisory capacity to the Board of Directors with regard to the Board's duties concerning the internal control system set out above, and it specifically:

- examined the work programme prepared by the Internal Control Officer as well as the periodic reports issued by this person on the work performed and details of activities to maintain and develop the system; - reported to the Board of Directors, at least once every six months on the occasion of the approval of the annual and half-yearly financial reports, on the activities carried out and on the adequacy of the internal control system; - examined prior to submission to the Board of Directors, the system's proposed guidelines for 2008, as well as a number of proposals regarding corporate governance and implementation of the contents of the Code, particularly the manner of carrying out the self-evaluation of the size, composition and performance of the Board of Directors and its sub-committees, as discussed in Part I; - monitored the effectiveness of the audit of the accounts and its results, encountering representatives of the external auditing firm during its own meetings, which were also attended by the Chairman of the Board of Statutory Auditors, and evaluated, together with the Head of Financial Reporting, the correct utilization of the accounting principles and their consistency for the purposes of preparing the consolidated financial statements; - reviewed, noting the absence of particular observations, the report by the external auditors on the separate and consolidated financial statements for 2006, there being no letter of recommendations issued by the same auditors.

Furthermore the Chief Executive Officer, in his role as executive Director responsible for supervising the functionality of the internal control system, has, with the assistance of the Internal Control Officer, discharged the duties listed in points a) and b) of guideline v) above. As regards the Internal Control Officer, he has reported on his work regarding the internal control system to the Internal Control Committee, the Board of Statutory Auditors and to the Chief Executive Officer in his supervisory role relating to the internal control system. He has specifically reported on the procedures used for managing risks, as well as on the observance of plans for their reduction, and has expressed his opinion on the ability of the internal control system to achieve an acceptable level of overall risk, also basing his assessment on reports received from the persons (the internal administrators of the internal control system) charged by the Company and its principal subsidiaries to interface with the Internal Control Officer particularly in relation to co-ordinating the process of evaluating the system in general and of identifying risks, and to reviewing the work of line management and the related tests.

Lastly, it is reported that, having applied the principle that the Internal Control Officer is the same person as the head of the Company's Internal Audit Department, and hence an employee, the Board has not adopted the option allowed by the Code whereby, under specific conditions, it is possible to outsource internal auditing and therefore also the position responsible for the internal control system.

The attached tables contain details of the number of meetings held by the Internal Control Committee during 2007 and of the attendance record of each of its members, specifying that all the meetings were nonetheless attended by the Chairman of the Board of Statutory Auditors.

88 IX. DIRECTORS' INTERESTS AND TRANSACTIONS WITH RELATED PARTIES

PRINCIPLES

1. (9.P.1.) The Board of Directors shall adopt measures aimed at ensuring that the transactions in which a Director has an interest, on his/her own account or that of third parties, and transactions carried out with related parties - defined in accordance with IAS 24 (Related Party Disclosures) as adopted by the European Union in art. 6 of EC Regulation 1606/2002 - are performed in a transparent manner and meet the criteria of substantial and procedural fairness.

APPLICATION GUIDELINES i) (9.C.1.) The Board of Directors shall, after consulting with the Internal Control Committee, establish procedures for approving and executing transactions undertaken by the Company, or its subsidiaries, with related parties. It shall specifically define the criteria for identifying those transactions which must be approved after consulting with the Internal Control Committee and/or with the assistance of independent experts. ii) (9.C.2.) The Board of Directors shall adopt operating solutions suitable for facilitating the identification and adequate management of those situations in which a Director has an interest on his/her own account or that of third parties.

********** When adopting this principle and related application guidelines, the Board of Directors has not only identified IAS 24 (also referred to by Consob in its own regulations) as the point of reference for the purposes of defining the Company's related parties, but has also established a set of internal procedures which, amongst others, include general details on how such transactions shall be approved and executed, based on principles of substantial and procedural fairness and of transparency in respect of the Company's governing bodies, with the related involvement of the Internal Control Committee and/or independent experts. Such guidelines also define the criteria for identifying related-party transactions requiring the prior approval of the Board of Directors. There are also internal procedures for properly managing situations in which a Director (nonetheless identified as a related party under the above criteria) has an interest on his/her own account or that of third parties, which establish, notwithstanding the related legal provisions, that such a situation is promptly disclosed to the Board of Directors (or Executive Committee if appropriate) and the Board of Statutory Auditors and that the Director in question shall not take part in the discussion of this matter and related decision, unless the Board of Directors decides that his participation in the discussion and related decision is more appropriate, also taking account of the actual circumstances.

********** In implementation of the above, the Board of Directors, after consulting the Internal Control Committee and obtaining its positive opinion, approved a new set of procedures in 2006, updating and expanding the existing guidelines in this regard, for significant transactions, transactions with related parties and those in which a director has an interest with regard to the Company, or to or through companies under its control. Regardless of the management powers or powers to represent the company granted to directors vested with particular offices or to the Executive Committee, these internal procedures (in force in 2007 and viewable in the Governance section of the Company's website) require that the following types of related-party transaction shall be decided by the Board of Directors alone:

(I) those that are not ordinary in terms of their purpose, transfer price, method and timing such that they may affect the Company's net worth or the completeness and accuracy of its accounting and other information, with the presumption that this category of transaction includes mergers, spin-offs, disposals or acquisitions of a size that would require the preparation of a prospectus or information circular, under art. 70 and art. 71 of Consob Regulation 11971/19992; or

2 Meaning: 1. Merger and spin-offs in relation to which one of the following ratios is equal to or greater than 25%:

89 (II) a) those that nonetheless fall into the following categories: i) mergers or spin-offs in relation to which at least one of the following ratios, if applicable, is equal to or greater than 10%: - total assets of the company potentially to be absorbed (or merged) or the assets potentially being spun off/total assets of the Company (as reported in its latest consolidated financial statements); - earnings before tax and extraordinary items of the company potentially to be absorbed (or merged) or the assets potentially being spun off/earnings before tax and extraordinary items of the Company (as reported in its latest consolidated financial statements); - total equity of the company potentially being absorbed (or merged) or of the business unit potentially being spun off/total equity of the Company (as reported in its latest consolidated financial statements); ii) disposals or acquisitions, in any form, of equity interests, businesses, business units, fixed and other assets, including real estate, if the total value of each transaction exceeds €50 million; iii) investments in fixed assets if the total value of each transaction exceeds €100 million; iv) property lets (or sub-lets) or rentals (or sub-rentals) of businesses or business units, including those lasting for more than nine years, or if the total value of each transaction exceeds €50 million; v) settlements of disputes, in or out of court, if the value of each transaction exceeds €25 million; vi) grants of loans or guarantees in excess of €50 million per transaction, if in favour of or in the interest of the Company and/or in the interest and/or in the favour of companies (or other parties) directly or indirectly controlled by the Company, or grants of loans or guarantees in excess of €10 million per transaction, if in favour of or in the interest of another related party; vii) acceptance of loans, mortgages or debt securities in general, in any form and so also against the issue of financial instruments, in excess of €50 million per transaction; viii) sale and purchase agreements or supply agreements in any form for movable assets or the performance of work or services, not relating to investments in fixed assets, if the amount of each transaction exceeds €50 million or if the agreement has a term of more than 3 years;

b) those classified as any other type of transaction, with a value in excess of €20 million per transaction, except for those intragroup transactions - falling under a) and b) - which are not atypical, unusual or performed under non-standard terms and conditions; or

(III) even if intragroup, those that are nonetheless atypical, unusual and/or performed under non-standard terms and conditions.

In such cases the executive bodies must provide the Board of Directors with adequate, prior information on the nature of the related-party relationship, the conditions, particularly the economic ones, the method and a - total assets of the company being absorbed (or merged) or the assets being spun off/total assets of RCS (as reported in its latest consolidated financial statements, if prepared); b - earnings before tax and extraordinary items of the company being absorbed (or merged) or the assets being spun off/earnings before tax and extraordinary items of RCS (as reported in its latest consolidated financial statements, if prepared); c - total equity of the company being absorbed (or merged) or of the business unit being spun off/total equity of RCS (as reported in its latest consolidated financial statements, if prepared); 2. Acquisitions and disposals of businesses or business units in relation to which one of the following ratios is equal to or greater than 25%. a – price of the company (or business unit or assets) acquired (or sold)/RCS average capitalization in the last six months; b – earnings before tax and extraordinary items of the company (or business unit) acquired (or sold)/earnings before tax and extraordinary items of RCS (as reported in its latest consolidated financial statements, if prepared); c – total equity of the company (or business unit) acquired (or sold)/total equity of RCS (as reported in its latest consolidated financial statements, if prepared);

90 timing of such transactions, the evaluation process adopted, the interest and the reasons underlying the transaction, including in relation to established strategies, as well as any risks, including future ones, for the Company and its subsidiaries and any more general implications for their business.

Furthermore: - in the case of transactions falling into the categories specified in paragraphs I) and II) points i), ii), vi) and vii) and paragraph III), unless the required opinions have been already issued by one or more independent experts who have no conflicts of interest and possess the recognized professional skills and expertise, these transactions must be presented to the Internal Control Committee for it to express a prior opinion accordingly (possibly with the assistance of such independent experts and/or recommending their use to the Board), which it will then present to the Board of Directors, having given prior notice thereof to the Chairman of Board of Directors and the Chief Executive Officer; - even independently of the review and opinion of the Internal Control Committee, in the case of transactions considered to fall into category (I), as well as any other transaction whose nature, value or other characteristics make this appropriate or necessary, the Board of Directors is assisted by one or more experts with the characteristics described above in evaluating the economic and/or technical and/or financial and/or legal terms and conditions of the transaction and its performance. Lastly, related-party transactions not falling into the above cases, and hence not requiring the prior approval of the Board of Directors, shall be periodically reported to the Board by the executive bodies with reference to the type of related-party relationship, the conditions, particularly the economic ones, the method and timing of such transactions, the evaluation process adopted, the interest and reasons underlying the transaction, including in relation to established strategies, as well as any risks, including future ones, for the Company and its subsidiaries and any more general implications for their business.

X. STATUTORY AUDITORS

PRINCIPLES

1. (10.P.1) The appointment of statutory auditors shall take place on the basis of a transparent process. This process shall ensure, inter alia, the timely disclosure of adequate information on the candidates' personal details and professional qualifications.

2. (10.P.2) The statutory auditors shall act on an autonomous, independent basis, including with regard to the shareholders who elected them.

3. (10.P.3) The Company shall adopt suitable measures to ensure effective discharge of the duties falling to the Board of Statutory Auditors.

APPLICATION GUIDELINES i) (10.C.1.) Without prejudice to the applicable provisions of law and the By-laws, the lists of candidates for the office of statutory auditor, accompanied by detailed information on the personal characteristics and professional qualifications of the candidates, shall be filed at the Company's registered office at least fifteen days before the date fixed for the Shareholders’ Meeting. The candidate lists for the office of statutory auditor, accompanied by the candidates' details, shall be promptly published on the Company's website. ii) (10.C.2) Without prejudice to the related provisions of law and the By-laws, the statutory auditors shall be chosen from persons who may be classified as independent also on the basis of the criteria contained in

91 Article III of this Code with reference to the directors. The Board of Statutory Auditors shall check its compliance with these independence criteria after its appointment and subsequently on an annual basis, with the results of such review presented in the Corporate Governance Report. iii) (10.C.3) The statutory auditors shall accept their appointment if they believe that they can devote the necessary time to the diligent performance of their duties. iv) (10.C.4) A statutory auditor who has an interest, either directly or on behalf of third parties, in a specific company transaction, shall promptly and comprehensively inform the other statutory auditors and the Chairman of the Board of Directors, or his deputy, of the nature, terms, origin and extent of his/her interest. v) (10.C.5) The Board of Statutory Auditors shall monitor the independence of the external auditing firm, verifying both the observance of related legal and regulatory provisions, and the nature and extent of services other than the audit of the accounts provided to the Company and its subsidiaries by the same auditing firm and the entities belonging to its network. vi) (10.C.6.) As part of their activities, the statutory auditors may request that the Internal Audit Department performs tests on specific areas of the Company's operations or business. vii) (10.C.7.) Without prejudice to the attendance of the Chairman of the Board of Statutory Auditors at meetings of the Internal Control Committee, or of other such statutory auditor designated by him, the Board of Statutory Auditors and the Internal Control Committee, at the initiative of their respective chairmen, shall exchange relevant information on a timely basis for the discharge of their respective duties.

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When adopting these application guidelines in 2006, it was stated: - with reference to guideline i), that, while the provisions of law and the By-laws relating to the appointment of the Board of Statutory Auditors still apply, the above recommendations should be considered at the time of calling the related Shareholders’ Meetings and with regard to the additional documentation to be presented before such meetings, with an invitation that such recommendations be observed; - with reference to guideline ii), that the Board of Statutory Auditors has adopted the same evaluation criteria for independence as that required for members of the Board of Directors, considering such criteria suitable for the related purpose in regard to its own members; - with reference to guideline iv), that the required disclosure shall occur if the existence of an interest can be reasonably identified by a statutory auditor and so is an interest in relation to transactions of which he becomes aware by virtue of information received prior to or before a meeting of the Board of Directors or Executive Committee; accordingly, such an interest is usually disclosed either in writing before meetings of the Board of Directors or Executive Committee or during such meetings themselves; - with reference to guideline v), that the network of the appointed auditing firm refers to the definition already provided in relation to application guideline i) contained in the Code's Article III.

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With reference to application guidelines i) and ii), the Board of Directors invited shareholders when reappointing the Board of Statutory Auditors at the meeting of April 27, 2006, to take account of the Code's recommendations concerning the prior filing of candidate names and the independence requirements contained therein, even though the latest edition of the Code had not yet been formally adopted. During 2007, the Board of Directors submitted proposals to the shareholders and later directly adopted resolutions (pursuant to art. 17 of the By-laws) in order to revise the By-laws within the legally required deadline to reflect the new provisions on the appointment of statutory auditors contained in Law 262/2005 as amended by Decree 303/2006, hence complying with Consob’s implementation instructions. As a result of these changes, art. 21 of the By-laws (which can be viewed in the Governance section of the Company's website) establishes the following in relation to the appointment of the Company's Board of Statutory Auditors: - its members (three acting and three alternates) must be selected from persons with the requirements, also relating to the maximum number of appointments, established by laws and regulations, including the requisite experience

92 stipulated by Ministry of Justice Decree 162 of March 30, 2000, specifying that the fields strictly relating to the Company's business are: (i) matters relating to commercial law, tax law, accounting, business administration, general economics, international economics, financial markets, corporate finance and (ii) sectors of industry and trade relating to publishing and communication in general; - the appointment takes place on the basis of lists presented by shareholders who, alone or together with other shareholders, own at least 2.5 % of share capital with voting rights at ordinary Shareholders’ Meetings or such lower percentage that is compulsory under laws or regulations (Consob has currently set this lower percentage at 1.5% of such share capital); - the lists, accompanied by the candidates' curriculum vitae containing personal and professional details as well as the list of other directorships or statutory auditorships held in other companies, must be filed at the Company's registered office at least fifteen days before the date of the Shareholders’ Meeting in first call; such lists must also be accompanied by statements in which the individual candidates accept their candidacy and declare under their own responsibility: 1) that there are no reasons of ineligibility or incompatibility preventing them from holding office, and that they satisfy the requirements established by existing primary and secondary legislation; ii) that they meet the independence qualifications required by art. 148.3 of Decree 58/1998; - the lists and accompanying information must be published in the forms established by prevailing laws and regulations (currently art. 144-octies of the Issuer Regulations); - two acting members and two alternate members shall be taken from the list obtaining the highest number of votes in the Shareholders’ Meeting, while the remaining acting member, who also becomes this Board's Chairman, and the other alternate member are taken from the list obtaining the second highest number of votes and which is not connected, either directly or indirectly, with the shareholders who presented or voted for the list receiving the highest number of votes.

By law the Company must have its financial statements audited by a firm of external auditors listed in the special register kept by Consob pursuant to art. 161 of Decree 58/1998. The Shareholders’ Meeting held on April 15, 2003 appointed the firm of Reconta Ernst & Young S.p.A. to perform this audit, originally for three financial years and then extended for three more (therefore expiring with financial year 2008) under a resolution adopted by the shareholders on April 27, 2006 in accordance with the prevailing law at that time. Although art. 159.4 of Decree 58/1998, as amended by Decree 303/2006, states that audit engagements may last a maximum of nine years and may be not renewed with the same auditors unless at least three years have passed since the end of the previous engagement, and despite the fact that Reconta Ernst & Young S.p.A. has audited the Company's financial statements for the past eleven years, the current engagement may be taken to its natural term under the law's transitional provisions.

The Board of Statutory Auditors carried out the checks envisaged by guideline v) and the activities contained in guidelines iv) and vii) during 2007 or with reference to such; with regard to these activities, it invited the Company's Head of Internal Audit to report on an ongoing basis on the tests performed, requesting clarifications and explanations where appropriate, and exchanging, through its Chairman, useful information for the fulfilment of their respective duties with the Internal Control Committee, particularly during this committee's meetings attended by the Chairman.

The Board of Statutory Auditors also re-checked during 2007 the observance by its members of the same independence criteria adopted in Part III for the directors, concluding in the affirmative. The Board of Statutory Auditors currently in office was appointed on April 27, 2006 for three financial years, meaning until the Shareholders’ Meeting called to approve the financial statements for the year ended December 31, 2008. It was appointed upon presentation of a single list and its members are: Pietro Manzonetto, Chairman, Gianrenzo Cova and Giorgio Silva, as acting statutory auditors, and Cesare Gerla, Agostino Giorgi and Maurizio Bozzato, as alternate statutory auditors. The Board of Statutory Auditors attended, with all or a majority of its members, the nine meetings of the Board of Directors and the five meetings of the Executive Committee held during 2007. Candidate personal and professional details, as presented to the above Shareholders’ Meeting, can be viewed on the Company's website in the section entitled "Governance/Shareholders’ Meetings". Based on the information received from the persons concerned, personal and professional details of the acting auditors are presented below, along with details of the appointments held in other companies at December 31, 2007, with particular reference to listed ones:

93 Pietro Manzonetto, born in Castelfranco Veneto (Treviso) in 1944. He is a graduate in Economics and Business and a registered professional accountant and auditor. He is an associate lecturer in Financial Analysis at Milan's Catholic University, where he is also a lecturer in Economics and Finance of corporate groupings. His appointments at December 31, 2007 include: Chairman of the Board of Statutory Auditors of Allianz S.p.A., CIR S.p.A., Gruppo Banca Leonardo S.p.A., Allianz Bank Financial Advisors S.p.A., Allianz Global Investors Italy Sgr, Otis S.p.A., Ceam Srl, E-mid S.p.A. and Humanitas Mirasole S.p.A. as well as a Member of the Supervisory Board of Banco Popolare Soc. Coop.;

Gianrenzo Cova, born in Milan in 1934. He is a graduate in Economics and Business from Milan's Bocconi University and a registered professional accountant and auditor. His appointments at December 31, 2007 include: Chairman of the Board of Directors of Sika Italia S.p.A. and Sika Engineering Silicones S.r.l., Director of Sofia Holding S.p.A., Chairman of the Board of Statutory Auditors of Magneti Marelli Powertrain S.p.A. and Magneti Marelli Holding S.p.A., Chairman of the Board of Statutory Auditors of Pubblicustomer S.p.A., Acting auditor of Canon Italia S.p.A., Chairman of the Board of Statutory Auditors of Fipas S.r.l., Acting auditor of Pentar S.p.A. and Franchini International S.p.A.;

Giorgio Silva, born in Samarate (Varese) in 1945. He is a graduate in Economics and Business and a registered professional accountant and auditor. After spending several years as a tax manager in Peat Marwick & Mitchell (now KPMG), he joined the legal and tax advisory firm of Biscozzi – Fantozzi, now called Studio Legale Tributario Biscozzi Nobili, of which he is one of the founding partners. His appointments at December 31, 2007 include: Chairman of the Board of Statutory Auditors of Trevisan Cometal S.p.A., AC Partners S.p.A., Actalis S.p.A., Fotospazio S.p.A., Hewlett Packard Italiana S.r.l. Kedrios S.p.A., TSP – Tecnologie e Servizi per il Pubblico S.r.l., TSKJ Italia S.r.l.; Acting auditor of ENI S.p.A., Luxottica S.p.A., Snamprogetti S.p.A., SIA-SSB S.p.A., Bolton Alimentari S.p.A. Director of Bigli 1 S.r.l. (and for completeness, Alternate auditor of Autogrill S.p.A. and Autogrill International S.p.A).

The attached tables contain details of the number of meetings held by the Board of Statutory Auditors and of the attendance record of each of its serving members.

XI. RELATIONS WITH THE SHAREHOLDERS

PRINCIPLES

1. (11.P.1) The Board of Directors shall take initiatives aimed at fostering the broadest possible participation of the shareholders in the Shareholders’ Meetings and at facilitating the exercise of shareholder rights.

2. (11.P.2.) The Board of Directors shall endeavour to develop a continuous dialogue with the shareholders based on an understanding of their reciprocal roles.

APPLICATION GUIDELINES i) (11.C.1.) The Board of Directors shall endeavour to ensure that information concerning the Company that is relevant for its shareholders is provided on a timely basis and is easy to access, so as to allow shareholders to exercise their rights in an informed manner. To such purpose, the Company shall establish a specific section on its website that may be easily identified and accessed, in which, in compliance with legal rules and taking account of internal procedures on the management and disclosure of corporate information adopted under Article IV of the Code, the aforementioned information is made available, with particular reference to the procedures required for the participation and, in the case of specific established procedures, for the exercise of voting rights at every Shareholders’ Meeting, as well as the documentation relating to items on the agenda of such meetings, including the lists of candidates for the positions of director or statutory auditor with details of the relevant personal characteristics and professional qualifications filed at the Company's registered office.

94 ii) (11.C.2.)The Board of Directors shall ensure that one or more persons is identified as responsible for handling the relationships with both institutional and other shareholders and shall evaluate from time to time whether it would be advisable to establish one or more company offices for such function, to be discharged nonetheless in compliance with applicable laws and related procedures for managing corporate information adopted in accordance with Article IV of the Code. iii) (11.C.3.) The Board of Directors shall use its best efforts, bearing in mind the need to plan and complete the related preparatory activities, to reduce the restrictions and requirements, which make it difficult and expensive for shareholders to participate in meetings and exercise their voting rights. iv) (11.C.4.) As a rule and except for forcible impediment, all the Directors shall attend Shareholders’ Meetings. Shareholders’ Meetings shall also be an opportunity for providing shareholders with information on the Company, in compliance with the legal provisions on price-sensitive information and taking account of the related procedures for managing corporate information adopted in accordance with Article IV of the Code. More specifically, the Board of Directors, usually through its Chairman and/or the Chief Executive Officer, shall report to the Shareholders’ Meeting on the activity performed and planned and shall endeavour to ensure that the shareholders receive adequate information on the facts needed for them to take decisions in an informed manner. v) (11.C.5.) Bearing in mind the conduct of previous Shareholders’ Meetings, the Board of Directors shall periodically assess whether to present for shareholder approval a set of rules governing the orderly and effective conduct of their meetings, while guaranteeing the right of each shareholder to speak on the matters on the agenda. If such a set of rules is drawn up, their contents may include instructions as to how long each speaker may have the floor, the order in which they may speak, the voting procedures, the reports by the directors and statutory auditors, and the powers of the chairman, including to settle or prevent the occurrence of conflicts during the meeting. Even in the absence of a set of rules for Shareholders’ Meetings, without prejudice to his powers under law and the company's by-laws, the meeting's chairman nonetheless ensures that meetings are conducted in strict observance of shareholder rights, and also in a spirit of mutual respect between shareholders involving a balanced moderation of their rights with an orderly conduct of their decision-making function. Furthermore, in such a case the chairman has the power to decide procedures at each meeting, that in view of its nature and the number and breadth of the matters to be discussed, he intends to apply in order to ensure that the meeting is conducted in an orderly, calm and productive fashion. vi) (11.C.6.) In the event of a significant change in the Company's market capitalization and/or composition of its shareholders, the Board of Directors shall assess whether to submit proposals to the Shareholders’ Meeting to amend the By-laws in relation to the minimum percentage required for exercising the rights and prerogatives serving to protect minority interests.

**********

When adopting these application guidelines: - with reference to guidelines i), ii) and iv), a number of clarifications have been made regarding compliance, when carrying out the related activities, with the procedures adopted in accordance with the Code's Article IV as well as with legal requirements; in relation to guideline iv), it has been clarified that the reporting to Shareholders’ Meeting is usually done by the Chairman or the Chief Executive Officer and that all the Directors are required to attend, except for forcible impediment.

It is also reported that: - with reference to guideline iii), the Board of Directors shall take those actions designed to facilitate shareholders' participation in meetings and their exercise of voting rights, to the extent possible and bearing in mind the need to plan and complete the related preparatory activities, on the basis of a balanced tempering with the organizational needs of the related internal activities, whose adequate discharge will benefit the Company and hence the shareholders themselves; - with reference to guideline v), this is not entirely in line with what the Code recommends, since the Board does not intend proposing that shareholders adopt a set of rules governing the conduct of their meetings (for which a number of suggested contents are listed in the comments to the Code's related article). Instead it

95 intends to carry out a periodic review of this matter, also bearing in mind the conduct of past Shareholders’ Meetings. This is because the need has never arisen in the past to adopt such rules, with the Chairman, also thanks to his prerogatives under law and the By-laws, having always seen that such meetings were conducted not only in a spirit of general participation and strict respect for shareholder rights, but also in a spirit of mutual respect between shareholders involving a balanced moderation of their rights with their decision- making function. On this basis, it has been stated that, even in the absence of a set of rules governing the conduct of Shareholders’ Meetings and given the powers established by law and the By-laws, the meeting's Chairman shall nonetheless endeavour to ensure respect for the above principles, having the power to inform each meeting of the rules he intends to adopt for its conduct in order to ensure that it runs in an orderly, calm and productive fashion.

**********

When implementing these application guidelines:

- with reference to guideline i), the Board of Directors charged the Chief Executive Officer back in 2006 with seeing that the Company's website meets the specified requirements, taking any steps that might be necessary. In preparation for the annual general meeting in 2007, a specific section was created on the website for publishing all the related documents; subsequently, the structure of the entire website was completely redesigned; - with reference to guideline ii), the Board acknowledged back in 2006 that the Company's organizational structure already contains both an Investor Relations office, responsible for dealing with institutional investors, and a Corporate Affairs office, whose duties include looking after relationships with shareholders in general; both these offices continued to function in 2007; - with reference to guideline iii), the Board of Directors considers that there are no circumstances necessitating specific initiatives, bearing in mind the related internal organizational needs already discussed. Like the annual general meeting held in 2007, the Board of Directors has nonetheless decided to hold the Shareholders’ Meeting called to approve the financial statements for 2007 in an easily reached location close to its head office in the centre of Milan. Like the annual general meeting held in 2007, the notice of this year's meeting not only contains the contact details of the Company's Corporate Affairs office (also contained in the Company's website, like those of the Investor Relations office) for those wishing to obtain additional information on how to take part, but also states that the pre-meeting documentation has been made available at its registered office and the market management company within the required deadline, as well with on the Company's website; - with reference to guideline iv), members of the Board of Directors have acknowledged the adopted guideline, assuring their presence at Shareholders’ Meetings, except for forcible indisposition; this has been specifically restated in relation to the annual general meeting convened to approve the financial statements for 2007; - with reference to guideline v), the Board of Directors reviewed the specific recommendations once again at the end of 2007 and decided that it was not necessary to propose that shareholders adopt a set of rules governing their meetings; - with reference to guideline vi), the Board of Directors considers that there have been no changes in the Company's capitalization or composition of its shareholders such as would require amending the By-laws in the manner recommended by the Code. The Board of Directors submitted a proposal to the annual general meeting convened to approve the financial statements for 2006 to amend the By-laws to introduce a minimum 2.5% level of ordinary share ownership, without prejudice to a lower level established by law, for the purposes of presenting lists of candidates for appointments to the Board of Directors and Board of Statutory Auditors. Subsequent to this meeting, the Board also voted, pursuant to art. 17 of the By-laws, to make additional changes to the By-laws to reflect new CONSOB regulations which implemented relevant legal requirements (see Parts VI and X).

Summary tables relating to Section 2 – Corporate Governance Report STRUCTURE OF THE BOARD OF DIRECTORS AND COMMITTEES (Ø)

Board Internal Group Appointmen Board of Directors Executive Control Compensation ts Committee Committee Committee Committee (◊) Number of Non- Office Members Executive Independent **** other *** **** *** **** *** **** executive appointm ents ** Piergaetano Chairman X 100 0 X 100 X 100 Marchetti Gabriele Galateri Deputy Chairman di Genola X 78 8

Chief Executive Antonio Perricone 1 X 100 X 100 Officer Raffaele Agrusti Director X 89 7 X 80

4 Director Roberto Bertazzoni X 89 Claudio De Conto 6 Director X 89

Diego Della Valle 10 Director X 33

John P. Elkann 7 Director X 11 X 60

Giorgio Fantoni 0 Director X X 67 X 60

Franzo Grande 3 Director Stevens X 86 (1) Berardino Libonati 2 Director X 33

Jonella Ligresti Director X 44 8

Paolo Merloni Director X 89 7

Andrea Moltrasio Director X X 100 2 X 100 X 80

Director Renato Pagliaro X 78 7 X 80 X 100 Corrado Passera Director X 33 1

Alessandro Director X X 78 3 X 100 X 100 Pedersoli Carlo Pesenti Director X 55 5 X 80

Virginio Rognoni Director X X 100 0

Number of meetings held in year Board of Directors: 9 Internal Group Board Executive Control Compensation Appoint- Committee: 5 Committee: Committee: 5 ments 5 Committee: 0

(◊) The Board of Directors does not currently see the need for this committee in view of the Company's current ownership structure and the standing of the candidates usually proposed for the office of independent director.

NOTES (Ø) Composition during 2007 and at March 14, 2008, although Franzo Grande Stevens was suspended from the office of director for certain parts of 2007 (detailed in Part I of Section 2 - Corporate Governance Report) following an administrative penalty ordered by CONSOB under art. 187-quater of Decree 58/1998. * The asterisk indicates whether the director was nominated through lists presented by the minority. ** This column indicates, based on the information provided by the persons concerned and any other available information, the number of other appointments as a director or acting statutory auditor (or member of another supervisory body) held by this person in other listed companies, in Italy or abroad, and in financial, banking, insurance or other large companies, excluding those appointments held in the Company's direct or indirect subsidiaries or associates (details of these appointments are provided in Part I of Section 2 (Corporate Governance Report). *** These columns indicate with an "X" the director's membership of the each sub-committee of the Board of Directors. **** These columns indicate the director's attendance record in percentage terms at meetings of the Board and of each of the Committees held over the period that they were in office in 2007. (1) The percentage of Board meetings attended is calculated on the basis of the period in office and so (excludes the periods of suspension mentioned above.)

BOARD OF STATUTORY AUDITORS

Attendance at Number of other Office Members board meetings % appointments** Chairman Pietro Manzonetto 91 2 Acting auditor Giorgio Silva 100 3 Acting auditor Gianrenzo Cova 100 0 Alternate auditor Maurizio Bozzato - Alternate auditor Agostino Giorgi - Alternate auditor Cesare Gerla - Number of meetings held in year: 11 Information on the quorum required for minorities to present lists for the election of the Board of Statutory Auditors can be found in Part X of Section 2 (Corporate Governance Report).

NOTES **This column indicates the number of other appointments as a director or acting statutory auditor (or membership of another supervisory body) held by this person in other listed companies in Italy at December 31, 2007. Part X of Section 2 (Corporate Governance Report) provides full details of these appointments.

OTHER REQUIREMENTS OF THE CORPORATE GOVERNANCE CODE

Summary of reasons for any departure from the Code's YES NO recommendations System of delegating powers and monitoring related-party transactions Has the Board of Directors delegated powers, establishing their: a) limits X b) manner of exercise X c) and frequency of reporting? X Has the Board of Directors reserved for itself the examination and approval of transactions with a significant impact on the company's income statement, balance sheet and financial situation (including related-party transactions)? X Has the Board of Directors established guidelines and principles for identifying "significant" transactions? X Are the guidelines and principles referred to above described in the report? X Has the Board of Directors established specific procedures for examining and approving related-party transactions? X Are the procedures for approving related-party transactions described in the report? X

Conduct of the most recent appointment of directors and statutory auditors Were the names of candidates for the office of director filed at least ten days in advance? X Were the nominations for the office of director accompanied by comprehensive information? X Were the nominations for the office of director accompanied by an indication of whether they met the requirements for qualifying as independent directors? X Were the names of candidates for the office of statutory auditor filed at least ten days in advance? X Were the nominations for the office of statutory auditor accompanied by comprehensive information? X Shareholders’ Meetings Has the company approved a set of rules for shareholders' X Based on the conduct of previous Shareholders’ Meetings, meetings? the Board of Directors does not consider it necessary to recommend the adoption of an associated set of regulations. Without prejudice to his powers under law and the Company's By-laws, the meeting's chairman is responsible for ensuring that such meetings are conducted not only in a spirit of general participation and strict respect for shareholder rights, but also in a spirit of mutual respect between shareholders involving a balanced moderation of their rights with their decision-making function.

Are the rules annexed to the report (or is it specified where they may be obtained/downloaded)? X

Internal control Has the company appointed officers responsible for internal X control? Are these persons hierarchically not responsible to persons in charge of operational areas of the business? X Department in charge of internal control (pursuant to art. 9.3 of The Officer responsible for internal control is the Head of Internal Audit the Code) (Carlo Palazzesi) who uses this department to carry out his duties and works towards their discharge with the assistance of an internal administrator of the system itself.

Investor relations Has the company appointed someone to be responsible for X investor relations? Department and references of person responsible for investor Investor Relations Manager: Federica De Medici relations (address/tel/fax/e-mail) Via San Marco , 21 – 20121 Milan Tel. 02/2584.5508 – Fax 02/2584.5490 e-mail: [email protected]

CONSOLIDATED FINANCIAL STATEMENTS

100

Consolidated income statement (*)

4th quarter Year ended Dec-31 (€/millions) Notes 2007 2006 2007 2006 I Revenues from sales and services 13 763.6 670.5 2,737.9 2,380.7 II Increase in assets built internally 15 1.9 1.3 4.5 3.5 Changes in inventories of work in progress, finished and semi-finished II products 38 4.6 0.6 12.8 11.3 II Raw materials and services consumed 16 (510.8) (442.6) (1,896.0) (1,682.0) III Payroll costs 17 (132.5) (106.4) (504.0) (418.6) II Other operating revenues and income 18 26.1 26.8 65.1 62.3 II Other operating expenses 19 (8.5) (20.1) (44.0) (50.7) V Increases in provisions 44 (2.1) (5.6) (5.9) (7.6) IV Impairment of trade and other receivables 20 (0.2) (1.0) (10.2) (12.2) VI Amortization of intangible assets 21 (15.4) (8.8) (48.8) (20.2) VII Depreciation of property, plant and equipment 21 (14.4) (9.7) (47.1) (33.6) VIII Impairment of fixed assets 21 (4.3) (5.3) (4.9) (5.3) EBIT 108.0 99.6 259.4 227.6 IX Financial income 22 2.9 5.5 16.6 23.1 IX Financial charges 23 (16.1) (9.2) (52.2) (21.1) X Other income (charges) from financial assets/liabilities 24 (5.3) 28.7 55.1 70.5 XI Share of income (losses) from investments valued using equity method 25 7.6 5.3 9.3 3.2 Earnings before tax 97.2 130.0 288.2 303.3 XII Income taxes 26 (41.4) (25.6) (61.5) (58.6) Net income (loss) from continuing operations 55.8 104.4 226.7 244.8 XIII Net income (loss) from discontinuing and discontinued operations 27 0.4 (3.2) 7.0 (10.1) Net income (loss) before minority interests 56.2 101.2 233.7 234.6 XIV Net (income) loss pertaining to minority interests 28 (1.1) (6.4) (14.0) (15.1) Net income (loss) pertaining to the group 55.1 94.8 219.7 219.5

Basic earnings per share: continuing operations 29 0.29 0.31 Diluted earnings per share: continuing operations 29 0.29 0.31 Basic earnings per share: discontinuing and discontinued operations 29 0.01 (0.01) Diluted earnings per share: discontinuing and discontinued operations 29 0.01 (0.01)

(*) In accordance with Consob Resolution 15519 of July 27, 2006, the effects of transactions with related parties and of non-recurring income and charges on the consolidated income statement are reported in the specific income statement format presented on a subsequent page and are described in detail in notes 14 and 30 respectively.

The notes form an integral part of this report.

101 Consolidated balance sheet (*)

(€/millions) Notes Dec-31-2007 Dec-31-2006

ASSETS XVI Property, plant and equipment 31 478.1 370.0 XV Intangible assets 32 1,679.8 482.8 XVII Investments in associated companies and joint ventures 33 147.5 72.3 XVII Available-for-sale financial assets 34 30.7 221.1 XXVII Financial assets recognized for derivatives 35 5.5 1.3 XVII Non-current financial receivables 36 12.5 12.8 XVII Other non-current assets 37 8.6 13.1 XVII Deferred tax assets 26 105.3 77.9 Total non-current assets 2,468.0 1,251.3 XVIII Inventories 38 175.4 162.1 XIX Trade receivables 39 845.6 680.8 XXI Other current receivables and assets 40 222.2 182.1 XXI Current tax assets 26 68.1 75.1 XXVII Financial assets recognized for derivatives 35 0.3 0.3 XXVII Current financial receivables 41 33.5 66.1 XXVII Cash and cash equivalents 41 70.9 259.8 Total current assets 1,416.0 1,426.3 Non-current assets held for sale 0.0 0.0 TOTAL ASSETS 3,884.0 2,677.6 EQUITY AND LIABILITIES XXIV Share capital 42 762.0 762.0 XXIV Other equity instruments 42 4.5 4.2 XXIV Treasury shares 42 (14.5) (61.7) XXIV Reserves 42 72.8 145.0 XXIV Earnings (losses) carried forward 247.6 97.9 XXIV Net income (loss) for the year 219.7 219.5 Total group consolidated equity 1,292.1 1,166.9 XXIV Minority interests in capital and reserves 42 96.1 73.2 Total 1,388.2 1,240.1 XXV Non-current financial payables 41 914.3 260.5 XXV Financial liabilities recognized for derivatives 35 0.0 0.0 XXIII Provisions for employee benefits 43 98.0 104.1 XXII Provisions for risks and charges 44 35.9 40.4 XXII Deferred tax liabilities 26 157.7 73.6 XXI Other non-current liabilities 45 49.8 22.4 Total non-current liabilities 1,255.7 501.0 XXVI Bank loans and overdrafts 41 36.6 8.3 XXVI Current financial payables 41 125.0 52.8 XXVI Financial liabilities recognized for derivatives 35 0.5 0.2 XXI Current tax liabilities 26 21.5 13.5 XX Trade payables 46 779.9 620.8 XXII Current portion of provisions for risks and charges 44 27.8 30.6 XXI Other current payables and liabilities 47 248.8 210.3 Total current liabilities 1,240.1 936.5 Liabilities associated with assets held for sale 0.0 0.0 TOTAL EQUITY AND LIABILITIES 3,884.0 2,677.6

(*) In accordance with Consob Resolution 15519 of July 27, 2006, the effects of transactions with related parties on the consolidated balance sheet are reported in the specific balance sheet format presented on a subsequent page and are described in detail in note 14.

102 Consolidated cash flow statement

(€/millions) Notes Dec-31-2007 Dec-31-2006

A) Cash flows from operating activities Net income from continuing operations 226.7 234.6 Amortization, depreciation and impairment 21 100.8 65.4 Capital (gains) losses and other non-monetary items 49 (65.4) (70.6) Impairment (revaluation) of equity investments 50 7.1 1.9 Grant of stock options 3.7 3.6 - of which to related parties 14 0.9 0.9 Net financial income (charges) including dividend income 23.7 (11.8) - of which with related parties 14 1.8 (1.1) Increase (decrease) in provisions 51 (52.7) (27.0) Increase (decrease) in deferred tax liabilities/assets recognized in income statement 26 (3.9) 3.7 Changes in working capital 52 4.2 (37.3) - of which with related parties (0.3) (25.1) Total 244.2 162.4 B) Cash flows from investing activities Purchase of equity investments (net of dividends received) 53 (1,238.7) (64.0) Purchase of property, plant and equipment and intangible assets 54 (107.4) (76.7) Purchase/sale of other non-current financial assets 4.6 13.5 Proceeds from sale of equity investments 55 175.4 129.9 Proceeds from sale of property, plant and equipment and intangible assets 56 7.4 11.2 Other changes 2.8 0.8 Total (1,155.9) 14.7 Free cash flow (A+B) (911.7) 177.1 C) Cash flows from financing activities Net change in financial payables and other financial assets 57 746.8 40.9 - of which with related parties 14 0.3 3.3 Net interest received/paid 58 (39.0) 3.9 - of which with related parties (1.8) (1.1) Dividends paid 42 (22.9) (82.3) Change in equity reserves 59 9.6 (8.0) Total 694.5 (45.4) Net increase (decrease) in cash and cash equivalents (A+B+C) (217.2) 131.7 Opening cash and cash equivalents 251.6 119.9 Closing cash and cash equivalents 34.3 251.6 Increase (decrease) for the period (217.2) 131.7 (331)

RECONCILIATION OF CASH AND CASH EQUIVALENTS (€/millions) Dec-31-2007 Dec-31-2006

Opening cash and cash equivalents consist of: 251.6 119.9 Cash and cash equivalents 259.8 154.4 Current bank loans and overdrafts (8.2) (34.5) Closing cash and cash equivalents consist of: 34.3 251.6 Cash and cash equivalents 71.0 259.8 Current bank loans and overdrafts (36.6) (8.2) Increase (decrease) for the period (217.2) 131.7

103 Statement of changes in consolidated capital and reserves

Treasury Earnings Minority Group Share Other equity Share Legal and shares and Valuation Cash flow (losses) Net income interests in Total capital (€/millions) consolidated capital instruments premium reserve other reserves equity reserve hedge reserve carried (loss) for year capital and and reserves equity transactions forward reserves Note 42 Notes 42-48 Note 42 Note 42 Note 42 Note 42 Note 35 Note 42 Note 42 Note 42 Note 42 Note 42

Balance at Dec-31-2005 762.0 0.7 71.2 152.4 (183.7) 83.0 (0.4) (42.4) 219.3 1,062.1 64.8 1,126.9

Allocation of net income for year ended Dec-31-2005 - to carried forward earnings 219.3 (219.3) - to dividends (82.3) (82.3) (5.5) (87.8) Grant of stock options 3.5 0.6 4.1 4.1 Change in translation reserve (1.2) (1.2) 0.1 (1.1) Fair value measurement of financial assets 26.7 0.4 27.1 27.1

Release of reserve after sale of securities carried at fair value (42.5) (42.5) (42.5) Equity transaction (17.5) (17.5) (17.5) Income/ (costs) booked directly to equity (5.1) 2.7 (2.4) (2.4) Change in minority interests in capital and reserves (1.3) (1.3) Net income for year 219.5 219.5 15.1 234.6 Balance at Dec-31-2006 762.0 4.2 71.2 152.4 (201.2) 60.9 97.9 219.5 1,166.9 73.2 1,240.1

Balance at Dec-31-2006 762.0 4.2 71.2 152.4 (201.2) 60.9 97.9 219.5 1,166.9 73.2 1,240.1

Allocation of net income for year ended Dec-31-2006 - to carried forward earnings 219.5 (219.5) - to dividends (22.9) (22.9) (0.4) (23.3) Bonus grant of treasury shares 47.2 (47.2) Grant of stock options 8.2 0.5 8.7 0.4 9.1 Cancellation of 1st block stock option plan (7.9) (7.9) (7.9) Change in translation reserve (2.1) (2.1) (1.5) (3.6) Fair value measurement of financial assets 2.0 2.2 2.2

Release of reserve after sale of securities carried at fair value (58.9) (58.9) (58.9) Equity transaction (13.2) (13.2) (0.1) (13.3) Income/ (costs) booked directly to equity (0.2) (0.4) (1.0) (1.4) Change in minority interests in capital and reserves 11.5 11.6 Net income for year 219.7 219.7 14.0 233.6 Balance at Dec-31-2007 762.0 4.5 71.2 152.4 (167.2) (0.1) 2.0 247.6 219.7 1,292.1 96.1 1,388.2

104

Consolidated income statement pursuant to Consob Resolution 15519 of July 27, 2006

Year ended Dec-31 (€/millions) Notes 2007 2006 I Revenues from sales and services 13 2,737.9 2,380.7 - of which with related parties 14 522.7 579.8 II Increase in assets built internally 15 4.5 3.5 II Changes in inventories of work in progress, finished and semi-finished products 38 12.8 11.3 II Raw materials and services consumed 16 (1,896.0) (1,682.0) - of which with related parties 14 (120.1) (125.6) - of which non-recurring 30 (1.0) III Payroll costs 17 (504.0) (418.6) - of which with related parties 14 (8.9) (17.7) - of which non-recurring 30 (8.3) (8.7) II Other operating revenues and income 18 65.1 62.3 - of which with related parties 14 4.1 4.9 - of which non-recurring 30 9.9 11.1 II Other operating expenses 19 (44.0) (50.7) - of which non-recurring 30 (1.3) (2.0) V Increases in provisions 44 (5.9) (7.6) IV Impairment of trade and other receivables 20 (10.2) (12.2) VI Amortization of intangible assets 21 (48.8) (20.2) VII Depreciation of property, plant and equipment 21 (47.1) (33.6) VIII Impairment of fixed assets 21 (4.9) (5.3) - of which non-recurring 30 (1.9) EBIT 259.4 227.6 IX Financial income 22 16.6 23.1 - of which non-recurring 30 5.0 IX Financial charges 23 (52.2) (21.1) - of which with related parties 14 (1.8) (1.1) X Other income (charges) from financial assets/liabilities 24 55.1 70.5 - of which non-recurring 30 52.1 61.8 XI Share of income (losses) from investments valued using equity method 25 9.3 3.2 Earnings before tax 288.2 303.3 XII Income taxes 26 (61.5) (58.6) Net income (loss) from continuing operations 226.7 244.7 XIII Net income (loss) from discontinuing and discontinued operations 27 7.0 (10.1) Net income (loss) before minority interests 233.7 234.6 XIV Net (income) loss pertaining to minority interests 28 (14.0) (15.1) Net income (loss) pertaining to the group 219.7 219.5

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Consolidated balance sheet pursuant to Consob Resolution 15519 of July 27, 2006

(€/millions) Notes Dec-31-2007 Dec-31-2006

ASSETS XVI Property, plant and equipment 31 478.1 370.0 XV Intangible assets 32 1,679.8 482.8 XVII Investments in associated companies and joint ventures 33 147.5 72.3 XVII Available-for-sale financial assets 34 30.7 221.1 XXVII Financial assets recognized for derivatives 35 5.5 1.3 XVII Non-current financial receivables 36 12.5 12.8 XVII Other non-current assets 37 8.6 13.1 XVII Deferred tax assets 26 105.3 77.9 Total non-current assets 2,468.0 1,251.3 XVIII Inventories 38 175.4 162.1 XIX Trade receivables 39 845.6 680.8 - of which with related parties 14 46.7 50.5 XXI Other current receivables and assets 40 222.2 182.1 XXI Current tax assets 26 68.1 75.1 XXVII Financial assets recognized for derivatives 35 0.3 0.3 XXVII Current financial receivables 41 33.5 66.1 - of which with related parties 14 1.5 2.3 XXVII Cash and cash equivalents 41 70.9 259.8 Total current assets 1,416.0 1,426.3 Non-current assets held for sale 0.0 0.0 TOTAL ASSETS 3,884.0 2,677.6 EQUITY AND LIABILITIES XXIV Share capital 42 762.0 762.0 XXIV Other equity instruments 42 4.5 4.2 - of which with related parties 14 1.1 1.1 XXIV Treasury shares 42 (14.5) (61.7) XXIV Reserves 42 72.8 145.0 XXIV Earnings (losses) carried forward 247.6 97.9 XXIV Net income (loss) for the year 219.7 219.5 Total group consolidated equity 1,292.1 1,166.9 XXIV Minority interests in capital and reserves 42 96.1 73.2 Total 1,388.2 1,240.1 XXV Non-current financial payables 41 914.3 260.5 XXV Financial liabilities recognized for derivatives 35 0.0 XXIII Provisions for employee benefits 43 98.0 104.1 XXII Provisions for risks and charges 44 35.9 40.4 XXII Deferred tax liabilities 26 157.7 73.6 XXI Other non-current liabilities 45 49.8 22.4 Total non-current liabilities 1,255.7 501.0 XXVI Bank loans and overdrafts 41 36.6 8.3 XXVI Current financial payables 41 125.0 52.8 - of which with related parties 14 28.9 29.4 XXVI Financial liabilities recognized for derivatives 35 0.5 0.2 XXI Current tax liabilities 26 21.5 13.5 XX Trade payables 46 779.9 620.8 - of which with related parties 14 28.3 32.4 XXII Current portion of provisions for risks and charges 44 27.8 30.6 XXI Other current payables and liabilities 47 248.8 210.3 Total current liabilities 1,240.1 936.5 Liabilities associated with assets held for sale 0.0 0.0 TOTAL EQUITY AND LIABILITIES 3,884.0 2,677.6

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EXPLANATORY NOTES

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FORM, CONTENT AND OTHER INFORMATION ON THE FINANCIAL STATEMENTS

1. Corporate information

RCS MediaGroup S.p.A. is incorporated and domiciled in Milan, with its registered office at no. 21, Via San Marco. The consolidated financial statements of RCS MediaGroup for the year ended December 31, 2007 were approved by the Board of Directors on March 14, 2008 and also authorized for publication. The Group's principal activities are described in note 13 "Segment information".

2. Form and content

The consolidated financial statements of the RCS Group have been drawn up in accordance with International Financial Reporting Standards (IFRSs). They comprise the financial statements of RCS MediaGroup S.p.A. and its subsidiaries. As from 2006 all consolidated companies have adopted international financial reporting and accounting standards, except for a few smaller Italian companies and the foreign companies. All the financial statements of the subsidiaries and the parent company, or the balance sheets and income statements restated for IAS/IFRS purposes, have been approved by the respective Boards of Directors. The consolidated financial statements are audited by Reconta Ernst & Young.

The presentation currency of these consolidated financial statements is the euro, which is used as the functional currency by most of the Group's companies. Unless otherwise specified, all amounts are stated in millions of euro.

3. Reporting formats

The RCS Group has adopted: • the balance sheet format in which assets and liabilities are separately classified as current and non- current; • the income statement format in which costs are classified by nature; • the cash flow statement using the indirect method, whereby net income for the year is adjusted for the effects of non-monetary items, of any deferral or provision of past or future operating receipts or payments and revenues or costs associated with cash flows from investing or financing activities. With reference to Consob Resolution 15519 of July 27, 2006, significant transactions with related parties and non-recurring items have been highlighted in a separate balance sheet and income statement.

4. Changes in the scope of consolidation

The changes in the scope of consolidation since December 31, 2006 refer to investments mostly in the Newspapers Spain segment, involving the acquisition of Recoletos Grupo de Comunicacion S.A., in the television segment involving Digicast S.p.A. and its subsidiaries, and in the multimedia segment of DADA, a company already consolidated line-by-line and in which another 1.46% was acquired, taking the overall interest to 46.87%. The main company leaving the scope of consolidation in the year was RCS Broadcast, which was transferred to Gruppo Finelco under a transaction which, together with additional share purchases at the same time, has given RCS a 34.6% interest in Gruppo Finelco S.p.A.. Most of the company liquidations and disposals carried out in the year were designed to streamline the Group's corporate structure, as part of the wider goal of reducing overhead costs.

In detail: • The following companies have been consolidated on a line-by-line basis:

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- RCS DB Games S.p.A.; - DADA Iberia Sl.; - Unidad Liberal Radio; - AGR S.r.l. - Digicast S.p.A.; (1 2) - Recoletos Grupo de Comunicacion S.A.;(1 2) - Namesco L.t.d.; - Media DADA Science and Development Co.Ltd; - Automobili.com S.r.l.; - Editoriale Fiorentina S.r.l.; - Unidad Editorial Prensa Diaria S.L.; - Unidad Editorial Sociedad de Rivista S.L.; - Unidad Editorial Prensa Economica S.L.; - Unidad Editorial Prensa Deportava S.L;

AGR S.r.l. contains the business of producing press services previously belonging to RCS Broadcast now transferred.

• The following companies have been consolidated using the equity method: - Unidad Liberal Radio Sl. - A.S.E. S.r.l. Agenzia Servizi Editoriali; - E-Box S.r.l.; - DADA Entertaiment LLC; - Gruppo Finelco S.p.A.;

• The following companies previously valued using the equity method have now been consolidated on a line-by-line basis: - Red de Distribuziones Editoriales S.l.; - Veo Television S.A.; - Media DADA Science and Development CO. Ltd.

• The following companies previously consolidated line-by-line or using the equity method have left the scope of consolidation or have been reported in accordance with IFRS 5, in the case of assets held for sale: - Best Fly S.r.l. (formerly travel on line) wound up - Casterpar SA wound up - GFT Great BrItain Ltd wound up - GFT USA wound up - Omni S.l.u. wound up - Sercom S.p.A. sold - Softec S.p.A. sold - Webnet S.r.l. sold - Business Engineering S.r.l. sold - Sailog S.r.l. sold - Mediatec S.r.l. sold - Media Alpi S.r.l. sold - RCS Broadcast S.p.A. transferred - Garamond S.r.l. sold - CNR S.r.l. sold

1 The Recoletos Grupo de Comunicacion S.A. group and the Digicast group have been consolidated for income statement purposes from the month of April. 2 Details of the equity investments owned by Recoletos Grupo de Comunicacion S.A. and Digicast S.p.A. can be found in the "List of RCS Group equity investments", appended to the Annual Report and Financial Statements 2007.

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The following companies were merged during the period: - La Hune into Sas La Hune (formerly Sas St. Germain). - Financial Retos Partner S.L. into Unidad Editorial S.A. - Recoletos grupo de comunication S.A. into Unidad Editorial S.A. - Ediciones Reunitel S.L. into Unidad Editorial S.A. - Global Donageld S.L. into Unidad Editorial S.A. - Tu salud servicios interactivos S.L. into Unidad Editorial S.A. - Novomedia S.A. into Unidad Editorial S.A. - Boj Media S.A. into Unidad Editorial S.A. - Bimbi in Fiera S.r.l. into Sfera Editore S.p.A. - Audie 2 Sas into Editions Audie Sas - Tipic Inc. into Dada Usa Inc..

5. Consolidation methods

Subsidiary companies are consolidated on a line-by-line basis as from their acquisition date, meaning the date on which the Group obtains control, and cease to be consolidated on the date on which control is transferred outside of the Group. Control is defined as the parent company's power to govern the financial and operating policies of a subsidiary so as to obtain benefits from its activities. The income and expenses of the subsidiaries acquired or sold during the period are included in the consolidated income statement from the effective acquisition date, or until the effective disposal date.

Companies under joint control with other shareholders and associated companies or those nonetheless over which the Group has a significant influence have been consolidated using the equity method.

The accounting policies adopted are uniform for all the companies included in the consolidation and the related financial statements are all prepared with reference to the date of December 31, 2007.

The principal procedures used for line-by-line consolidation are listed below:

• The acquisition of subsidiaries is accounted for using the purchase method, whereby the acquiree's identifiable assets, liabilities and contingent liabilities, which meet the recognition criteria specified by IFRS 3, are recognized at their fair value on the acquisition date. Deferred taxes are therefore recognized on adjustments to carrying amounts to bring them into line with fair value.

• The very complexity of applying the purchase method means that the standard provides for an initial, provisional calculation of the fair value of the assets, liabilities and contingent liabilities acquired, such as to allow initial recognition of the transaction in the consolidated financial statements at the end of the year in which the business combination took place. Such initial accounting must be completed and adjusted within twelve months of the acquisition date and as from the acquisition date itself.

• Goodwill is recognized as the difference between the acquisition cost, including directly attributable expenses, and the Group's interest in the fair value of the assets and liabilities acquired. It is recorded in the consolidated financial statements on the basis of an initial, provisional measurement by the end of the year in which the combination was finalized. Having finalized the fair value of assets, liabilities and contingent liabilities, any excess of the Group's share of their net fair value over the cost of the business combination shall be immediately credited to the income statement. Goodwill is regularly reviewed to check its recoverability through the future cash flows generated by the underlying investment. Minority interests in the acquiree are initially measured in proportion to their share of the fair value of the assets, liabilities and contingent liabilities recognized.

• The purchase method has not been used for: − the purchase of minority interests in investments already under the Group's control. In this case any goodwill is deducted directly from equity in accordance with the entity control method;

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− acquisitions carried out before the IAS/IFRS transition date, for which the value of goodwill has been retained at the amounts resulting from the application of Italian GAAP and tested periodically for impairment.

• Profits and losses arising from transactions between subsidiaries that have not yet been realized outside the Group are eliminated, as are receivables, payables, costs and revenues between consolidated companies when the amounts concerned are material.

• Dividends paid by consolidated companies are eliminated from the income statement and added to prior year retained earnings if, and to the extent which, they have been drawn from the latter.

• Minority interests in capital and reserves and in net income (loss) for the period are shown separately in the balance sheet and the income statement.

• Companies held for sale and which are highly likely to be sold in the next twelve months have been classified in accordance with the provisions of IFRS 5. This means that, whereas formerly they would have been consolidated on a line-by-line basis, the related non-current assets have been classified in a separate line item called "Non-current assets held for sale" and the related liabilities have been recorded in a separate line item on the liabilities side of the balance sheet. Such companies' results are shown in the income statement as "Net income (loss) from discontinuing and discontinued operations".

With reference to transactions with companies accounted for using the equity method, unrealized gains and losses are eliminated to the extent of the Group's interest in the associated company, unless the unrealized losses present evidence that the asset transferred is impaired.

The financial statements of foreign subsidiaries expressed in currencies other than the euro are translated into euro on consolidation, using the year-end rate for the balance sheet and the average rate for the year for the income statement. The resulting translation differences are recorded in a separate equity reserve known as the "translation reserve".

6. Accounting policies

The consolidated financial statements have been prepared in compliance with International Financial Reporting Standards (IFRSs), adopting the general measurement basis of historical cost. The following items have been measured at fair value:

• derivatives, • available-for-sale financial instruments, • held-for-trading financial instruments.

This section summarizes the more important accounting policies adopted by the RCS Group:

Revenues

Revenues are recognized on an accrual basis when their value can be reliably measured and the associated consideration is likely to be collected. Specifically: • revenues from the sale of goods are recognized when ownership changes hands, generally considered to be on the date of shipment for books and partworks and on the issue date for newspapers; • revenues from the sale of advertising space and magazines are booked according to the issue date of the publications concerned, with magazine sales shown net of a reasonable estimate for returns;

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• revenues from services are recognized by reference to the stage of completion of the transaction at the balance sheet date; • royalties are booked on an accrual basis, as defined in the respective contracts; • dividends are recognized on the date the dividend is declared.

Costs

Costs and other operating expenses are recognized in the income statement when they are incurred under the accrual basis of accounting, and when they do not produce future economic benefits, meaning that they do not meet the conditions for being recorded as assets in the balance sheet. Payroll costs include benefits received in the form of share-based remuneration.

Government grants

Government grants are recognized when there is reasonable assurance that they will be received and that all the conditions attaching to them are satisfied.

Financial income and charges

Financial income and charges are recorded in the income statement on a time proportion basis using the applicable effective rate.

As required by IFRS 7, financial income and charges are presented in note 11 on the basis of the categories defined in IAS 39.

Income taxes

Income taxes are calculated on the basis of laws in effect in the different countries where group companies operate. In detail, the calculation takes account of the more significant tax adjustments and, in the case of companies filing for income tax on a group basis in Italy, the credit arising on tax losses that have been offset and may be offset against taxable income. Deferred tax assets and liabilities are recognized on temporary differences between the asset and liability amounts used in the consolidation and the corresponding figures in the companies' statutory financial statements that are applicable for tax purposes. Deferred tax assets are recorded only if is likely that the company will have sufficient taxable income to use them. Deferred tax liabilities are recognized for all taxable temporary differences.

Earnings per share

Basic earnings per share are calculated by dividing the Group's net income for the period attributable to the ordinary shares by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share are calculated by taking into account, when calculating the number of outstanding shares, the potential dilutive effect arising from the allocation of treasury shares to the beneficiaries of stock option plans that have already vested and for which no capital increase is planned.

Property, plant and equipment

Items of property, plant and equipment are reported at historical cost if purchased separately or at fair value on the acquisition date if purchased through a business combination, and are systematically depreciated over their remaining useful lives. Land and assets held for sale are classified separately under non-current assets held for sale and no longer depreciated, but adjusted to their fair value if the latter is less than book value. Depreciation is calculated on a straight-line basis using rates considered to reflect the estimated useful lives of the assets; assets acquired during the year are depreciated on a pro-rata basis, taking account of the asset's effective use during the year. Improvement expenditure is added to the value of the assets concerned only when it is clearly separable and identifiable and can be recovered through expected future economic benefits. Ordinary maintenance costs are charged to the income statement in the year in which they are incurred.

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Any dismantling costs are estimated and added to the cost of the asset, with a corresponding credit recognized in a provision for dismantling charges. They are then depreciated over the remaining useful life of the asset concerned. The effects on the balance sheet, cash flow statement and income statement of assets acquired under finance lease are recorded in compliance with IAS 17. This standard requires such assets to be booked at cost among assets owned by the Group and depreciated on the same basis as other property, plant and equipment. The principal portion of lease repayments is deducted from the associated payable recognized on the liabilities side of the balance sheet, while the related interest included in repayments is recognized on an accrual basis as a financial charge in the income statement. This policy is also applied to leased assets that meet the specific conditions laid down by IAS 17, the more important ones of which are as follows: • the present value of future lease repayments envisaged in the contract is higher than or equal to the fair value of the asset itself; • the duration of the lease contract is basically the same as that of the useful life of the asset itself. The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. Any associated gains or losses (calculated as the difference between the net disposal proceeds and the carrying amount of the item) are included in the income statement in the year of such derecognition. Items of property, plant and equipment are periodically reviewed to identify any impairment losses as described in the paragraph on "Impairment of assets".

Intangible assets

These are recorded at purchase cost if purchased separately or capitalized at fair value on the acquisition date if purchased through a business combination. The Group does not capitalize research costs. Intangible assets generated internally as a result of developing the Group's products are capitalized only if all the following conditions are met: • the asset is identifiable; • it is probable that the asset developed will generate future economic benefits; • the costs of developing the asset can be measured reliably. Such intangible assets are amortized on a straight-line basis over their related useful lives. If internally generated assets cannot be recognized in the balance sheet, the development costs are expensed to income in the period incurred. Intangible assets with a finite useful life are systematically amortized on a straight-line basis over that life. Goodwill and intangible assets with an indefinite useful live are not amortized but periodically tested for impairment, as described in the paragraph on "Impairment of assets". If the discounted expected cash flows do not allow the initial investment to be recovered, the value of the asset is written down accordingly. If goodwill is allocated to an intangible asset with a finite life upon first-time consolidation of an equity investment in accordance with IFRS 3, it is amortized. If goodwill is allocated to intangible assets with an indefinite life, it is not amortized but periodically tested for impairment, as required by IAS 36. Advertising costs, start-up and expansion costs, research costs, internally-generated trademarks and publishing titles are not capitalized.

Business combinations and goodwill

Business combinations are accounted for by applying the purchase method. This requires recognizing at fair value the acquiree's identifiable assets (including previously unrecognized intangible assets) and identifiable liabilities (including contingent liabilities and excluding those for future reorganizations). Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities. For the purpose of consistent review, goodwill acquired in a business combination is allocated, at the acquisition date, to the Group's individual cash-generating units, or groups of cash-generating units expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or groups of units to which the goodwill is allocated:

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• represents the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets; and • is not larger than a segment based on either the Group's primary or secondary segment reporting format determined in accordance with IAS 14 - Segment Reporting. If goodwill has been allocated to a cash-generating unit (or groups of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed of in such circumstances is measured on the basis of the relative values of the operation sold and the portion of the cash-generating unit retained. If the disposal relates to a subsidiary company, the difference between the disposal price and the net assets, plus cumulative exchange differences and unamortized goodwill is recognized in the income statement.

Impairment of assets

IAS 36 requires impairment testing to be carried out for property, plant and equipment, intangible assets and equity investments whenever there are any signs that they may be impaired. In the case of goodwill and other intangible assets with an indefinite useful life or assets not available for use, this test must be carried out at least once a year. The recoverability of the values recorded is tested by comparing the book value with the higher of the net selling price, if an active market exists, and the asset's value in use. The value in use is defined as the present value of estimated future cash flows expected to arise from the continuing use of an asset, or from its cash generating unit, and from disposal at the end of its useful life. The cash generating units have been identified in keeping with the Group's organizational structure and business, as groups of like assets that generate cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.

Investments in associated companies and joint ventures

Investments in associated companies and joint ventures are valued using the equity method, whereby the investment is recorded at purchase cost and adjusted thereafter for the post-acquisition change in the investor's share of the company's equity. If the losses of an associate, plus any long-term receivables forming part of the Group's net investment, exceed the Group's interest in the same, these are not recognized unless the Group has incurred an obligation to cover such losses. The income statement reflects the investor's share of the associate's net income or loss, reported in the line item "Share of income (losses) from investments valued using equity method". Goodwill is represented by the positive difference between the purchase cost and the Group's share of the fair value of the associate's identifiable assets, liabilities and contingent liabilities at the acquisition date. Such goodwill is included in the carrying amount of the investment and is periodically tested for impairment. Any excess of the Group's share of the fair value of the associate's assets, liabilities and contingent liabilities at the acquisition date over the cost of the investment is credited to income for the period as soon as the process of applying the purchase method has been completed, ie. within twelve months of the acquisition date. If an associated company or joint venture makes any adjustments directly to their equity, the Group recognizes its related share in equity and reports such a change in the statement of changes in capital and reserves.

Inventories

Inventories are valued at the lower of purchase or production cost and their estimated realizable value as deduced from market trends. The purchase cost of raw materials is calculated using the weighted average cost method, while the FIFO method is used for finished products. Inventories are adjusted to their net realizable value by taking into account market prices, selling prices under normal business conditions, and technical and commercial obsolescence. The resulting provisions are deducted directly from the cost of inventories. Product returns in the "partworks" sector are recorded at zero when they re-enter inventory, with any benefits arising from their resale recognized only once they are sold. Finished products comprising

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books are adjusted at each balance sheet date for the estimated value of returns on a consistent basis with the estimated adjustment to trade receivables.

Financial assets and receivables

Financial assets and receivables are initially recognized at fair value, which basically corresponds to purchase price, plus any related purchase costs. Purchases and sales of financial assets are recognized on their trade date, ie. the date when the Group assumes an obligation to buy/sell these assets.

As required by IFRS 7, financial assets have been identified and classified in note 11 on the basis of the definitions contained in IAS 39. Management determines upon initial recognition how financial assets are to be classified in the categories defined by IAS 39 and repeated in IFRS 7. After initial recognition, financial assets are valued on the basis of their classification under IAS 39. More specifically:

• "Financial assets, designated upon initial recognition, at fair value through profit or loss" are measured at market value on the reporting date; in the case of unquoted instruments, this value is determined using valuation techniques based on market information. Gains and losses arising on the fair value measurement of assets held for trading are recognized in the income statement.

• "Held-to-maturity investments" are measured at amortized cost using the effective interest method, in other words adopting a rate that exactly discounts the financial asset's estimated future cash flows to its net carrying amount. If there is objective evidence of impairment, the value of the assets is reduced to the present value of estimated future cash flows; the resulting losses are recognized in the income statement. If, in a subsequent period, the amount of a previous impairment loss decreases, the value of the assets is reinstated but to no more than what their amortized cost would have been had the impairment not been recognized. At December 31, 2007 the RCS Group does not own any financial instruments with the intent of holding them to maturity.

• "Loans and receivables" are measured at amortized cost, with interest calculated using the effective interest rate recognized in the income statement. Gains and losses are recognized in income when the loans and receivables are removed from the balance sheet or when they become impaired. Impaired receivables are stated at their estimated realizable value (fair value) by means of the provision for doubtful accounts, which is directly deducted from their gross value. With reference to the parent company RCS Mediagroup, receivables are written down when there is objective evidence that the receivable is unlikely to be collected (for example, when more than 5% of the total receivable is past due). As far as other group companies are concerned, writedowns are made on the basis of past experience and statistics. If, in a subsequent period, the amount of previous impairment losses decreases, the value of the assets is reinstated but to no more than what their amortized cost would have been had the impairment not been recognized. The RCS Group mainly reports in this category assets due within twelve months, which are therefore recorded at face value as an approximation of amortized cost. If, however, the terms of payment are longer than normal market ones and the receivable does not earn interest, the amount recognized in the balance sheet contains an implicit financial component and so must be discounted to present value by debiting the discount to the income statement. Loans and receivables expressed in foreign currencies are translated at period-end exchange rates, and the gains or losses from their conversion are charged to the income statement.

• "Available-for-sale financial assets" are measured at fair value; gains and losses arising from changes in the fair value of these assets are recognized directly in an equity reserve for as long as these assets are held in the portfolio. This reserve is also used to absorb any negative adjustments to fair value; once the reserve has been used up, any additional negative adjustments, representing an

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impairment loss, will be recorded in the income statement. If such additional negative adjustment represents a market fluctuation, it is reflected in the equity accounts. In the case of securities traded on active markets, fair value is determined with reference to the closing price on the last trading day of the reporting period. In the case of assets for which there is no active market, fair value is determined on the basis of the price used in recent transactions between independent parties in instruments that are substantially the same, or using valuation techniques based on discounted cash flow analysis. Only if no future plans for the underlying asset are available, is the valuation maintained at cost. At the reporting date, the Group has classified less than 20% of its equity investments in this category.

Derivative financial instruments

Derivatives are classified as "Hedging derivatives" when they qualify for hedge accounting, otherwise, even if they have been taken out with the intent of managing exposure to risks, they are reported as "Held-for- trading financial assets". In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when their relationship with the hedged item is formally documented and the hedge effectiveness is high (effectiveness test). The effectiveness of hedging transactions is documented both at the inception of the hedge and periodically thereafter (at least at every annual or interim reporting date) and is measured by comparing changes in the hedging instrument's fair value with those in the hedged item. Fair value hedges, which hedge the exposure to changes in the fair value of the item being hedged, are recorded at fair value with any gains/losses recognized in the income statement. Changes in the fair value of cash flow hedges, which hedge the exposure to changes in cash flow for the items hedged, are initially recorded in equity and subsequently booked to the income statement, to match the effects of the transaction being hedged. Fair value changes relating to the ineffective portion are immediately recognized in the income statement. If the derivative instrument is sold or no longer qualifies as an effective hedge of the risk for which it was taken out or if the underlying transaction is no longer highly probable, the related portion of the cash flow hedge reserve is immediately reversed to the income statement. Changes in the fair value of derivatives that do not satisfy the criteria for being treated as hedging derivatives are recorded in the income statement. Regardless of classification, all derivatives are stated at fair value, determined using valuation techniques based on market data (such as discounted cash flow, forward exchange rate method, Black-Scholes model and its offshoots). In particular, this value is determined by the Group Finance department, using specific pricing instruments based on market parameters (i.e. interest rates, exchange rates and volatilities), reported on individual valuation dates.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, bank and post office sight deposits and investments in securities carried out as part of the treasury management function which have a short-term maturity, are highly liquid and subject to an insignificant risk of changing value. They are stated at face value. For the purposes of the disclosures required by IFRS 7 and presented in note 11, in which financial instruments are classified on the basis of the definitions contained in IAS 39, cash and cash equivalents have been classified in the category "Loans and receivables", while in the consolidated cash flow statement, they are presented as cash and cash equivalents, as defined above, less bank overdrafts.

Payables and other liabilities

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As required by IFRS 7, financial liabilities have been identified and classified in note 11 on the basis of the definitions contained in IAS 39. Management determines upon initial recognition how financial liabilities are to be classified in the categories defined by IAS 39 and repeated in IFRS 7. After initial recognition, financial liabilities are valued on the basis of their classification under IAS 39. More specifically, it should be noted that:

• "Financial liabilities at fair value through profit or loss" are measured at market value on the reporting date; in the case of unquoted instruments (eg. derivative financial instruments), this value is determined using valuation techniques based on market information. Gains and losses arising from changes in the fair value of liabilities held for trading are recognized in the income statement.

• "Financial liabilities at amortized cost" due within twelve months are stated at their face value as an approximation of amortized cost.

Payables may be classified in one of the above categories, defined by IAS 39, depending on their characteristics.

Payables expressed in foreign currencies are translated at period-end exchange rates, and the gains or losses from their conversion are charged to the income statement.

The Group has included in this category trade payables, financial payables, bank loans and overdrafts and other liabilities. These mostly fall due within twelve months and so are stated at face value.

Treasury shares

Treasury shares are recorded as a deduction from equity. The original cost of the treasury shares and the income arising on any subsequent sales are reported as movements in equity.

Provisions for employee benefits

The provision for employee termination indemnities and the defined-benefit retirement plans reported by Unidad Editorial and Flammarion are recorded at the actuarial value of the Group's effective liability to all employees, determined by applying existing statutory and regulatory provisions. The actuarial valuation, based on financial and demographic assumptions, is carried out by outside professional actuaries. The actuarial gains and losses are recorded in the income statement. The provision for employee termination indemnities reported by Italian companies until December 31, 2006 used to be treated like a defined benefit plan. The rules applying to this provision were revised by Law 296 of December 27, 2006 (2007 Finance Act) and subsequent enacting decrees and regulations issued in the early part of 2007. Further to these changes, companies with at least 50 employees must now treat only that part of the provision accruing before January 1, 2007 (and not yet paid out at the balance sheet date) like a defined benefit plan, while amounts accruing thereafter must be treated like a defined contribution plan. The effects on the financial statements of applying these new rules are described in note 43.

Provisions for risks and charges

The provisions for risks and charges relate to certain or probable liabilities of a specific nature whose amount and/or timing is unknown. Provisions are recognized when (i) an enterprise has a present obligation, deriving from a past event, (ii) it is probable that an outflow of resources will be required to settle the obligation and (iii) a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the expenditure that the Group would rationally pay to settle the obligation at the balance sheet date or to transfer it to a third party at that time. The estimate implicitly reflects a financial component associated with the assumption that the obligation will be settled in the long term. If this component is material and the date of paying the obligation may be reliably estimated, the provision is therefore discounted to its present value; the increase in the provision associated with the time value of money is recorded in the income statement under "Financial charges".

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If the liability relates to property, plant and equipment (eg. site dismantling and restoration), the provision is recognized as the other side of the increase in value of the asset to which it refers: the cost is recognized in the income statement through the process of depreciating the related asset.

Assets and liabilities held for sale

Assets and liabilities held for sale include non-current assets (or disposal groups) and the associated liabilities that the Group intends to sell on the basis of a specific plan. These balances are valued at the lower of the net book value at which these assets and liabilities were recorded and their fair value less any foreseeable disposal costs. Any losses arising from this valuation are reported in "Net income (loss) from discontinuing and discontinued operations".

Share-based remuneration plans

The Group gives additional benefits to certain employees holding key positions in the form of stock option plans which are classified as equity-settled since they involve the physical delivery of shares. Under IFRS 2 (Share-based payment) stock options for employees are measured at their fair value on the grant date, determined using the binomial model. This model takes account of all the option's characteristics (life of the option, strike price and vesting conditions etc.), as well as the value of the underlying shares on the grant date and the expected volatility of these shares. If the right to exercise the option is exercisable after the end of a vesting period and after satisfying specific performance conditions, the overall cost of the options is recognized evenly over this period in a specific line item known as "Other equity instruments", with the matching entry going to "Payroll costs" in the income statement. At the end of each year the fair value of options determined in the past is not revised; instead, the estimated number of options that will vest up until their expiry is updated. The changes in this estimate are recorded as an adjustment to "Other equity instruments" with the matching entry going to "Payroll costs" in the income statement. When the options expire the amount recorded in the equity account is reclassified as follows: the portion of equity relating to exercised options is reclassified to the "Share premium reserve", while the portion relating to unexercised options is reclassified to "Earnings (losses) carried forward". If the right to exercise options is cancelled or settled during the vesting period (except for grants cancelled by forfeiture when the vesting conditions are not satisfied), the cancellation or settlement is accounted for as an acceleration of vesting and the cost that otherwise would have been recognized for services received over the remainder of the vesting period is therefore recognized immediately.

Translation of foreign currency items

The consolidated financial statements are presented in euro, being the functional and presentation currency adopted by the parent company. Each company within the Group decides its own functional currency, which is used to record the contents of their individual financial statements. Foreign currency transactions are recorded, on initial recognition in the functional currency, at the exchange rate between the functional currency and the foreign currency at the date of the transaction. Foreign currency monetary assets and liabilities are retranslated into the functional currency using the exchange rate at the balance sheet date. All exchange differences are recognized in the income statement, except for differences arising from foreign currency loans taken out to fund a net investment in a foreign operation, which are recognized directly in equity until the net investment is sold, at which point the cumulative exchange differences deferred in equity are recognized in the income statement. The income taxes and tax credits attributable to exchange differences on these loans are also recorded directly in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. At the balance sheet date, the assets and liabilities of subsidiaries which adopt a foreign functional currency are translated into the presentation currency of the Group's consolidated financial statements using the closing rate at that date, while their income statements are translated using the average rate for the year. The resulting exchange differences are recognized as a separate component of equity. On disposal of a foreign

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operation, the cumulative amount of the exchange differences deferred in equity relating to that foreign operation are recognized in the income statement.

7. Changes in international accounting standards

The accounting standards adopted are the same as those in the prior year except for the following new or revised IFRSs and IFRICs, which the Group adopted during the year. The adoption of these revised standards and interpretations has not had a significant impact on the Group's financial statements, although they have involved making additional disclosures.

• IFRS 7 – Financial instruments: Disclosures This standard requires the Group to provide disclosures in its financial statements such that they enable users to evaluate the significance of financial instruments for the Group's financial position and performance and the nature and extent of risks arising from such financial instruments. The new disclosures are provided in various points of the financial statements and notes. Although there has been no effect on financial position or results, the comparative information has been restated where necessary.

• IAS 1 Revised – Presentation of financial statements This amendment requires the Group to provide additional disclosures that will enable users of the financial statements to evaluate the Group's objectives, policies and processes for managing capital. These new disclosures can be found in note 10.

• IFRIC 7 – Applying the restatement approach under IAS 29 - Financial reporting in hyperinflationary economies This interpretation, effective from January 1, 2007, relates to a situation that does not apply to the Group.

• IFRIC 8 – Scope of IFRS 2 This interpretation requires IFRS 2 to be applied to every transaction in which the entity cannot specifically identify all or part of the goods received, particularly when such transactions involve issuing equity instruments at a price that would appear to be less than their fair value. Since equity instruments are only issued to employees under stock option plans, this interpretation has had no impact on the Group's results.

• IFRIC 9 – Reassessment of embedded derivatives IFRIC 9 establishes that the date for determining the existence of an embedded derivative is the date the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies its cash flows. Since the Group does not have any embedded derivatives requiring separation from the host contract, this interpretation has had no impact on its financial position and results.

• IFRIC 10 – Interim financial reporting and impairment The Group has adopted IFRIC 10 with effect from January 1, 2007. This interpretation states that an entity shall not reverse an impairment loss recognized in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. Since the Group has not reversed previously recognized impairment losses, this interpretation has had no impact on its financial position or results.

• IFRIC 11 IFRS 2 – Group and treasury share transactions The Group has adopted IFRIC 11 with effect from January 1, 2007. This interpretation requires agreements that grant employees an entity's equity instruments to be accounted for as equity-settled plans, both when the entity acquires such instruments from a third party and when it is the shareholders who provide the required equity instruments.

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8. IFRSs and IFRICs not yet in force

8 a) IFRSs not yet in force

The IASB issued IFRS 8 – Operating segments on November 30, 2006.

• IFRS 8 Operating segments IFRS 8 – Operating segments, is effective from January 1, 2009 and supersedes IAS 14 – Segment information. This standard requires information to be presented on the Group's operating segments and replaces the criteria for determining the Group's primary (business) segments and secondary (geographical) segments. The new standard requires the entity to base segment information on factors management uses to makes its operating decisions, meaning that operating segments must be identified on the basis of internal reports, which are regularly reviewed by management for the purposes of allocating resources to the different segments and assessing their performance. The adoption of this standard does not have any impact on the valuation of items contained in the financial statements.

8 b) IFRICs not yet in force

The following interpretations have been issued but are not yet in force:

• IFRIC 12 – Service concession arrangements (effective from January 1, 2008 and not yet endorsed by the European Union). • IFRIC 13 – Customer loyalty programmes (effective from January 1, 2009 and not yet endorsed by the European Union). • IFRIC 14 on IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction (effective from January 1, 2008 and not yet endorsed by the European Union).

8 c) Amendments not yet in force

• IAS 1 Presentation of financial statements Revised IAS 1 - Presentation of financial statements was endorsed in September 2007 and will become effective for annual periods starting on or after January 1, 2009. The standard now separates changes in equity relating to owners from those relating to non-owners. The statement of changes in equity will include only details of transactions with owners (shareholders), while all the changes relating to transactions with non-owners will be presented in a single line. In addition, the revised standard has introduced a statement of comprehensive income: this statement must contain all revenues and costs for the period reported in the income statement plus any other income and expense recognized in that period. The statement of comprehensive income may be presented in the form of a single statement or two related statements. The Group is still deciding whether to prepare one or two statements.

• IAS 23 Borrowing costs The IASB issued a revised version of IAS 23 – Borrowing costs on March 29, 2007. The new version will be effective from January 1, 2009. The new version no longer contains the option allowing companies to expense immediately to income borrowing costs incurred for assets normally requiring a substantial period of time to get ready for their intended use or sale. This standard will be applicable to borrowing costs relating to assets capitalized in annual periods starting on or after January 1, 2009. At the current balance sheet date, the European Union had not yet completed the required endorsement process for this standard's application.

• IFRS 2 – Share-based payments: vesting conditions and cancellations This amendment to IFRS 2 (Share-based payments) was published in January 2008 and becomes effective for annual periods starting on or after January 1, 2009. The standard restricts the definition of "vesting conditions" to a condition that includes an explicit or implicit obligation to provide a service. Any other condition is a "non-vesting condition" and must be taken into consideration when determining the fair value of the equity instrument granted.

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If the reward fails to vest as a result of failing to satisfy a "non vesting condition" which is under the control of the entity or the counterparty, this must be treated like a cancellation. The Group has not undertaken transactions involving share-based payments with "non vesting" conditions and, as a result, does not expect this amendment to have a significant impact on its accounting for option- based reward schemes.

• IFRS 3R Business combinations and IAS 27/R Consolidated and separate financial statements These two revised standards were endorsed in January 2008 and will become effective from annual periods starting on or after July 1, 2009. IFRS 3R introduces a number of changes to the treatment of business combinations which will affect the amount of goodwill recognized, net income in the year of acquisition and net income thereafter. IAS 27R requires that changes in interests held in a subsidiary be accounted for like an equity transaction. As a result, such changes will have no impact on goodwill, nor will they give rise to gains or losses. In addition, the revised standards change the accounting treatment for a loss incurred by a subsidiary and for the loss of control of a subsidiary. The changes introduced by IFRS 3R and IAS 27R must be applied on a forward-looking basis and will affect future acquisitions and transactions with minority shareholders.

Amendments to IAS 32 and IAS 1 Puttable financial instruments The amendments to IAS 32 and IAS 1 were endorsed in February and will become effective for annual periods starting on or after January 1, 2009. The amendment to IAS 32 requires that certain puttable financial instruments and obligations arising at the time of settlement be classified as equity if certain conditions are met. The amendment to IAS 1 requires the explanatory notes to provide certain disclosures about puttable options classified as equity. The Group does not expect these amendments to have an impact on its financial statements.

9. Main decisions when applying accounting standards and key sources of estimation uncertainty

Main decisions taken when applying the accounting standards For the purposes of testing the impairment of fixed assets, future cash flows have been estimated using the most recent business plans approved by the respective Boards of Directors, as updated to take account of actual figures and subsequent budgets, also approved by the same Boards of Directors. In the absence of subsequent events and circumstances such as to undermine the reliability of such plans, management considers that they represent the best estimate of future cash flow.

Key sources of estimation uncertainty The preparation of the consolidated financial statements and explanatory notes has required using estimates and assumptions both for determining the carrying amounts of some assets and liabilities and for measuring contingent assets and liabilities. Actual events might not fully confirm the estimates. The principal estimates refer to the provisions for risks and charges, the estimate of returns in the Books segment, the provisions for doubtful accounts and other writedown provisions, particularly for inventories, to depreciation and amortization, employee benefits and deferred taxes. The estimates and assumptions are periodically reviewed and the effects of any changes recorded in the income statement. Detailed information can be found in note 21, as required by IAS 8.

The key assumptions regarding the future and other sources of estimation uncertainty at the balance sheet date which might cause material changes in reported carrying amounts within the next financial year, basically refer to the process of measuring impairment losses for goodwill. In order to determine whether there is evidence that goodwill is impaired, it is necessary to estimate the value in use of the cash generating unit (CGU) to which the goodwill has been allocated. Value in use is calculated by estimating the cash flows that the company expects to derive from the CGU, and by determining an appropriate discount rate. More details can be found in note 32.

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10. Management of capital and financial risks

The Group manages its capital structure, modifying it according to the circumstances in order to provide adequate support to its business and maximize value for shareholders. It is also the Group's objective to maintain a solid credit rating and capital ratios that are consistent with its asset structure. The objectives, policies and processes for managing capital underwent no changes during 2006 and 2007.

The RCS Group is exposed to a variety of financial risks: market risks (interest rate risk, price risk and to a lesser extent currency risk), liquidity risk and credit risk. After a formal process of review and approval, the Group uses different types of derivative to manage its exposure to interest rate and currency risk; the types of contract currently in existence are: interest rate swaps (and similar instruments: forward rate agreements), interest rate caps and forward foreign exchange contracts. Derivatives are used solely for hedging purposes. Even if a financial instrument has been designated for hedging purposes, whenever it fails to satisfy the formal conditions of the hedge effectiveness test required by IAS 39, it will be classified as held-for-trading.

Interest rate risk

Interest rate risk refers to the risk of higher financial charges because of an adverse, unexpected fluctuation in interest rates. The Group is exposed to this risk in relation to its floating-rate financial liabilities. Interest rate risk is managed using specific policies defining the risk management objectives, limits, roles and responsibilities within the process. In detail: • it is the Group's objective to mitigate exposure to interest rate risk by establishing an adequate mix between floating-rate and fixed-rate liabilities, using derivatives where necessary; • interest rate risk is managed by the Finance department within the permitted operating limits; this department draws up strategies for hedging exposure and presents them for top management approval; • it is not allowed to use derivatives for speculative purposes, ie. not in pursuit of the stated objective, unless previously authorized by the Board of Directors in cases of proven opportunity; • the Finance department informs top management of its work and results in different ways, including a report on the status of the derivatives portfolio and a report analyzing changes in net financial position.

At December 31, 2007 66% of loans and borrowings, including finance lease payables, were at a contractually fixed rate, or transformed to such via IRS, or hedged by interest rate caps (compared with 75% at December 31, 2006). This percentage is in line with the Group's policy. As far as the position at December 31, 2007 is concerned, this objective was pursued using interest rate swaps (IRS) and interest rate caps taken out with highly-rated leading financial institutions. IRS transform the floating rate into a fixed one through the periodic swap, with the financial counterparty, of the difference between the fixed-rate interest (swap rate) and floating-rate interest, both calculated on the notional contractual amount. In the case of interest rate caps, only if the interest rate rises above the contractual one, does the financial counterparty pay the RCS Group the difference between the contractual rate and the market floating rate in such a way as to bring the Group's financial cost back to its contractual level. Note 35 contains detailed information about the fair value of derivative financial instruments at the balance sheet date, while note 41 contains the table summarizing interest rate risks.

Sensitivity analysis

The following table presents the results of the sensitivity analysis of interest rate risk, reporting its impact on the income statement and equity, as required by IFRS 7. This sensitivity analysis was performed assuming a parallel 1% increase/decrease in relevant interest rates.

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(€/millions) Increase/ Impact on Sensitivity analysis of interest rate risk Impact on Underlying amount Decrease in interest income on floating-rate financial instruments equity rates statement

2007 (959.5) 1% (3.1) 12.7 2006 14.3 1% 0.5 2.6

2007 (959.5) -1% 1.7 (5.4) 2006 14.3 -1% (0.7) (0.2)

Floating-rate financial instruments were analyzed separately from fixed-rate ones when identifying the potential impact of positive and negative shifts in the rate curve. In the case of floating-rate instruments, the sensitivity analysis looked at cash flows; in the case of fixed-rate financial instruments, the analysis looked at changes in fair value.

As far as floating-rate financial instruments are concerned, these included cash and cash equivalents, non- current financial receivables and payables and any interest rate derivatives held. The sensitivity analysis takes account of: • the change in interest income and expense during the year attributable to any reasonable changes in interest rates applying to floating-rate assets and liabilities held at the balance sheet date; • the impact in terms of fair value changes in interest rate derivatives recognized in equity (for the hedge) and in the income statement, assuming an instantaneous change in the rate curve at the balance sheet date. No impact is reported in relation to fixed-rate financial instruments because the balance sheet contains no financial assets or liabilities at fair value with fixed interest payments.

As far as risk factors generating significant exposures to risk were concerned, the sensitivity analysis revealed that an increase in interest rates would cause a potential loss of €3.1 million in the income statement at December 31, 2007 (gains of €0.5 million in 2006) and an increase of €12.7 million in equity (€2.6 million in 2006). A decrease in interest rates would cause a potential gain of €1.7 million in the income statement (loss of €0.7 million in 2006) and a decrease of €5.4 million in equity (€0.2 million in 2006).

Currency risk

Currency risk can be defined as the sum of negative effects on assets or liabilities caused by a change in foreign exchange rates. Although the RCS Group has an important international presence, it does not have a large exposure to currency risk since the euro is the functional currency of its principal areas of business and is the currency in which most of its business is conducted. The exposure to currency risk mainly refers to: • expected purchases in British pounds, in relation to the import of books into the United Kingdom: • trade and financial receivables in US dollars, held by the DADA group; • future purchases in euro and Canadian dollars by Flammarion's Canadian subsidiary; • investments in machinery denominated in Swiss francs.

Like with interest rate risk, currency risk is also managed using specific policies defining the risk management objectives, limits, roles and responsibilities within the process. In detail: • it is the Group's objective to mitigate the effects caused by an adverse movement in exchange rates on operating margin, using derivatives where necessary; • currency risk is managed by the Finance department within the permitted operating limits; this department draws up strategies for hedging exposure and presents them for top management approval; • it is not allowed to use derivatives for speculative purposes, ie. not in pursuit of the stated objective, unless previously authorized by the Board of Directors in cases of proven opportunity; • the Finance department informs top management of its work and results through its report on the status of the derivatives portfolio;

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• for the purposes of ensuring consistency between currency flows from trading activities and those generated by financial instruments, the Group can use roll-over and unwinding transactions.

Currency derivatives, although operationally for hedging purposes, being undertaken in compliance with approved risk management strategies, do not use hedge accounting. Identified positions are hedged using derivatives, specifically forward foreign exchange purchase or sale contracts and currency swaps. Note 35 contains detailed information about the fair value of currency derivatives at the balance sheet date, all taken out with different, leading banks.

Sensitivity analysis

The two currencies to which the Group has a significant currency risk exposure are the US dollar and British pound. As regards the US dollar exposure, the net receivable position of €19.5 million (€9.4 million in 2006) has been hedged with €9.3 million in opposite-sign positions (none in 2006), resulting in a net post-hedge receivable position of €10.2 million. A 10% appreciation of the euro against the dollar would have caused consolidated losses of €1.0 million (€0.9 million in 2006). The exposure to the British pound consists of an underlying payable position of €7.3 million (€6.9 million in 2006) and hedges of €10.2 million (€11.2 million in 2006), resulting in a net post-hedge receivable position of €2.9 million (€4.3 million in 2006), which in the event of a 10% appreciation of the euro against the pound would have generated a loss of €0.3 million in 2007 (€0.4 million in 2006). The amount of hedges is higher than the hedged balance in pounds because they were taken out in advance on the basis of estimated currency flows contained in the annual budget. Excluding therefore the part of the derivative affecting income and the corresponding impact of the hedged item, a 10% appreciation of the euro against the pound would generate gains of €0.2 million in relation to the remaining exposure (losses of €0.2 million in 2006). If the dollar and pound had appreciated 10% against the euro, the impact on the income statement would have been the same but opposite amount. The impact of other currencies on the income statement is not material. There is no impact on the Group's equity because the balance sheet contains no "Available-for-sale assets" in currency or derivatives designated for hedging under the hedge accounting rules.

Liquidity risk

Liquidity risk can arise in relation to difficulties in obtaining finance in due time to support operating activities. The Group's Finance department has central responsibility for fund-raising and investment activities in compliance with the objectives and policies defined by management. The Group's objective is to keep a balance between continuity of financing and flexibility of management by: • investing surplus cash in short-term operations (usually lasting between one and three months) that can be easily and quickly unwound, such as money-market instruments; • using different types of finance, such as revolving committed credit facilities, with several banks, lasting between seven and eleven years for a total of €800 million, or by using short-term credit lines, usually just for a minimum part of the total to achieve cost savings.

The Finance department prepares a periodic report for top management containing an analysis of changes in the net financial position of each individual company and of the Group as a whole.

Note 41 contains details of the make-up of the Group's current net financial position.

Liquidity analysis

The following table presents a maturity analysis of the RCS Group's financial and trade liabilities at December 31, 2007 and December 31, 2006, based on undiscounted contractually agreed payments (including principal and interest).

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In the absence of an agreed repayment date, the payments have been included on the basis of the first date when payment could be requested. This is why bank overdrafts have been included in the first repayment range.

Drawdowns of short-term credit lines generally cover only a minimal part of the capital employed.

2007 Contractual due date (interest and principal) Analysis of balances reported at end of 2007 on demand 1 year 1-2 years 2-5 years >5 years Total Non-derivative financial instruments Trade payables due to third parties (750.5) - - - - (750.5) Financial payables due to third parties (including leases) (50.8) (128.7) (248.5) (232.6) (610.4) (1,270.9) Intercompany payables (29.3) - - - - (29.3) Other payables (trade or financial) ------Derivatives embedded in financial liabilities ------Hedging derivatives ------Non-hedging derivatives - (0.5) - - - (0.5) Committed credit facilities (1.4) - - - -- 1.4 Total (832.0) (129.2) (248.5) (232.6) (610.4) (2,052.6)

2006 Contractual due date (interest and principal) Analysis of balances reported at end of 2006 on demand 1 year 1-2 years 2-5 years >5 years Total Non-derivative financial instruments Trade payables due to third parties (588.0) - - - - (588.0) Financial payables due to third parties (35.8) (30.9) (35.1) (177.8) (85.1) (364.6) Intercompany payables (32.8) - - - - (32.8) Other payables (trade or financial) ------Derivatives embedded in financial liabilities ------Hedging derivatives - (0.2) - - - (0.2) Non-hedging derivatives ------Committed credit facilities ------Total (656.6) (31.1) (35.1) (177.8) (85.1) (985.6)

The analysis of financial liabilities shows that overall non-derivative financial liabilities have increased by €1,065.6 million, while the payments expected after more than 5 years amount to €610.4 million.

Credit risk

Credit risk can be defined as the possibility that one party to a financial instrument will cause a financial loss by failing to discharge an obligation. The following table presents the maximum exposure to credit risk by items reported in the balance sheet, including derivatives. Maximum exposure to risk is shown with a separate indication of the mitigating effects of netting agreements and collateral held.

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FINANCIAL ASSETS Notes book value at book value at collateral held at Dec-31-2007 Dec-31-2006 Dec-31-2007 Dec-31-2006

Financial assets at fair value through profit or loss Investment funds 41 0.6 6.7 Held-for-trading securities 41 026.4

Non-hedging derivatives 35 0.2 0.3 Loans and receivables Trade and other receivables 39 910.7 738.1 41.5 35.7 Current financial receivables 41 32.9 33.0 Cash and cash equivalents 41 70.8 259.8 Other current receivables and assets 40 59.4 62.1 Non-current financial receivables 36 12.5 12.8 Other non-current assets 37 7.6 6.4 Hedging derivatives 35 5.5 1.3 Committed credit facilities 1.4 0 Financial guarantees given 45.3 8.6 Total 1,146.9 1,155.5 41.5 35.7

When financial instruments are measured at fair value, the amounts shown represent the current credit risk but not the maximum exposure to credit risk which could arise in the future due to changes in fair value. More details on the maximum exposure to credit risk by each category of financial instruments can be found in the specific notes.

The Group's exposure to credit risk is distributed by geographical area and business segment as follows:

Credit risk concentration by business % % segment Book value at Dec-31-2007 Book value at Dec-31-2006

Newspapers Italy 51.5 5.0% 50.4 5.9% Newspapers Spain 227.1 22.2% 111.2 13.0% Books 274.3 26.8% 269.4 31.6% Magazines 38.9 3.8% 44.1 5.2% Advertising 318.2 31.1% 284.8 33.4% Dada 59.2 5.8% 42.7 5.0% Digicast 8.5 0.8% 0.0% Corporate Functions 45.4 4.4% 44.4 5.2% Broadcast 5.3 0.6% Total 1,023.1 100.0% 852.4 100.0%

Credit risk concentration by geographical % % area Book value at Dec-31-2007 Book value at Dec-31-2006

Italy 666.5 65.1% 614.4 72.1% Spain 231.8 22.7% 115.8 13.6% France 91.7 9.0% 88.3 10.4% Others 33.1 3.2% 33.8 4.0%

TOTAL 1,023.1 100% 852.4 100%

Trade receivables are managed by the Group's individual companies in compliance with the Group's economic objectives, agreed commercial strategies and operating procedures, which prevent products or services from being sold to customers without an adequate credit record or collateral. New customers and their credit rating are generally evaluated using an automatic scoring system. What is more, receivables management during the year seeks to limit late payments and any significant losses.

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The following tables provide information about the credit quality of financial assets.

Book value at Dec-31-2007 Past due and not Past due and Provision for doubtful Not past due and not impaired impaired impaired accounts Total Trade and other receivables 717.4 184.1 61.7 (52.5) 910.7 Current financial receivables 32.9 32.9

Other current assets 59.2 0.2 12.2 (12.2) 59.4 Current portion 809.5 184.3 73.9 (64.7) 1,003.0 Non-current financial assets 12.5 12.5 Other non-current assets 7.6 7.6

Non-current portion 20.1 0.0 0.0 0.0 20.1 Total 829.6 184.3 73.9 (64.7) 1,023.1

Past due and not Past due and Provision for doubtful Not past due and not impaired impaired impaired accounts Total Trade and other receivables 622.5 106.8 59.2 (50.5) 738.0 Current financial receivables 33.0 33.0

Other current assets 61.8 0.3 12.2 (12.2) 62.1 Current portion 717.3 107.1 71.4 (62.7) 833.1 Non-current financial assets 12.8 12.8 Other non-current assets 6.4 6.4

Non-current portion 19.2 19.2 Total 736.5 107.1 71.4 (62.7) 852.4

Current financial and trade receivables, not past due and not impaired at December 31, 2007 and December 31, 2006, are summarized in the following table, on the basis of the credit rating assigned by the Group to individual debtors.

Rating Book value at Dec-31-2007 Book value at Dec-31-2006 Current portion Non-current portion Current portion Non-current portion

High 327.4 1.3 252.1 1.5 Medium 163.2 168.6 Low 43.1 2.4 64.3 Not rated 275.8 16.4 232.3 17.7

Total 809.5 20.1 717.3 19.2

The "Not rated" category of receivables mostly refers to trade receivables with an average unit balance of under €5 thousand, as well as receivables from public entities.

The age of receivables reported in the balance sheet at December 31, 2007 and December 31, 2006 is shown below.

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Receivables ageing

Receivables not past Total past due due and not impaired Receivables past due and not impaired and not impaired 30 days31-60 days61-90 days91-180 days 181-360 days >361 days

2007829.6 60.7 39.7 17.9 35.6 20.4 10 184.3 2006736.5 37.4 27.8 7.9 12.1 18 3.9 107.1

Impaired trade receivables amount to €61.7 million and are reported in the balance sheet net of the provision for doubtful accounts of €52.5 million. Under the adopted writedown procedures, individual impairment losses are recognized for large, individual trade positions which are objectively in default, reflected in the fact that more than 5% of the total receivable is past due. The applicable writedown percentage is established according to the past due age range, and periodically reviewed to take account of credit ratings given by the Group to individual counterparties. The following table presents the average writedown percentages applied to past due receivables at December 31, 2007:

Past due Writedown applied

1day – 30 days 10% of past due 31days – 180 days 10% of full receivable 181days – 360 days 20% of full receivable 361days – 540 days 30% of full receivable 541days – 720 days 40% of full receivable > 720 days 50% of full receivable

Receivables put into legal hands are generally written down by at least 80%.

As far as financial receivables are concerned, investments of surplus cash and derivative transactions are carried out solely with highly reputable banking counterparties, for maximum amounts that are set internally for each individual counterparty.

Price risk

Price risk refers to the uncertainty associated principally with changes in the market prices of equity instruments and the impairment of financial assets/liabilities resulting from changes in the price of commodities.

The Group is exposed to fluctuations in the price of paper, being the principal raw material used for its output. The Group manages this risk through agreements with major Italian and foreign suppliers that set quantities and prices and last for the maximum duration currently allowed by the market of up to about one year. The Group has never used hedging derivatives for this purpose, in keeping with the practice generally adopted by Italy's main players; this strategy is mostly associated with the limited liquidity of these derivatives both in terms of counterparties and maturities. The Group is also exposed to fluctuations in the price of quoted financial equity investments (this risk mostly relates to the investment in Poligrafici Editoriale).

Sensitivity analysis

The potential loss in fair value of the investment in Poligrafici Editoriale held at December 31, 2007, arising from a hypothetical, instantaneous adverse change of 20% in its share price would be around €2.9 million (€3.8 million at December 31, 2006). A corresponding increase in the share price would have had an equal but opposite effect, this time on equity.

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11. Financial instruments: disclosures

As required by IFRS 7, the following table presents the carrying amounts of items included in each category identified by IAS 39. Carrying amount usually coincides with the fair value of the financial instruments represented, except for non-current receivables and payables and items included in net debt, whose fair value is reported in the specific explanatory notes, to which the reader should refer.

Balance sheet

Financial instrument categories

book value at Dec-31- book value at Dec- Notes 2007 31-2006

FINANCIAL ASSETS

Financial assets at fair value through profit or loss Investment funds 41 0.6 6.7 Held-for-trading securities 41 026.4 Non-hedging derivatives 35 0.2 0.3 Available-for-sale financial assets Equity investments 34 30.7 221.1 Loans and receivables Trade and other receivables 39 910.7 738.1 Current financial receivables 41 33.0 33.0 Cash and cash equivalents 41 70.8 259.8 Other current receivables and assets 40 59.4 62.1 Non-current financial receivables 36 12.5 12.8 Other non-current assets 37 7.6 6.4 Hedging derivatives 35 5.5 1.3 Total 1,130.9 1,368.0

FINANCIAL LIABILITIES

Financial liabilities at amortized cost Trade payables due to third parties 46 779.9 620.8 Short-term bank loans and overdrafts 36.6 8.3 Current financial payables 124.9 52.8 Other current payables and liabilities 47 77.5 86.2 Non-current financial payables 914.3 260.5 Other non-current payables and liabilities Financial liabilities at fair value through profit or loss Non-hedging derivatives 35 0.5 Hedging derivatives 35 0.2 Total 1,933.7 1,028.8

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"Available-for-sale financial assets" include all those assets not classified in the preceding categories. "Financial liabilities at fair value through profit or loss" include (i) financial liabilities designated by the Group upon initial recognition as at fair value with changes in fair value through the income statement and (ii) financial liabilities held for trading. "Financial liabilities at amortized cost" include all financial liabilities, except for those previously designated as held for trading.

In compliance with IFRS 7, the following table presents the effects on the income statement and equity of each category of financial instruments held by the Group in 2006 and 2007. These mainly consist of gains and losses arising on the purchase and sale of financial assets and liabilities as well as changes in the value of the financial instruments measured at fair value and the interest income/expense relating to financial assets/liabilities measured at amortized cost.

Impact of financial instruments on income statement and equity, in compliance with IFRS 7

This table reports the effect on the income statement and balance sheet of financial instruments classified in accordance with IAS 39, and so it not directly reconcilable with the classification contained in the balance sheet.

Notes Dec-31-2007 Dec-31-2006

Net gains/ losses recognized on financial instruments

Financial assets/liabilities held for trading (0.3) 5.0 Hedging derivatives 3.2 0.5 __ of which gains/losses booked to equity 35 2.0 0.4 __ of which gains/losses booked to income statement 1.2 0.1 Gains/losses on available-for-sale financial assets 65.4 99.2 __ of which change in fair value booked to equity 3.3 28.8 __ of which gains/losses for period reversed from equity and booked to income statement 24 51.9 59.8 Gains/losses on loans/receivables (0.4) (1.1)

Interest income/expense (at internal rate of return) earned on financial assets/liabilities not at FVTPL Interest income on 9.5 10.9 __ Loans/receivables 9.5 10.9 __ Available-for-sale assets Interest expense on __ Financial liabilities at amortized cost (43.7) (12.6)

Expenses and fees not included in effective interest rate relating to financial assets __ Loans/receivables __ Available-for-sale assets relating to financial liabilities __ Financial liabilities at amortized cost

Interest income earned on impaired financial instruments __ Loans/receivables __ Available-for-sale assets

Provisions for impairment of financial assets (19.7) (17.8) __ Loans/receivables 12.5 15.4 __ Available-for-sale assets 7.2 2.4

More details on the characteristics of financial instruments held and the associated gains and losses can be found in the specific explanatory notes.

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12. Business combinations and acquisitions of minority interests

Acquisition of Recoletos Group

On April 12, 2007, RCS MediaGroup completed, through its indirect subsidiary Unidad Editorial, the purchase of all the share capital of Recoletos Grupo de Comunicacion, the unlisted holding company of the eponymous Spanish publishing group with interests in the sectors of printed media, radio, television and the internet. This is a landmark acquisition not only in terms of its economic and financial importance but also because of its strategic relevance to RCS's international expansion policy. This acquisition is a decisive event for the scale of RCS operations on a European level since it relates to an important Spanish publisher of leading newspapers in their own specific markets with a product portfolio that contains many synergies with the RCS Group, already present in Spain with the Unidad Editorial group.

The following table reports the fair value of the assets and liabilities acquired:

Fair value recognized Book value on acquisition Property, plant and equipment 54.1 54.1 Intangible assets 469.7 5.7 Equity investments and other assets 18.1 18.1 Deferred tax assets 21.6 21.6 Inventories 8.1 8.1 Trade receivables 64.9 64.9 Other current receivables and assets 14.3 14.3 Cash and cash equivalents 9.3 9.3 Non-current financial payables and liabilities (295.6) (295.6) Provisions for risks and charges (41.9) (41.9) Deferred tax liabilities (85.9) (85.9) Other non-current liabilities (366.8) (366.8) Trade payables (70.8) (70.8) Other current payables and liabilities (13.0) (13.0) Net assets acquired (213.9) (677.9)

Share of equity acquired (213.9) (677.9) Goodwill arising on acquisition 690.2 1,154.2

Total acquisition cost 476.3 476.3

Net cash outflow for acquisition (1,124.1) Payment to shareholders (476.3) Cash and banks acquired at April 12, 2007 9.3 Settlement of bank loans at April 12, 2007 (297.1) Settlement of loan from shareholders (360.0)

The acquisition cost is €476.3 million and includes €20.4 million in related costs. At the same time as making this acquisition RCS closed out €297.1 million in bank loans to Recoletos (€295.6 million in the balance sheet at March 31, 2007) while Unidad Editorial closed out the loan of €360 million from the former Recoletos shareholders.The acquisition brought €9.3 million in cash. RCS MediaGroup has obtained the financial resources needed for this acquisition mainly by using long-term revolving credit facilities already available and not specifically opened for this deal. The net cash outflows upon making this acquisition amounted to €1,096.8 million. This was followed by an additional outlay of €22.9 million by June 30, 2007, while the balance of €4.4 million was settled by December 31, 2007.

In application of IFRS 3, RCS has recognized the Recoletos group's historic titles at a fair value of €464 million. The useful life of these titles has been estimated at 30 years, with amortization being charged

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accordingly. The final valuation of the assets and liabilities to which goodwill was allocated was performed by independent experts. This recognition has resulted in the recording of €85.9 million in deferred tax liabilities and €690.2 million in goodwill.

Acquisition of Digicast

On April 2, 2007 RCS MediaGroup purchased 51% of Digicast S.p.A. for €17.1 million, all of which has been paid. This acquisition is accompanied by call and put options whereby RCS could increase its interest to 100% of this company's share capital. The options may be exercised in 2010, unless they are exercised earlier in the event of disagreement between the shareholders; in fact, the RCS Mediagroup Board of Directors decided on February 7, 2008 to exercise such options early. The following table reports the fair value of the assets and liabilities acquired:

Fair value recognized on Book value acquisition Property, plant and equipment 0.3 0.3 Intangible assets 26.6 14.7 Deferred tax assets 1.6 1.6 Trade receivables 8.7 8.7 Other current receivables and assets 0.4 0.4 Cash and cash equivalents 1.2 1.2 Provisions for employee benefits (0.4) (0.4) Provisions for risks and charges (3.8) (0.5) Trade payables (13.1) (13.1) Net assets acquired 21.5 12.9

Share of equity acquired 21.5 12.9 Goodwill arising on acquisition 15.2 23.8

Total acquisition cost 36.7 36.7

The acquisition cost consists of: Liability recognized for put option 19.6 Acquisition price 16.7 Related costs 0.4

The acquisition price has been settled as follows: Cash (bank transfer) 17.1

Net cash outflow for acquisition (15.9) Cash payment (17.1) Cash and banks acquired 1.2

The valuation of the assets and liabilities for the purposes of allocating goodwill under the purchase method was carried out by independent experts. Based on their work, the following have been identified and reported as intangible assets: • licenses at the acquisition date with television broadcasters (€6.3 million); • customer relationships with assumed contract renewals (€4.6 million); • satellite broadcasting rights for over 750 films not reported in the balance sheet because fully amortized (€1 million). The estimated useful life of the identified assets was assessed by the independent experts to be as follows: • licenses: 4 years; • customer relationships: 8 years; • library broadcasting rights: 4 years. Deferred tax liabilities of €3.3 million were recognized in respect of these assets.

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Acquisition of Automobili.com

On July 13, 2007 RCS MediaGroup bought, through its indirect subsidiary RCS Digital, 70% of Automobili.com S.r.l. for €1.5 million, all of which has been paid. This acquisition is accompanied by call and put options whereby RCS Digital could buy the remainder of share capital. The options may be exercised during 2010. The strike price of the options over the remaining shares will be determined on the basis of a minimum value of no more than €2 million, calculated with reference to turnover reported in 2007- 2009.

Book value Property, plant and equipment 0.1 Intangible assets 0.1 Trade receivables 0.2 Other receivables 0.2 Cash and cash equivalents 0.2 Provisions for employee benefits (0.0) Trade payables (0.3) Other assets (liabilities) (0.3) Net assets acquired 0.0

Share of equity acquired 0.0 Goodwill arising on acquisition 3.5

Total acquisition cost 3.5

The acquisition cost consists of: Liability recognized for put option 2.0 Acquisition price 1.5

The acquisition price has been settled as follows: Cash (bank transfer) 1.5

Net cash outflow for acquisition (1.3) Cash payment (bank transfer) (1.5)

The process of allocating part of the purchase price to the fair value of the investment in Automobili.com S.r.l. will be completed within 12 months of the acquisition date.

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Acquisition of Namesco Ltd.

On July 18, 2007 DADA purchased, through its subsidiary Register.it S.p.A., 100% of the British company Namesco Ltd. for cash consideration of GBP 24.5 million (around €36.7 million inclusive of related costs), paid in full on closing. The acquisition was funded partly by using cash belonging to Register.it and partly through a long-term bank loan for €30 million, guaranteed by the parent DADA S.p.A. under a credit mandate permitted by art. 1958 of the Italian Civil Code. The value of identifiable assets and liabilities at the acquisition date is as follows:

Book value Property, plant and equipment 5.0 Intangible assets 1.0 Financial assets 0.0 Cash and cash equivalents 0.2 Trade receivables 0.0 Other receivables 0.6 Trade payables (0.5) Other payables (4.3) Net assets acquired 2.1

Share of equity acquired 2.1 Goodwill arising on acquisition 34.6

Total acquisition cost 36.7

Payments (36.7) Net cash of subsidiary 0.2 Net cash used (36.4)

Since its acquisition the company has contributed €6.8 million in revenues to the Group's consolidated total, and €1.3 million in net income. The process of allocating part of the purchase price to the fair value of the investment in Namesco Ltd. will be completed within 12 months of the acquisition date.

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13. Segment information

In application of IAS 14, segment information will now be provided using the primary and secondary reporting formats. RCS has adopted the primary reporting format by business segment, defined as a distinguishable component of the Group that is engaged in providing a group of related products and services, and that is subject to risks and returns that are different from those of the Group's other business segments. The accounting policies under which segment figures are reported in the notes are consistent with those adopted for preparing the consolidated financial statements. The secondary reporting format, required by IAS 14, is by geographical area; this format reports revenues by geographical location of business for each region whose revenues represent at least 10% of the total. Following the acquisition of the Recoletos group on April 12, 2007, the Unidad Editorial group of Spain has reached a significant size, such that it has now exceeded the materiality thresholds specified in IAS 14 and now represents a separately reportable segment known as Newspapers Spain. The acquisition of the Digicast group has marked the RCS Group's entry into the television sector; even though these activities do not exceed the materiality thresholds specified by IAS 14, RCS views them as important and so has decided to create a new segment known as "Television".

Transactions between the different segments mostly refer to the exchange of goods, the provision of services and the provision and obtaining of funding. All such transactions are conducted on an arm's length basis, according to the standard of the goods and services provided.

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Primary reporting format by business segment

4th quarter

(€/millions)

Discontinuin g and discontinued Newspapers Newspapers Television Corporate Eliminations/a operations 4th quarter 2007 Italy Spain (1) Books Magazines Advertising DADA (2) (3) Functions djustments TOTAL (4) TOTAL Distribution revenues 87.1 80.9 184.8 27.5 2.9 (4.7) 378.6 378.6 Advertising revenues 100.4 94.4 0.0 56.8 194.7 1.0 1.0 (150.9) 297.4 4.5 302.0 Other publishing revenues 0.9 20.3 8.5 9.5 1.0 42.5 6.1 14.0 (15.2) 87.6 87.6 Total segment revenues 188.4 195.6 193.4 93.8 195.8 43.4 7.1 16.9 (170.7) 763.6 4.5 768.2 Intersegment revenues (102.5) (0.1) 0.2 (50.6) (3.1) (1.2) (13.4) (2.1) (2.1) Net revenues 85.9 195.5 193.6 43.3 192.6 42.2 7.1 3.4 763.6 2.4 766.1 Segment EBITDA 32.4 37.6 35.5 15.4 0.5 3.7 0.6 (14.8) (2.9) 108.0 0.8 108.9 Financial income (charges) (13.2) (13.2)

Other income (charges) from financial assets/liabilities (5.2) (0.6) (5.8)

- of which dividends from long-term equity investments (21.3) 9.6 0.3 0.3 Share of income (losses) from investments valued using equity method 0 2.0 0.9 3.4 (3.5) 7.6 7.6 Earnings before tax 97.2 0.2 97.4 Income taxes (41.4) 0.1 (41.3) Net income (loss) from continuing operations 55.8 0.4 56.2

Net income (loss) from discontinuing and discontinued operations 0.4 (0.4) (0.0) Net income (loss) before minority interests 56.2 56.2 Net (income) loss pertaining to minority interests (1.1) (1.1) Net income pertaining to the group 55.1 55.1

(€/millions)

Discontinuing and Newspaper Newspapers DADA Corporate Eliminations discontinued 4th quarter 2006 s Italy Spain (1) Books Magazines Advertising (2) Functions /adjustments TOTAL operations (4) TOTAL Distribution revenues 99.9 49.3 198.6 29.3 3.0 (9.6) 370.5 370.5 Advertising revenues 89.2 48.0 0.1 56.1 181.5 3.1 (137.0) 241.1 5.7 246.8 Other publishing revenues 2.1 8.6 13.0 9.2 1.8 28.4 13.7 (17.8) 58.9 0.1 59.0 Total segment revenues 191.3 105.8 211.6 94.6 183.3 31.5 16.7 (164.3) 670.5 5.8 676.3 Intersegment revenues (93.8) (6.1) (47.5) (3.1) (1.2) (13.5) (5.3) (5.3) Net revenues 97.5 105.8 205.5 47.1 180.2 30.3 3.2 670.5 0.5 671.0 Segment EBITDA 28.8 25.9 27.8 16.1 3.4 1.7 (3.9) 99.6 (4.7) 94.9 Financial income (charges) (3.7) (3.7) Other income (charges) from financial assets/liabilities 28.7 28.7 - of which dividends from long-term equity investments Share of income (losses) from investments valued using equity method 0.1 3.5 2.2 5.3 5.3

Earnings before tax 130.0 (4.7) 125.3 Income taxes (25.6) 1.5 (24.1)

Net income (loss) from continuing operations (3.2) (3.2) Net income (loss) from discontinuing and discontinued operations 3.2 3.2

Net income (loss) before minority interests 101.2 101.2 Net (income) loss pertaining to minority interests (6.4) (6.4) Net income pertaining to the group 94.8 94.8

(1) Following the acquisition of the Recoletos group, the amounts relating to Newspapers Spain have exceeded the materiality thresholds specified in IAS 14, meaning that Newspapers Spain is now a separately reportable segment; the figures for 4th quarter 2006 have been reclassified accordingly. (2) The DADA group's EBIT in 4th quarter 2007 includes €0.4 million in amortization charges for goodwill arising on first-time consolidation that has been allocated to intangible assets. (3) Refers to the Digicast group acquired on April 2, 2007. (4) Discontinuing and discontinued operations report income and expenses relating to the PlayRadio and CNR businesses arising in 4th quarter 2007. AGR has been reclassified to Corporate Functions.

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Year ended December 31

(€/millions)

Discontinuing and Newspapers Newspaper Television Corporate Eliminations/ discontinued Year ended Dec-31-2007 Italy s Spain (1) Books Magazines Advertising DADA (2) (3) Functions adjustments TOTAL operations (4) TOTAL Distribution revenues 378.9 277.4 698.6 123.6 10.5 (28.6) 1,460.5 17.3 1,477.8 Advertising revenues 334.1 286.6 0.1 174.7 639.3 13.0 3.0 0.0 (481.8) 969.0 0.1 969.1 Other publishing revenues 21.6 64.8 32.1 32.4 3.7 145.5 18.3 54.9 (64.7) 308.5 308.5 Total segment revenues 734.6 628.8 730.8 330.6 643.0 158.5 21.4 65.4 (575.2) 2,737.9 17.4 2,755.3 Intersegment revenues (342.4) (0.6) (15.4) (154.9) (5.4) (4.1) (0.0) (52.4) (15.3) (15.3) Net revenues 392.2 628.2 715.4 175.7 637.6 154.4 21.3 13.0 2,737.9 2.1 2,740.0 Segment EBITDA 101.5 95.0 58.4 24.5 5.451 14.3 0.8 (37.7) (2.9) 259.4 (6.5) 252.9 Financial income (charges) (35.7) (0.2) (35.9) Other income (charges) from financial assets/liabilities 55.1 13.1 68.2

- of which dividends from long-term equity investments 11.982 12.0 Share of income (losses) from investments valued using equity (0.2) 2.2 2.0 4.1 3.8 9.3 9.3 Earnings before tax 288.2 6.4 294.6 Income taxes (61.5) 0.6 (60.9) Net income (loss) from continuing 226.7 7.0 233.7

Net income (loss) from discontinuing and discontinued operations 7.0 (7.0) 0.0 Net income (loss) before minority 233.7 233.7 Net (income) loss pertaining to minority interests (14.0) (14.0) Net income pertaining to the group 219.7 219.7

(€/millions)

Discontinuing and Newspapers Newspapers Corporate Eliminations/adju discontinued Year ended Dec-31-2006 Italy Spain (1) Books Magazines Advertising DADA (2) Functions stments TOTAL operations (4) TOTAL Distribution revenues 407.0 169.7 690.0 136.1 11.3 (30.2) 1,383.9 1,383.9 Advertising revenues 311.0 147.1 0.5 167.9 606.1 7.0 0.0 (444.7) 794.8 20.0 814.8 Other publishing revenues 19.7 24.8 31.0 31.0 2.0 104.5 56.5 (67.5) 201.9 0.2 202.1 Total segment revenues 737.8 341.6 721.4 335.0 608.1 111.4 67.8 (542.4) 2,380.7 20.2 2,400.9 Intersegment revenues (317.4) (24.8) (140.6) (3.9) (2.8) (52.5) (21.2) (21.2) Net revenues 420.4 341.6 696.6 194.4 604.2 108.6 15.3 2,380.7 (1.0) 2,379.7 Segment EBITDA 111.3 49.9 53.5 25.1 8.246 9.3 (29.7) 227.7 (14.6) 213.1 Financial income (charges) 2.0 (0.2) 1.8 Other income (charges) from financial assets/liabilities 70.5 70.5 - of which dividends from long-term equity investments 10.1 10.1 10.1 Share of income (losses) from investments valued using equity method (1.0) (0.8) 1.6 3.4 3.2 3.2

Earnings before tax 303.3 (14.8) 288.5 Income taxes (58.6) 4.7 (53.9)

Net income (loss) from continuing operations 244.8 (10.1) 234.7

Net income (loss) from discontinuing and discontinued operations (10.1) 10.1 (0.0) Net income (loss) before minority interests 234.6 234.6 Net (income) loss pertaining to minority interests (15.1) (15.1) Net income pertaining to the group 219.5 219.5

1) Following the acquisition of the Recoletos group, the amounts relating to Newspapers Spain have exceeded the materiality thresholds specified in IAS 14, meaning that Newspapers Spain is now a separately reportable segment; the figures at December 31, 2006 have been reclassified accordingly. (2) The DADA group's EBIT at December 31, 2007 includes €1.5 million in amortization charges for goodwill arising on first-time consolidation that has been allocated to intangible assets. (3) Refers to the Digicast group acquired on April 2, 2007. (4) Discontinuing and discontinued operations report income and expenses relating to the PlayRadio and CNR businesses arising in the months prior to their respective transfer and sale, as well as the capital gains realized on transfer and disposal plus associated taxes; AGR has been reclassified to Corporate Functions, along with the associated amounts at December 31, 2006 as required by IFRS 5.

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(€/millions) Eliminatio Newspapers Newspapers Television Corporate Books Magazines Advertising DADA (1) ns/adjustm TOTAL Italy Spain (2) Functions Dec-31-2007 ents Segment assets 275.4 1,711.6 582.7 114.1 323.8 203.1 48.3 193.9 3,452.9 Investments in associated companies and JVs 1.1 10.4 14.1 0.0 39.1 4.3 0.0 78.4 147.5 Unallocated financial assets 110.2 Unallocated tax assets 173.3 Total assets 3,884.0 Segment liabilities 277.6 277.5 303.5 118.5 72.8 77.7 11.8 100.7 1,240.3 Unallocated financial liabilities 1,076.4 Unallocated tax liabilities 179.2 Total liabilities 2,495.9

Other segment information Increase in provisions (1.4) (0.8) (1.0) (1.3) (0.5) (0.3) (0.1) (0.5) (5.9) Increase in employee benefit provisions (3) (2.8) (0.6) (1.7) (0.4) (0.1) (0.5) (6.1) Depreciation of property, plant & equipment (19.0) (14.7) (3.7) (0.7) (0.1) (2.0) (0.1) (6.8) (47.1) Amortization of intangible assets (0.3) (18.8) (3.1) (0.6) (0.0) (4.8) (8.8) (12.2) (48.8) Impairment of fixed assets (0.2) 0.0 (2.2) 0.0 0.0 0.0 0.0 (2.5) (4.9) Investment in prop., plant & equip. & intang. assets 45.6 31.8 9.1 0.6 0.7 2.5 5.0 12.1 107.4

(€/millions) Eliminatio Newspapers Newspapers Corporate Books Magazines Broadcast Advertising DADA (1) ns/adjustm TOTAL Italy Spain Functions Dec-31-2006 ents Segment assets 265.6 315.0 560.3 118.9 41.6 291.0 145.5 386.9 2,124.8 Investments in associated companies and JVs 1.3 10.7 9.4 35.0 0.8 15.1 72.3 Unallocated financial assets 327.5 Unallocated tax assets 153.0 Total assets 2,677.6 Segment liabilities 280.5 97.2 302.9 108.0 13.9 89.7 56.9 79.5 1,028.6 Unallocated financial liabilities 321.8 Unallocated tax liabilities 87.1 Total liabilities 1,437.5

Other segment information Increase in provisions (1.7) (1.7) (2.1) (1.4) (0.5) (0.1) (7.6) Increase in employee benefit provisions (3) (7.2) (1.1) (2.8) (1.1) (0.6) (1.4) (14.2) Depreciation of property, plant & equipment (16.7) (5.9) (3.5) (0.7) (0.3) (1.3) (5.2) (33.6) Amortization of intangible assets (0.3) (5.1) (1.9) (0.5) (4.1) (8.3) (20.2) Impairment of fixed assets (5.3) (5.3)

Investment in prop., plant & equip. & intang. assets 26.2 12.8 7.2 0.1 2.9 5.0 22.5 76.7

(1) DADA's assets include the goodwill arising on its first-time consolidation (€55 million), part of which allocated to other intangible assets during 2006, the associated deferred tax liabilities and intragroup eliminations relating to trade receivables. Goodwill amortization, included in amortization of intangible assets, amounts to €1.5 million. (2) Refers to the Digicast group acquired on April 2, 2007. (3) The "Increase in employee benefit provisions" shown in the primary reporting format does not include the provision for employee termination indemnities accrued and paid in the period (€7.2 million at December 2007 compared with €3.5 million at December 2006). (4) The primary reporting format presents investments on a cash-accounting basis, ie. those that were paid for in the period.

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Secondary reporting format by geographical area 4th quarter (€/millions) Eliminations Other / 4th quarter 2007 Italy France Spain countries adjustments TOTAL Distribution revenues 203.9 61.0 81.1 35.8 (3.2) 378.6 Advertising revenues 200.4 96.1 0.9 297.4 Other publishing revenues 36.1 5.0 27.3 18.9 0.4 87.6 Total segment revenues 440.4 66.0 204.5 55.5 (2.8) 763.6 Intersegment revenues (3.5) (1.8) (0.1) 2.6 Net revenues 436.8 64.2 204.4 58.2 763.6 Discontinuing and discontinued operat 4.5 4.5 Other and eliminations (2.1) (2.1) Total 439.2 64.2 204.4 58.2 766.0

Eliminations Other / 4th quarter 2006 (1) Italy France Spain countries adjustments TOTAL Distribution revenues 209.3 73.7 49.5 38.8 (0.9) 370.5 Advertising revenues 190.8 0.1 49.7 0.6 (0.1) 241.1 Other publishing revenues 24.5 8.7 13.2 14.0 (1.5) 58.9 Total segment revenues 424.6 82.5 112.4 53.4 (2.5) 670.5 Intersegment revenues (1.2) (0.2) (0.3) (0.5) Net revenues 423.3 82.3 112.2 52.9 670.5 Discontinuing and discontinued operat 5.8 5.8 Other and eliminations (5.3) (5.3) Total 423.8 82.3 112.2 52.9 671.0

Year ended December 31

Eliminations Other / Year ended Dec-31-2007 Italy France Spain countries adjustments TOTAL Distribution revenues 846.5 200.3 278.5 141.4 (6.3) 1,460.5 Advertising revenues 672.8 293.1 3.0 969.0 Other publishing revenues 145.8 14.8 85.9 64.8 (2.8) 308.5 Total segment revenues 1,665.2 215.1 657.5 209.2 (9.1) 2,737.9 Intersegment revenues (5.8) (2.3) (0.6) (0.3) Net revenues 1,659.4 212.8 656.9 208.9 2,737.9 Discontinuing and discontinued operat 17.4 17.4 Other and eliminations (15.3) (15.3) Total 1,661.5 212.8 656.9 208.9 2,740.0

Eliminations Other / Year ended Dec-31-2006 (1) Italy France Spain countries adjustments TOTAL Distribution revenues 852.7 233.9 170.6 129.4 (2.7) 1,384.0 Advertising revenues 639.1 0.4 153.1 2.3 (0.1) 794.8 Other publishing revenues 111.4 14.4 36.1 44.7 (4.7) 201.9 Total segment revenues 1,603.2 248.7 359.8 176.4 (7.5) 2,380.7 Intersegment revenues (5.5) (0.5) (0.7) (0.5) Net revenues 1,597.7 248.2 359.2 175.9 2,380.7 Discontinuing and discontinued operat 20.2 20.2 Other and eliminations (21.2) (21.2) Total 1,596.7 248.2 359.2 175.9 2,379.7 1) The figures for 2006 have been restated to reflect the reclassification of RCS Broadcast and CNR to discontinuing and discontinued operations (assets held for sale).

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(€/millions) Other Dec-31-2007 Italy France Spain countries TOTAL

Segment assets 1,349.8 261.6 1,726.9 114.8 3,453.0 Investments in associated companies and JV 124.7 9.5 10.4 2.9 147.5 Unallocated financial assets 110.2 Unallocated tax assets 173.3 Total assets 3,884.0

Investment in intangible assets 103.6 4.5 1,165.7 2.1 1,275.9 Investment in property, plant & equipment 48.6 2.6 52.9 1.4 105.4

Other Dec-31-2006 Italy France Spain countries TOTAL

Segment assets 1,463.4 258.1 324.2 79.1 2,124.8 Investments in associated companies and JV 53.5 8.1 10.7 0.0 72.3 Unallocated financial assets 327.5 Unallocated tax assets 153.0 Total assets 2,677.6

Investment in intangible assets 38.8 6.3 12.0 10.7 67.8 Investment in property, plant & equipment 25.6 2.1 22.1 0.5 50.3

14. Transactions with related parties

Transactions with related parties are carried out on an arm's length basis as part of the normal course of business of each party concerned. The conduct of transactions with related parties is governed by specific procedures approved by the Board of Directors, as described in the "Ownership structure and corporate governance" section of the Report on operations. As required by IAS 24, the following table reports the total value of transactions and balances in 2007 between RCS group companies and "related parties", excluding intragroup transactions and balances which are eliminated on consolidation.

Other Current Current Trade Trade operating Financial financial financial Net revenues Cost of services receivables payables revenues and charges receivables payables income

Joint ventures 37.4 1.5 28.6 21.5 500.3 54.4 3.5 1.8 Associated companies 9.3 - 0.3 7.0 22.4 60.5 0.6 0.04

Total related parties 46.7 1.5 28.9 28.5 522.7 114.9 4.1 1.8 Reported total 845.6 33.4 125.0 779.8 2,737.9 1,896.0 65.1 52.3 % of reported total 6% 4% 23% 4% 19% 6% 6% 4%

It is reported that there were no transactions with "related parties" that were atypical or unusual or fell outside the normal course of business or such that would have a significant impact on the Group's income statement, balance sheet and financial position. Transactions with joint ventures mostly refer to M-dis S.p.A., in respect of which group companies have earned €498.3 million in revenues, incurred €39.1 million in costs, earned €1.8 million in other operating revenues and income, incurred €1.7 million in financial charges and reported €35.3 million in trade receivables, €13 million in trade payables and €25 million in financial payables. The more significant trading

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relationships with other associated companies are with Eurogravure, Mach 2, IGPDecaux, Editoriale del Mezzogiorno, Edi T.A.A. and the Finelco group. Transactions between group companies and subsidiary and associated companies mostly refer to the exchange of goods, the provision of services, the provision and obtaining of funding, as well as tax-related transactions. All such transactions are conducted on an arm's length basis, according to the standard of the goods and services provided.

Transactions by RCS MediaGroup S.p.A. with subsidiary and associated companies, which are reported in the parent company's explanatory notes to its financial statements, mostly refer to: • transactions associated with agreements for the centralized provision of services (communication, corporate and legal affairs and planning); • commercial transactions involving the letting of offices and work space by the parent company to its subsidiaries; • financial transactions, involving loans and current account transactions undertaken as part of the centralized treasury management service.

Group tax election for IRES purposes As part of the Group's tax management, its Italian subsidiaries have opted to make a group tax election under Decree 344 dated December 12, 2003 in order to achieve a tax saving for the Group through the immediate offsetting of tax credits and tax losses against taxes due, and to benefit from the wider opportunities available for getting around the abolition of exemption for equity investment writedowns and dividend tax credits. Intercompany transactions deriving from the group tax election are based on the objectives of fairness and neutrality.

Group tax election for VAT purposes RCS MediaGroup S.p.A. has continued during 2007 to make use of the rules allowing the filing of group VAT returns, ending the year with a net payable balance of €6 million. RCS MediaGroup S.p.A. transferred net receivables totaling around €2.3 million to the group VAT position during 2007.

As required by IAS 24, key management personnel have been identified as members of the Board of Directors and Board of Statutory Auditors of the parent company and its subsidiaries, the parent company's Chief Executive Officer and Chief Operating Officer, the Chief Executive Officers and Chief Operating Officers of RCS Quotidiani, RCS Libri, RCS Pubblicità, RCS Periodici and Unidad Editorial (all directly and/or indirectly controlled by RCS MediaGroup S.p.A.), and the directors and statutory auditors of DADA. The following table presents the required information regarding their compensation in the various forms received:

Cost of services Payroll costs Other equity instruments Board of Directors - emoluments 4.3 1.1 Board of Statutory Auditors - emoluments 0.9 Chief Executive Officer & Chief Operating Offer - other remuneration 8.9 Total related parties 5.2 8.9 1.1 Reported total 1,114 504.0 4.5 % of reported total 0.5% 2% 25%

"Payroll costs" also include €8,9 million in compensation paid to key management personnel in the form of remuneration.

"Other equity instruments" report the overall cost of stock options granted as from the date they vest.

In addition to the disclosure requirements envisaged by IAS 24 and so not included in the amounts reported on the face of the income statement and balance sheet, it is reported that members of the RCS Group had dealings during 2007 with companies belonging to the groups headed by Mediobanca S.p.A. and Fiat S.p.A., which have direct and indirect shareholdings of more than 10% of RCS MediaGroup S.p.A.'s ordinary share capital. The overall amounts involved in these transactions are set out below. The transactions with companies in the Mediobanca Group refer to advisory fees, mainly in relation to acquisition of the Recoletos

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group, and financial relationships mostly relating to leasing arrangements. The transactions with companies in the Fiat Group are trade-related and mostly refer to the sale of advertising space.

Non- Raw Derivative Current Trade current Trade Net materials Financial financial financial receivables financial payables revenues and services charges instruments payables payables consumed

Fiat Group companies 4.3 11.5 0.2 Mediobanca Group companies 0.3 4.1 30.2 0.4 4.3 1.8

Total 0.3 4.3 4.1 30.2 0.4 11.5 4.5 1.8 Reported total 5.3 845.6 125.0 914.3 779.8 2,737.9 1,896.0 35.7 % of reported total 5.7% 0.5% 3.3% 3.3% 0.1% 0.4% 0.2% 5.0%

Lastly, it is reported that RCS MediaGroup S.p.A. and some of its subsidiaries had trade and financial dealings during the year with the existing shareholders and/or companies under their control. These transactions were nonetheless carried out in the ordinary course of business and conducted on an arm's length basis.

15. Increase in assets built internally

The amount of €4.5 million relates to the DADA group and refers to the capitalization of costs incurred to develop new products and services mostly for websites and consumer services. The increase of €1 million on the prior year is due to the business's geographical expansion and diversification of its product range.

16. Raw materials and services consumed

These amount to €1,896 million and consist of €582 million in costs for raw and ancillary materials, consumables and goods, €1,114.3 million in costs for services, and €199.7 million in rentals and leasing. These items are discussed below:

Raw and ancillary materials, consumables and goods

Details of raw and ancillary materials, consumables and goods are presented below:

Description 2007 2006 Change Paper consumption 258.5 227.8 30.7 Purchase of finished products 133.1 169.3 (36.2) Purchase of other materials 121.0 106.9 14.1 Purchase of advertising space 69.7 69.1 0.6 Increase in inventory writedown provision (0.3) (1.0) 0.7

Total 582.0 572.1 9.9

The increase of €9.9 million is basically due to an increase of €30.7 million in paper purchases, of which €28.1 million attributable to Newspapers Spain, mostly as a result of the first-time consolidation of the Recoletos group, and €2.8 million to Magazines, as well as to (€14.1 million) in extra costs incurred for purchasing other materials, mostly attributable to semi-finished goods and gadgets purchased by GE Fabbri as partly offset by lower purchases by Italy's Partworks division as a result of fewer new releases. These changes have been partly absorbed by the reduction in finished product purchases (€36.2 million) mostly for Flammarion, which changed its method of recognizing margins on its distribution service (-€39.7 million), part of which offset by the higher cost of finished product purchases by Newspapers Spain, also as a result of consolidating the Recoletos group.

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Services

Description 2007 2006 Change Subcontracted work 279.0 255.9 23.1 Advertising, promotions, merchandising 231.7 201.3 30.4 Transport costs 127.3 104.7 22.6 Other services 145.3 96.1 49.2 Freelance staff and reporters 99.0 85.7 13.3 Professional and consulting fees 61.2 56.2 5.0 Commission expense 57.6 53.6 4.0 Post, telephone and telegraph 36.4 35.5 0.9 Travel and accommodation 34.5 28.4 6.1 Maintenance and refurbishing 19.9 14.4 5.5 Energy and power 12.9 10.9 2.0 Directors' and statutory auditors' fees 5.2 4.5 0.7 Insurance 4.3 4.3 0.0 Total 1,114.3 951.5 162.8

The cost of services has increased by €162.8 million on 2006, mostly attributable to changes in the scope of consolidation after acquiring the Recoletos group, the Digicast group and the Skirà group, DADA as a result of increased business and enlargement of its group, and Newspapers Italy. The most significant changes relate to the increase in advertising costs attributable to Newspapers Spain (€35.6 million), partly absorbed by lower costs incurred by the Magazines segment (€7 million).

Rentals and leasing

These costs, totaling €199.7 million, mostly refer to copyrights for text and photographs and to operating leases for the rental of buildings, office machinery and motor vehicles. The increase of €41.3 million on the prior year is chiefly due to the first-time consolidation of the Recoletos group by Newspapers Spain (€19.9 million) and of the Digicast group (€2.9 million).

17. Payroll costs

These amount to €504 million in 2007. The increase of €85.4 million particularly refers to Newspapers Spain (€60.9 million), the Digicast group (€2.4 million), the Skirà group (€1.8 million), as well as higher costs for DADA's new international activities (€8.7 million). Non-recurring charges amount to €10.4 million and comprise the cost of stock options, granted on November 11, 2005 and waived by their beneficiaries (€4.4 million), as well as costs for reorganizing Newspapers Italy (€6 million). Non-recurring income of €2.1 million has arisen on the adoption of a different actuarial calculation of employee termination indemnities in compliance with IAS 19, resulting from legislative changes regarding the treatment of such indemnities. A total of €8.7 million in non-recurring charges were reported in 2006 for top management changes involving the Chief Executive Officer and some of the Group's other managers.

Description 2007 2006 Change Wages and salaries 364.1 292.5 71.6 Social security charges 98.8 85.5 13.3 Employee benefits 22.7 20.5 2.2 Other costs 18.4 20.1 (1.7) Total 504.0 418.6 85.4

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The average workforce during the year is broken down by category as follows:

Category 2007 2006 Change Senior managers/office staff 4,140 3,217 923 Journalists 1,756 1,354 402 Blue collar 732 608 124 Total 6,628 5,179 1,449

18. Other operating revenues and income

Description 2007 2006 Change Cost recharges 17.0 15.4 1.6 Operating grants 1.2 8.6 (7.4) Ordinary release of provisions for risks 3.5 6.7 (3.2) Rental income 5.5 6.6 (1.1) Sale of returns, leftovers and sundry material 15.3 6.4 8.9 Other revenue 22.6 18.6 4.0 Total 65.1 62.3 2.8

These have increased mainly as a result of consolidating the Recoletos group and of higher co-publication revenue. The figure for 2006 included €6.8 million in grants towards the cost of paper.

19. Other operating expenses

These are detailed as follows:

Description 2007 2006 Change Taxes 22.3 22.6 (0.3) Other overheads 17.5 23.0 (5.5) Contest prizes 1.8 1.8 0.0 Bad debts 2.4 3.3 (0.9) Total 44.0 50.7 (6.7)

The taxes mostly consist of VAT paid by the publishing houses under art. 74 of Presidential Decree 633/1972 and local property taxes. "Other overheads" include €4.1 million in positive margins passed back to co-publishers working with the Books business, €8.3 million in entertaining, gifts and association dues, and €2.7 million in operating costs in the foreign partworks division.

20. Impairment of trade and other receivables

This amounts to €10.2 million in 2007, having decreased by €2 million on the prior year due to fewer writedowns against receivables, particularly by the Advertising segment.

21. Amortization, depreciation and impairment

These charges amount to €100.8 million, up by €41.7 million on the prior year.

Description 2007 2006 Change Amortization of intangible assets 48.8 20.2 28.6 Depreciation of property, plant and equipment 47.1 33.6 13.5 Impairment of fixed assets 4.9 5.3 (0.4) Total 100.8 59.1 41.7 144

The increase in amortization of intangible assets mostly reflects the first-time consolidation not only of the Recoletos group, accounting for most of the €13.7 million additional charge reported by Newspapers Spain, but also of the Digicast group, which charged amortized €6.3 million in television rights. The increase in amortization was also explained by software licenses purchased by Corporate Functions and the Flammarion group (€5.4 million), higher amortization at the DADA group (€0.7 million), and amortization resulting from the allocation of goodwill arising on consolidation of the Digicast group to "Concessions, licenses and trademarks" (€1.6 million), "Other intangible assets" (€0.6 million) and "Intellectual property rights" (€0.3 million). The increase at Newspapers Spain comprises €11.6 million in amortization arising on allocation to "Concessions, licenses and trademarks" of part of the Recoletos group's purchase price, and €2.1 million in amortization of new software licenses and new television and film rights acquired by the Unidad Editorial group. Depreciation of property, plant and equipment has increased by €13.5 million, primarily due to the higher charges booked by Newspapers Italy and Spain after revising the remaining useful life of plant and machinery currently used to print Gazzetta dello Sport as a result of starting the full-color printing project, and after continuing to implement full-color printing in Spain for the daily El Mundo. The impairment losses refer to the loss in value of goodwill arising on consolidation of the Skirà group (€1.6 million) and the writedown of leasehold improvements after the related lease agreement was terminated early.

The following table shows the current and future effect on production plant and machinery at Gazzetta dello Sport of having revised its useful life after introducing full-color printing and replacing such machinery.

Depreciation Year Original estimate New estimate Change 2006 1.7 2.6 0.9 2007 1.3 4.1 2.8 2008 1.1 1.3 0.2 beyond 2008 3.9 0 (3.9) Total 8.0 8.0 0.0

22. Financial income

Description 2007 2006 Change Interest income on bank deposits 3.6 5.2 (1.6) Interest income on short-term receivables 3.0 2.5 0.5 Exchange gains 3.3 1.9 1.4 Gains on derivatives 2.0 1.3 0.7 Gains on sale of securities held for trading 0.3 5.0 (4.7) Interest on tax credits 1.0 1.4 (0.4) Other interest income 3.4 5.8 (2.4) Total 16.6 23.1 (6.5)

The decrease of €6.5 million on the prior year is explained by the fact that last year's figure included the capital gain of €5 million on the partial sale of units in hedge funds managed by Duemme Sgr, combined with lower interest income this year on bank deposits (€1.6 million), as a result of having less liquidity in 2007 than the year before.

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23. Financial charges

Description 2007 2006 Change Interest expense on finance leases (7.6) (5.5) (2.1) Exchange losses (4.2) (3.8) (0.4) Interest expense due to banks (4.0) (2.7) (1.3) Interest expense on loans (28.9) (2.2) (26.7) Losses on derivatives (1.5) (0.9) (0.6) Other interest expense (6.0) (6.0) 0.0 Total (52.2) (21.1) (31.1)

Financial charges are up due to higher interest expense on bank loans (€28million), reflecting the debt required to finance the acquisition of the Recoletos group, as well as increased interest on finance leases (€2.1 million) taken out to fund investments in newspaper full-color printing projects.

24. Other income (charges) from financial assets/liabilities

Description 2007 2006 Change Capital gains on sale of equity investments 52.1 62.2 (10.1) Equity investment impairment (7.1) (2.2) (4.9) Dividends 11.9 10.1 1.8 Other (1.8) 0.4 (2.2) Total 55.1 70.5 (15.4)

These include the capital gains realized by the parent company on the sale of its shares in Intesa Sanpaolo (€51.8 million), with €1.7 million in related costs, and on the sale of the investment in 3 Italia (€1.8 million) and the capital gain realized by DADA on the sale of Softec (€0.2 million). The dividends refer to amounts declared by Intesa Sanpaolo (€11.2 million), by Poligrafici Editoriale (€0.3 million), by minor companies in the Unidad Editorial group (€0.2 million) and by Raisat (€0.1 million). Equity investment impairment includes €4.5 million for Poligrafici Editoriale S.p.A., to adjust its value to its year-end share price, €1.6 million for MB Venture Capital and adjustments to minor companies in the Unidad Editorial group (€0.7 million) and the Flammarion group (€0.3 million). There was also a capital loss arising on the disposal of Garamond (€0.9 million).

25. Share of income (losses) from investments valued using equity method

Description 2007 2006 Change Share of income of companies valued at 12.7 6.4 6.3 equity Share of losses of companies valued at (3.4) (3.2) (0.2) equity Total 9.3 3.2 6.1

The share of income (losses) from investments valued using the equity method was a net gain of €9.3 million (€3.2 million in 2006) and mostly reflects the positive results reported by IGPDecaux (€4.1 million), M-dis (€1.9 million), minor companies in the Unidad Editorial group (€2.2 million), Mach 2 (€0.6 million), minor companies in the Flammarion group (€0.5 million), RL Libri (€0.3 million) and Hachette Rizzoli Magazine (€0.1 million); the results also reflect the revaluation of RBA Fabbri France (€0.7 million) and Inimm Due (€2.5 million). This was partially offset by the Group's share of losses reported by GE Eaglemoss (€0.1 million), Eurogravure (€0.4 million), Edi T.A.A. (€0.2 million) and Gruppo Finelco (€1.7 million).

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26. Income taxes

The income taxes reported in the income statement are as follows:

2007 2006 Change Current taxes: (65.4) (53.8) (11.6) - Income taxes (45.2) (33.7) (11.5) - Irap (Italian regional business tax) (20.2) (20.1) (0.1) Change in deferred tax assets/liabilities: 3.9 (4.8) 8.7 - Assets 7.3 (1.5) 8.8 - Liabilities (3.4) (3.3) (0.1) Total taxes (61.5) (58.6) (2.9)

The increase in income taxes is principally due to Newspapers Spain (€7.7 million), partly as a result of first- time consolidation of the Recoletos group, and to higher taxes payable under the Italian group tax election (€7 million). The increase in deferred tax assets is mostly due to their recognition by RCS Investimenti S.p.A. on carryforward tax losses, which are expected to be recovered against future taxable income. Current tax assets and current tax liabilities are analyzed below:

Dec-31-2007 Dec-31-2006 Change Current tax assets 68.1 75.1 (7.0) Current tax liabilities (21.5) (13.5) (8.0)

"Current tax assets" of €68.1 million mostly consist of IRPEG (Italy's former corporate income tax) credits, for which application for repayment has been made in previous years, carried forward credits for IRES (Italy's new corporate income tax) and IRAP (Italy's regional business tax), tax credits transferred to the parent company to settle IRES on account and withholdings incurred. The decrease is principally attributable to the parent company after the partial transfer of its carried forward IRES credit to companies participating in the group tax election for Italy and to other group companies to help them settle IRAP and other taxes paid on a group filing basis. "Current tax liabilities" reflect tax of €21.5 million due on current-year income. Deferred tax assets and deferred tax liabilities are analyzed as follows:

Recognized in Exchange Recognized in Change in scope Dec-31-2006 income differences and Dec-31-2007 equity of consolidation statement other changes Deferred tax assets -Carried forward tax losses 19.2 8.9 0.3 28.4 -Provisions that adjust assets 10.9 3.0 13.9 -Provisions for risks and charges 13.5 (2.0) 0.3 11.8 -Costs with deferred deductibility 15.6 (4.6) 21.4 32.4 -Deferred tax arising from tax transparency criteria 3.6 1.0 4.6 -Deferred tax arising from group tax election 0.0 0.0 -Property, plant and equipment and intangible assets 7.6 0.4 8.0 -Discounting of receivables 0.7 0.1 0.2 1.0 -Leasing 2.0 (0.6) 1.4 -Reversal of prepaid advertising costs 4.7 (2.4) (2.1) 0.2 -Measurement of derivatives (1.1) (1.1) -Other 1.2 3.5 0.2 (0.2) 4.7 Total deferred tax assets 77.9 7.3 (2.1) 21.6 0.6 105.3 Deferred tax liabilities -Leasing (4.6) 0.2 (4.4) -Property, plant and equipment and intangible assets (52.0) 0.4 (83.7) (0.5) (135.8) -Receivables (impairment) (1.2) (0.2) (1.4) -Discounting of payables (2.1) 2.3 (0.1) 0.1

-Actuarial valuation of employee benefit provisions (4.9) (0.4) (0.1) (5.4) -Measurement of derivatives 0.1 (0.2) (0.3) (0.1) (0.5) -Provisions for risks and charges (3.9) (0.3) 0.1 (4.1) -Other (5.0) (5.2) 3.3 0.7 (6.2) Total deferred tax liabilities (73.6) (3.4) 3.0 (83.7) - (157.7)

Net total 4.3 3.9 0.9 (62.1) 0.6 (52.4)

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The actual tax charge reported in the financial statements is reconciled to the theoretical tax charge, resulting from the application of current rates, as follows:

2007 2006 Earnings before tax 288.2 303.3 Theoretical income tax 95.1 100.1 Tax effect of permanent differences (2.0) (16.6) Effect of using tax losses (19.6) (5.0) Net effect of temporary deductible and taxable differences (26.1) (45.8) Taxes relating to prior years (2.2) 1.0 Current taxes 45.2 33.7 Ires - deferred tax (4.1) 4.9 Income taxes reported in the financial statements, excluding current & deferred IRAP 41.1 38.6 IRAP - current 20.2 20.1 IRAP - deferred 0.2 (0.1)

Income taxes reported in the financial statements (current & deferred) 61.5 58.6

27. Net income (loss) from discontinuing and discontinued operations

This includes the capital gain realized on transfer of the subsidiary RCS Broadcast (€13.7 million) less €0.6 million in tax and the pre-transfer loss incurred by RCS Broadcast in relation to the Play Radio business of €6.7 million (€10.6 million loss in 2006), as well as taxes relating to liabilities of the discontinued operation (€0.9 million). It also includes the capital gain realized on the sale of CNR (€0.3 million) and the net income of €0.6 million earned by CNR in 2007 (€0.5 million in 2006). Note 13 on segment information contains the income statement of the discontinued operations.

28. Net (income) loss pertaining to minority interests

The share of net income (loss) pertaining to minority interests is analyzed as follows:

2007 2006 Dada Group 6.8 7.4 Ge Fabbri Ltd 4.1 3.9 Unidad Editorial (0.6) 1.8 Flammarion Sa 1.6 1.1 RCS International Advertising BV 2.0 0.7 Adelphi Edizioni S.p.A. (0.1) 0.1 Other minor companies 0.2 0.1 Total 14.0 15.1

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29. Earnings per share

2007 2006 Net income (loss) pertaining to the group from continuing 212.7 229.6 Dividendsti paid to savings shares 1.5 3.8 Net income for determining basic earnings per share 211.2 225.8 Net income (loss) from discontinuing and discontinued operations 7.0 (10.1)

No. ordinary shares 732,669,457.0 732,669,457.0 Bonus grant 14,851,777.0 14,851,777.0 No. treasury shares (19,430,225.0) (19,430,225.0) Ordinary shares outstanding during the year 728,091,009.0 728,091,009.0

Dilution arising from contingently issuable ordinary shares: -number of ordinary shares relating to options: 14,859,836 14,313,675 -number of shares that could be issued at fair value (15,689,176) (16,883,531)

Anti-dilutive effect (829,340) (2,569,856)

Weighted average number of ordinary shares for determining 728,091,009.0 728,091,009.0 diluted earnings per share

Basic earnings per share: continuing operations 0.29 0.31

Diluted earnings per share: continuing operations 0.29 0.31 Basic earnings per share: discontinuing and discontinued 0.01 (0.01) operations Diluted earnings per share: discontinuing and discontinued 0.01 (0.01) operations

30. Non-recurring income (charges)

Details of the non-recurring income and charges included in the results for 2007 are shown below, also indicating their percentage share of the line items in which they have been classified:

Other income Other operating Other Amortization, Raw materials and Financial (charges) from Payroll costs revenues and operating depreciation and services consumed (charges) income financial income expenses impairment assets/liabilities

Non-recurring charges - (10.4) - (1.3) (1.9) - - Non-recurring income - 2.1 9.9 - - - 52.1 Total - (8.3) 9.9 (1.3) (1.9) - 52.1 Reported total (1,896.0) (504.0) 65.1 (44.0) (100.8) (35.6) 55.1 % of reported total 0% 2% 15% 3% 2% 0% 95%

Non-recurring income relates to the overall capital gain of €51.9 million realized on sale of the investments in Intesa Sanpaolo and 3Italia, a capital gain of €0.2 million realized on selling the investment in Softec, the compensation of €7.7 million received for early termination of the lease on the property in Via Tomacelli, Rome, the capital gain of €2.2 million realized by the Flammarion group on selling the property in Dijon and lastly the benefit arising on the adoption of a different actuarial calculation for employee termination indemnities in compliance with IAS 19. Non-recurring charges mostly refer to costs for stock options granted on November 11, 2005 and now waived by their beneficiaries (€4.4 million), additional provisions for reorganization costs at Newspapers Italy (€6 million), the penalty incurred for early termination of the lease relating to the property in Via

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Rizzoli (€1.3 million) as a result of renegotiating better terms for the new building under development in Via Rizzoli, and the writedown of leasehold improvements relating to the old building (€1.9 million).

31. Property, plant and equipment

Movements during the year were as follows:

Assets under Land Buildings Leased buildings Plant Leased plant Equipment Other assets Total DESCRIPTION construction Cost 42.6 126.0 34.3 118.9 134.0 5.9 116.1 33.0 610.8 Revaluations Impairment losses (1.7) (4.2) (0.2) (6.1) HISTORICAL COST AT 12/31/06 42.6 124.3 34.3 114.7 134.0 5.9 115.9 33.0 604.7 Additions 18.5 2.4 35.6 0.3 20.7 27.8 105.4 Revaluations Impairment losses (1.4) (0.8) (0.1) (0.4) (2.6) Disposals (1.2) (8.2) (9.1) (18.5) Exchange differences (0.6) (0.2) (0.8) Change in scope of consolidation 1.39 21.0 66.2 0.3 35.5 (0.1) 124.2 Other movements 0.1 16.1 (1.3) (4.3) (1.5) (0.6) (8.0) (31.7) (31.2) HISTORICAL COST AT 12/31/07 44.1 179.3 32.7 203.2 132.5 5.9 154.5 29.1 781.2 ACC. DEPRECIATION AT 12/31/06 (48.7) (13.2) (69.0) (15.8) (5.1) (82.9) (234.7) Depreciation (4.3) (2.1) (17.3) (8.5) (0.2) (14.6) (47.1) Disposals 0.7 1.0 8.2 8.0 17.9 Exchange differences 0.4 (0.1) 0.3 Change in scope of consolidation (4.7) (41.9) (0.4) (0.1) (22.7) (0.5) (70.2) Other movements (2.4) 2.1 20.5 1.1 0.5 9.0 30.7 ACC. DEPRECIATION AT 12/31/07 (59.0) (12.2) (99.5) (23.6) (4.9) (103.3) (0.5) (303.1) NET BALANCE AT 12/31/06 42.6 75.6 21.1 45.7 118.2 0.8 33.0 33.0 370.0 Additions 18.5 2.4 35.6 0.3 20.7 27.8 105.4 Revaluations Impairment losses (1.4) (0.8) (0.1) (0.4) (2.6) Disposals 0.7 (0.3) (1.1) (0.6) Depreciation (4.3) (2.1) (17.3) (8.5) (0.2) (14.6) (47.1) Exchange differences (0.2) (0.3) (0.5) Change in scope of consolidation 1.4 16.3 24.2 (0.4) 0.2 12.8 (0.5) 54.0 Other movements 0.1 13.7 0.8 16.2 (0.4) (0.1) 1.0 (31.7) (0.4) NET BALANCE AT 12/31/07 44.1 120.3 20.5 103.7 108.9 0.9 51.2 28.6 478.1

Land is not being depreciated. However, its value is periodically reviewed in order to assess the need for any downward adjustments. Other property, plant and equipment recorded in the financial statements is being depreciated over the estimated useful life of each individual asset, using the following rates:

Buildings from 2% to 5% Plant and machinery from 10% to 30% Equipment from 10% to 25% Other assets from 10% to 25%

No financial expenses have been capitalized.

Land and buildings

The buildings (€120.3 million), leased buildings (€20.5 million) and related land (€44.1 million) mostly refer to industrial properties and the Via Solferino building in Milan, as well as the offices of companies in the Unidad Editorial and Flammarion groups. The additions to "Land and buildings" mostly refer to investments by Newspapers Spain for its new production site and television studio (€13.7 million), to investments by Newspapers Italy for restructuring the property in Via Solferino (€3.5 million), and expenditure by RCS MediaGroup S.p.A. on altering the premises in Via Rizzoli, Milan (€1.7 million).

The Via Solferino building in Milan is mortgaged against a loan originally for €71.3 million but now standing at €35.8 million.

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Plant and machinery

These report a balance of €212.6 million, of which €108.9 million refers to leased assets, most of which in relation to printing presses and other machinery used by Newspapers Italy and Spain. The additions in the year include €27.2 million in relation to Unidad Editorial for the full-color printing project at El Mundo, €6.2 million in relation to Newspapers Italy for adapting presses after reducing the format of Corriere della Sera, and €1.7 million in the Books segment for the new distribution line created by Flammarion.

Other assets

These amount to €51.2 million and consist mainly of servers supporting the publishing and management systems, plus PCs, miscellaneous electronic devices, furniture, fittings and motor vehicles. Most of the additions were made by Corporate Functions (€7.8 million) for furnishings and telephone systems in the new offices and for buying new servers, by Newspapers Spain (€4.3 million), by the DADA group (€5 million) and through the assets contributed by Namesco (€1 million) following its line-by-line consolidation from July 2007.

Assets under construction and advances

These amount to €28.6 million. The change during the year reflects steady advancement of Unidad Editorial's business plan and its plan to develop television infrastructure, as well as of the full-color printing project at Gazzetta dello Sport. There were also investments in network infrastructure and other work relating to the new premises at no. 8 Via Rizzoli.

32. Intangible assets

Movements during the year were as follows:

FINITE USEFUL LIFE INDEFINITE USEFUL LIFE DESCRIPTION Development Intellectual Concessions, Assets under Other Concessions, Goodwill Goodwill TOTAL costs property licenses, development intangible licenses, arising on rights trademarks and assets trademarks consolidation and similar advances and similar

HISTORICAL COST AT 12/31/06 8.2 17.7 193.1 3.3 5.6 137.5 25.4 287.1 677.9 Additions 4.6 3.4 492.2 6.8 7.6 2.5 758.7 1,275.9 Disposals (11.3) (8.5) (0.6) (20.4) Equity transaction (13.1) (13.1) Impairment losses (0.6) (0.1) (1.6) (2.2) Exchange differences (0.4) (1.5) (1.9) Change in scope of consolidation 32.0 (27.3) (0.3) 0.3 5.0 9.7 Other movements 0.2 0.4 (5.9) (2.0) 3.3 (4.0) HISTORICAL COST AT 12/31/07 13.0 41.7 643.2 7.7 13.5 143.3 25.4 1,034.0 1,921.8 ACC. AMORTIZATION AT 12/31/06 (3.4) (10.4) (102.5) (4.8) (22.2) (8.7) (43.1) (195.1) Amortization (2.6) (9.1) (35.8) (1.4) (48.8) Disposals 7.1 8.5 15.5 Exchange differences (0.2) (0.2) Change in scope of consolidation (18.0) 0.4 (0.1) (17.8) Other movements 3.1 4.7 0.0 (3.5) 4.3 ACC. AMORTIZATION AT 12/31/07 (6.0) (27.3) (124.9) (6.3) (25.7) (8.7) (43.1) (242.1) NET BALANCE AT 12/31/06 4.8 7.3 90.6 3.3 0.8 115.3 16.7 244.0 482.8 Additions 4.6 3.4 492.2 6.8 7.6 2.5 758.7 1,275.9 Disposals (4.2) (0.0) (0.6) (4.8) Equity transaction (13.1) (13.1) Amortization (2.6) (9.1) (35.8) (1.4) (48.8) Impairment losses (0.6) (0.1) (1.6) (2.2) Exchange differences (0.6) (1.5) (2.1) Change in scope of consolidation 14.0 (26.9) (0.3) 0.2 5.0 (8.1) Other movements 0.2 3.5 (1.2) (2.0) 0.0 (0.2) 0.3 NET BALANCE AT 12/31/07 7.0 14.3 518.2 7.7 7.3 117.6 16.7 990.9 1,679.8

Intangible assets with finite useful lives are amortized over their useful lives, estimated as follows

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Development costs 10 years Intellectual property rights 5 years Concessions, licenses and trademarks from 5 to 30 years Other intangible assets 5 years

The procedures relating to business combinations required by IFRS 3 were completed during the year in relation to the acquisitions of the Recoletos and Digicast groups. The allocation of part of the purchase price to intangible assets (see note 12) of the acquired groups to adjust them to fair value involved increasing Digicast's "Concessions, licenses, trademarks and similar rights" by €6.3 million, its "Other intangible assets" by €4.6 million and its "Intellectual property rights" by €1 million. In the case of the Unidad Editorial group's acquisition of the Recoletos group, the purchase price allocation added €464 million to "Concessions, licenses and trademarks". A total of €89.2 million in deferred tax liabilities were recognized in respect of these purchase price allocations.

Development costs

Development costs of €7 million relate to the DADA group and refer to the capitalization of costs incurred for developing new products and services mostly relating to consumer portals and services. Costs are capitalized as a function of their future profitability and in accordance with the principles established by international accounting standards.

Intellectual property rights

The balance of €14.3 million refers to costs incurred by the Unidad Editorial group for producing audiovisual material and films, as well as film and television rights owned by the Digicast group.

Concessions, licenses, trademarks and similar rights

Finite useful life

These amount to €518.2 million and report an increase of €427.6 million since December 31, 2006 of which €443.4 million for changes in the scope of consolidation, €21.9 million for investments made in the year, €35.9 million for amortization and €1.8 million in decreases relating to exchange differences and reclassifications. The increases arising from changes in the scope of consolidation refer to (i) the allocation of part of the purchase price for the Recoletos and Digicast groups, respectively to the Spanish group's principal titles (€464 million) and to concessions and licenses of the television business (€6.3 million) to adjust their carrying amount to fair value, and (ii) assets contributed by newly-acquired companies totaling €5.3 million. These changes have been partially offset by the transfer of Play Radio to Gruppo Finelco. Additions include €18.4 million in software licenses purchased mainly by Corporate Functions, Unidad Editorial, the Flammarion group and the Digicast group, and €3.5 million for acquiring the HLLA catalogue by Rizzoli International Publications and the free press publication of Urban by Newspapers Italy.

Indefinite useful life

These amount to €117.6 million and consist of the goodwill allocated to El Mundo, the daily newspaper published by the Unidad Editorial group in Spain (€110.3 million) and the Casterman trademark (€7.3 million).

El Mundo, whose first edition dates back to October 1989, has become one of the most widely circulated national newspapers in under four years; since 2001 it has been Spain's number two newspaper in terms of the number of readers and copies sold. Based on its past trends, its current leadership of the general news segment and its potential future earnings in terms of both distribution and number of readers, there is no

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foreseeable limit to the period when El Mundo will generate cash flows. This is why it is regarded as an intangible asset with an indefinite useful life.

The Casterman brand, specializing in the segment of comics and children's books since 1780, is also treated as an asset with an indefinite useful life: the brand's notoriety and image help transfer to its published works the benefits associated with the perception of the high quality of the graphics for which this brand is known. Furthermore, the remaining period over which the trademark is legally protected is not particularly relevant given the ease and low cost involved in renewing trademark protection.

The Casterman trademark and the El Mundo title both have indefinite useful lives and so are not amortized. Instead, their recoverable amount is reviewed each year by testing for impairment.

Goodwill allocated to the unexpressed higher value of assets gives rise to deferred taxes, which have been classified in deferred tax liabilities. In the case of assets with an indefinite life, these taxes will be released in the future if the asset is sold or its value adjusted for impairment. In the case of assets with a finite life (radio frequency licenses), these taxes are released to match the asset's amortization. The rates used are always revised to reflect the latest tax rate in force in the country concerned.

Assets under development and advances

These total €7.7 million. They report increases of €6.8 million and decreases of €2.3 million for reclassifications and changes in the scope of consolidation. The additions mostly refer to the purchase of television rights by the Digicast group (€2.5 million) and film rights by Unidad Editorial (€1.6 million), to costs for purchasing new software licenses by Corporate Functions (€1.1 million) and by Flammarion (€0.9 million), as well as costs for publishing projects incurred by the French group (€0.7 million).

Other intangible assets

The net balance amounts to €7.3 million and reflects €7.6 million in additions, of which €4.6 million for allocating part of the Digicast group's purchase price to "Other intangible assets" to adjust their amount to fair value, as well as €0.3 million in television rights bought by the Digicast group and €2.7 million in capitalizations carried out by the DADA group. These assets also reflect €1.4 million in amortization charges for the year as well as minor increases for changes in the scope of consolidation.

Goodwill

This amounts to €16.7 million and reflects the goodwill recorded in the financial statements of consolidated companies, specifically in the Books segment, of which €8.5 million pertaining to the acquisition of Casa Editrice La Tribuna and €8 million to the acquisition of the business activities of Tramontana and Markes and the textbook publishing division of Calderini-Edagricole.

Goodwill arising on consolidation

This amounts to €990.9 million and mostly consists of goodwill arising on first-time consolidation or identified as a residual after the allocation to unexpressed higher value of assets, liabilities and contingent liabilities of subsidiary companies. It refers in particular to the DADA group (€77.3 million), Flammarion (€77.7 million), the Sfera group (€36.1 million), RCS Advertising BV, the direct parent of IGP Decaux ( €17 million), Blei (€10.1 million), Publibaby (€9.3 million), Casterman (€10.4 million), the Skirà group (€5.8 million), Adelphi (€1.4 million) and Marsilio (€0.3 million). The increases in the year refer to Unidad Editorial's acquisition of the Recoletos group (€690.2 million), to the Digicast group (€15.2 million), to Automobili.com (€3.5 million) and to Namesco (€34.6 million), as well as other smaller companies purchased by the DADA group during 2007 (€2 million). Goodwill was also recognized during the year on the purchase of minority interests in DADA S.p.A. (€9.1 million), but this has been deducted from the Group's consolidated equity since this purchase qualified as an equity transaction.

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In compliance with EU regulations, goodwill and goodwill arising on consolidation are no longer being amortized, but are tested at least once a year for impairment in accordance with IAS 36. The purpose of this test is to demonstrate whether the intangible asset can be recovered through the discounted cash flow produced by the cash generating unit to which it refers, in a finite period of between 20 and 30 years.

The main assumptions used for calculating value in use refer to the discount rate, the growth rate and the expected changes in selling prices and in direct costs over the calculation period. The discount rate used for discounting future cash flows is the weighted average cost of capital (WACC), calculated as a weighted average of the return on risk-free investments plus a risk premium and the cost of borrowing. The discount rate used has been calculated post-tax and reflects the specific risk associated with the RCS Group's business: this rate varies between 6.4% and 6.8%. Future cash flows after the planning period have been prudently assumed to have zero growth; in fact, throughout the period from the end of the three year planning period, cash flows have been assumed to be the same as in the last year of the plan and so with no growth at all. The changes in selling costs and direct costs are based on past experience and future market expectations.

The following table reports the book value of intangible assets with indefinite useful lives allocated to individual cash generating units.

Goodwill arising on consolidation Goodwill Concessions, licenses & trademarks Segments CGU Dec-31-2007 Dec-31-2006 Dec-31-2007 Dec-31-2006 Dec-31-2007 Dec-31-2006 Newspapers Spain Unidad Editorial 690.2 110.3 108.0 Newspapers Italy Automobili.com 3.5 Books Flammarion (1) 88.0 88.0 7.3 7.3 Ed. d'Art Albert Skirà 5.8 7.4 Adelphi Edizioni 1.4 1.4 Education 0.3 0.3 16.7 16.7 Magazines Sfera (2) 45.4 45.4 Dada Dada 114.0 74.4 Digicast Group Digicast 15.2 Advertising Blei 10.1 10.1 IGPDecaux 17.0 17.0 Total 990.9 244.0 16.7 16.7 117.6 115.3

(1) Also includes Casterman (2) Also includes Pubblibaby

33. Investments in associated companies and joint ventures

The list of investments in associated companies and joint ventures can be found in one of the tables attached to this report.

Movements during the year were as follows:

Associated companies Notes and joint ventures Balance at Dec-31-2006 72.3 Revaluations 25 12.7 Additions 75.2 Other movements 0.3 Impairment losses 25 (3.4) Dividends paid (6.2) Change in scope of consolidation (3.4) Balance at Dec-31-2007 147.5

The revaluations and impairment losses, recognized in application of the equity method, amount to €9.3 million, details of which can be found in note 25. The increases mainly relate to recording the 34.6% interest

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in Gruppo Finelco (€67.3 million), as well as the purchase of another 9.1% of Mach 2 (€3.2 million) along with interests in E-box (€0.8 million) and DADA Entertainment (€3.9 million). These increases were partially offset by a total of €6.2 million in dividends distributed by M-dis (€2.8 million), Inimm Due (€2.8 million) and minor companies in the Books segment (€0.6 million), as well as by a net decrease in "other movements", mostly reflecting changes in the IAS/IFRS transition reserves included in the equity of associates, as well as minor reclassifications. The changes in the scope of consolidation mostly refer to the line-by-line consolidation of Veo Television, Red de Distribuciones Editoriales, Reunitel, Media DADA Science and Develop and Register Iberia, all previously equity accounted and now consolidated line-by-line having become subsidiaries, and to the increase for first-time consolidation of the investments in associates and joint ventures held by the Recoletos group. Figures for the principal associated companies and joint ventures are reported below:

Total non- Total current Total non- Total current Total operating current Total revenues assets current assets liabilities costs liabilities

Joint ventures: M-dis Distribuzione Media S.p.A. 178.6 12.3 162.3 5.3 521.9 518.2 Editoriale del Mezzogiorno S.r.l. 5.0 0.2 2.2 3.1 9.6 9.3 IGP Decaux S.p.A. 97.6 72.7 79.4 5.9 192.2 175.5 Associated companies: Mach 2 Libri S.p.A. 68.9 1.7 59.1 190.2 185.7 Eurogravure S.p.A. 27.5 110.4 75.0 48.8 68.2 44.0 Unidad Editorial associates 66.8 62.6 75.5 30.2 177.1 18.8 Flammarion associates 53.3 8.2 40.7 8.8 50.8 52.5 Gruppo Finelco 40.6 111.4 42.6 45.0 79.2 82.9

34. Available-for-sale financial assets

book value fair value change change Dec-31- Dec-31- Dec-31-2007 Dec-31-2006 2007 2006 book value fair value Banca Intesa 0.0 113.2 0.0 113.2 (113.2) (113.2) San Paolo - Imi 0.0 57.1 0.0 57.1 (57.1) (57.1) Poligrafici Editoriale 14.7 19.2 14.7 19.2 (4.5) (4.5) 3 Italia Spa 0.0 15.0 0.0 15.0 (15.0) (15.0) MB Venture Capital Fund 4.0 4.8 4.0 4.8 (0.8) (0.8) Istituto Europeo di Oncologia 4.1 4.1 4.1 4.1 0.0 0.0 RAISAT 2.5 2.5 2.5 2.5 0.0 0.0 Presse Universitaire de France 1.4 1.8 1.4 1.8 (0.4) (0.4) Alice Lab 1.4 1.0 1.4 1.0 0.4 0.4 Mode et Finance 0.4 0.4 0.4 0.4 0.0 0.0 Ansa 0.2 0.2 0.2 0.2 0.0 0.0 Other minor companies 2.0 1.8 2.0 1.8 0.2 0.2 Total 30.7 221.1 30.7 221.1 (190.4) (190.4)

Under IAS 39 securities and investments in companies which are not subsidiaries, associates or held for trading are defined as available-for-sale financial assets. Such assets amount to €30.7 million at December 31, 2007. These assets are stated at market (ie. fair) value. The market value of investments in listed companies is their quoted price at year end. In contrast, investments in unlisted companies, for which a market value is not available, are tested for impairment. Only a few minor investments have been valued at cost, since no future business plans, required for performing the impairment test, were available. It has been assumed that cost approximates their fair value. The change of €190.4 million at December 31, 2007 with respect to the end of last year is due to the sale of shares in Intesa Sanpaolo and 3 Italia, with a fair value of €170.3 million and €15 million respectively, to impairment losses of €4.5 million and €1.6 million recognized against Poligrafici Editoriale and MB Venture Capital respectively to adjust their carrying amount to fair value.

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35. Financial assets and liabilities recognized for derivatives

These line items report derivative financial instruments. Such instruments are recognized as financial assets or financial liabilities at fair value. The principal types of derivative contract taken out are analyzed below, specifying whether they are hedging or trading instruments.

Dec-31-2007 Dec-31-2006 Notes Assets Liabilities Assets Liabilities Interest rate caps for hedging cash flows 4.1 1.3 Interest rate swaps for trading 0.6 Interest rate swaps for hedging cash flows 0.8 NON-CURRENT 5.5 0.0 1.3 0.0 Interest rate swaps for hedging cash flows 0.1 Forward foreign exchange contracts for trading 0.2 (0.5) 0.3 Forward foreign exchange contracts for hedging (0.2) CURRENT 0.3 (0.5) 0.3 (0.2) TOTAL 11 5.8 (0.5) 1.6 (0.2)

Interest rate derivatives mature as follows:

Description Notional amount Parameter range Range% <1 year >1<2 >2<5 >5 Cash flow hedge: swap from floating to fixed rate 399.3 Euribor 3m - 1y 4% - 5% 29.9 60.2 251.9 57.3 CAP 399.3 29.9 60.2 251.9 57.3 Cash flow hedge: swap from floating to fixed rate 250.0 Euribor 3m - 6m 4,008% - 4,265% 100.0 150.0 Trading swap 160.0 Euribor 6m 4.008% 160.0 IRS 410.0 260.0 150.0 Cash flow hedge: swap from floating to fixed rate 100.0 Euribor 3m 3,97%-4,11% 100.0 FRA 100.0 100.0 TOTAL 909.3 289.9 160.2 401.9 57.3

The notional amount of interest rate swaps, forward rate agreements and interest rate caps at December 31, 2007 is €909.4 million (€232.3 million at December 31, 2006). The increase of €550 million is the result of hedging the exposure to interest rate risk on the debt incurred to finance the Recoletos group's acquisition, of which €200 million in such contracts have a forward start date. The Recoletos group's acquisition has involved recording €160 million in interest rate swaps; these positions were taken out to hedge the Recoletos group's debt, which was repaid at the time of closing. The interest rate caps for hedging the interest rate risk of floating-rate ten-year finance leases relating to the investment in the full-color project at RCS Quotidiani S.p.A. amount to €101.5 million. Unidad Editorial has an interest rate cap, for an ultimate amount of €18 million, which hedges the interest rate risk of 10-year finance leases relating to the investment being made in full-color printing at the daily El Mundo and an interest rate cap to hedge a 10-year loan. The contractual fixed interest rates of the interest rate swaps and the capped rates of the interest rate caps range between 3.97% and 5% at December 31, 2007 (between 3.025% and 5% at December 31, 2006); the reference parameter for the floating rate is three, six and twelve-month Euribor.

Foreign currency hedges have the following maturities at December 31, 2007:

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Description <1 year >1<2 >2<5 >5 Total Total Forward purchases for trading GBP 10.2 10.2 Forward sales for trading 0.0 EUR 11.2 11.2 USD 2.0 2.0 Total 23.5 23.5 Forward purchases for hedging CHF 0.4 0.4 Total 0.4 0.4 TOTAL 23.9 23.9

The notional amount of forward foreign exchange contracts is €23.9 million at December 31, 2007 (€17.4 million at December 31, 2006).

All the above instruments have been taken out for hedging purposes. However, in compliance with international accounting standards they have been submitted to the so-called effectiveness test to check that they meet the specific conditions required by these standards. This test has involved classifying some instruments as trading ones since they do not fully satisfy the conditions required for hedge accounting.

The Group Finance department assesses the effectiveness of hedges by carrying out retrospective and forward-looking tests. The forward-looking tests require that at the inception of a hedge and throughout its entire life, it must prove to be highly effective, where effectiveness means that the change in fair value or cash flows attributable to the hedged item must - almost entirely - offset the change in fair value or cash flows attributable to the hedging instrument. Under the retrospective tests, a hedge is deemed to be highly effective when its actual results are within a range of 80% to 125%. The principal methods available for testing effectiveness are linear regression analysis (for forward-looking purposes) and the dollar offset method or ratio analysis (for retrospective testing). The following table provides a brief description of hedges (by type of derivative), indicating their effective portion, reported in equity, and their ineffective portion, reported in the income statement.

The net financial position at year end is broken down by currency as follows:

Dec-31-2007 Dec-31-2006

EUR (976.4) (17.9) USD 2.5 10.7 GBP 5.4 10.5 CHF 0.8 2.0 Other currencies 1.7 0.4 Total liabilities (966.2) 5.7

In compliance with IFRS 7, details of the cash flow hedge reserve are provided below:

(€/millions) Fair Value Type of Hedged item Hedged risk Dec-31- Dec-31- Amount in equity hedge Change 2007 2006 Long-term loans IRS Interest rate risk (0.1) 0.1 Committed credit facilities IRS Interest rate risk 0.9 0.9 0.9 Long-term loans CAP Interest rate risk 0.7 0.4 0.3 0.5 Finance leases CAP Interest rate risk 1.5 0.9 0.6 0.5 Committed credit facilities CAP Interest rate risk 1.9 1.9 0.1 Printing presses FWD Currency risk (0.0) (0.2) 0.2 0.1 Committed credit facilities FRA Interest rate risk Total 5.0 1.1 3.9 2.0

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The following table shows movements in the cash flow hedge reserve in the past two years, reporting separately the amounts recognized in equity for increases/decreases in hedge effectiveness in the period and corresponding amounts transferred to the income statement. No hedging relationships were terminated in 2006 or 2007 due to cancellation of any forecast transactions.

€/millions

Dec-31-2005 Balance (0.4) + increases for recognition of new positive effectiveness 0.2 - decreases for recognition of new negative effectiveness 0.0 - decreases for reversal of positive effectiveness from equity and recognition of income in profit or loss 0.0 + increases for reversal of negative effectiveness from equity and recognition of cost in profit or loss 0.2

Dec-31-2006 Balance 0.0

+ increases for recognition of new positive effectiveness 2.2 - decreases for recognition of new negative effectiveness 0.0 - decreases for reversal of positive effectiveness from equity and recognition of income in profit or loss (0.2) + increases for reversal of negative effectiveness from equity and recognition of cost in profit or loss 0.1

Dec-31-2007 Balance 2.0

The cash flow hedge reserve is designed to hedge expected cash flows of underlying loans, whose payments and related effect on the income statement fall in the following periods:

(€/millions)

Dec-31-2007 Actual impact of underlying flows Expected flows 1 year 1-2 years 2 - 5 years beyond 5 years

Interest rate risk Expected outflows for floating-rate interest (local currency) (105.6) (30.2) (23.9) (45.5) (6.0) Expected outflows for floating-rate interest (foreign currency)

Total (105.6) (30.2) (23.9) (45.5) (6.0)

Dec-31-2006

Actual impact of underlying flows Expected flows 1 year 1-2 years 2 - 5 years beyond 5 years

Interest rate risk Expected outflows for floating-rate interest (local currency) (38.2) (8.7) (8.2) (14.2) (7.1) Expected outflows for floating-rate interest (foreign currency)

Total (38.2) (8.7) (8.2) (14.2) (7.1)

36. Non-current financial receivables

This balance, amounting to €12.5 million, has decreased by €0.3 million. This reflects the repayment of €2.6 million in loans made by the subsidiary RCS Quotidiani to non-group companies which manage the external printing operations of Corriere della Sera and Gazzetta dello Sport, and the grant of €2.3 million in loans to the GE Eaglemoss joint venture. Management has estimated the fair value of non-current financial receivables by discounting future cash flows at the market rate. Fair value is as follows:

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Book value Fair value Change Change Dec-31-2007 Dec-31-2006 Dec-31-2007 Dec-31-2006 book value fair value

Long-term loans to third parties 12.5 12.8 13.4 12.4 (0.3) 1.0 Total 12.5 12.8 13.4 12.4 (0.3) 1.0

37. Other non-current assets

Other non-current assets amount to €8.6 million at December 31, 2007, having decreased by €4.5 million on a year earlier, primarily as a result of transferring €4.7 million in tax credits held by RCS Investimenti S.p.A. to group companies for the purposes of settling advance and final payments of IRAP. For the purposes of the classification required by IFRS 7, the amounts reported below fall within the scope of IAS 39. The tax credits relating to mandatory payments on employee termination indemnities (€0.2 million) do not fall within the scope of IAS 39. The book value of these assets reflects their fair value. The financial assets component of this balance is presented below and is reported in the table presented in note 11 in compliance with IFRS 7.

Description Dec-31-2007 Dec-31-2006 Change Security deposits given 6.4 4.5 1.9 Restricted bank deposits 1.2 1.9 (0.7) Total 7.6 6.4 1.2

38. Inventories

The following table shows inventories by type along with the provisions made to adjust their cost to market value:

Gross Writedown Net balance Gross Writedown Net balance Change balance at provision at balance at provision at Dec-31- Dec-31-2007 Dec-31-2007 Dec-31-2006 2006 Raw and ancillary materials and 58.1 2.5 55.6 58.2 3.5 54.7 0.9 consumables Work in progress 18.5 0.3 18.2 15.3 15.3 2.9 Finished products and goods 123.9 22.3 101.6 117.1 25.0 92.1 9.5 Total 200.5 25.1 175.4 190.6 28.5 162.1 13.3

This balance is €13.3 million higher than at December 31, 2006. This increase is mostly due to the growth of €11.3 million in finished products and work in progress in the Books segment, of which (€4.7 million) attributable to finished products and (€2.6 million) to semi-finished products in the partworks division for the higher number of new releases scheduled in January 2008. The increase of (€7.9 million) in inventories at Newspapers Spain, also as a result of consolidating the Recoletos group, is partially offset by the reduction of €6 million in paper stocks at Newspapers Italy as a result of purchasing fewer raw materials given the smaller format for Corriere della Sera (also planned for Gazzetta dello Sport from April 2008) and by the reduction of (€0.3 million) in inventories held in the Magazines segment.

The following tables provide a breakdown by business segment of inventories and of the change in inventories of finished products, semi-finished products and work in progress:

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Raw and ancillary Work in progress and Inventories at Dec-31- Description materials and Finished products semi-finished products 2007 consumables Newspapers Italy 19.1 0.2 19.3 Newspapers Spain 18.7 0.7 2.1 21.5 Books 7.1 16.0 97.9 121.0 Magazines 10.7 1.2 0.9 12.8 Corporate Functions 0.7 0.7 Dada 0.1 0.1 Total 55.6 18.2 101.6 175.4

Total changes in Changes in work in Changes in finished Writedown of Description finished products and progress products finished products semi-finished products Newspapers (0.1) (0.1) Books (1) 2.8 10.3 13.1 Magazines (0.1) (0.1) Dada (0.1) (0.1) Total 2.5 10.3 12.8 (1): The change in inventories in the Books segment differs from the increase in inventories reported in the balance sheet, due to changes in the scope of consolidation as a result of exchange differences arising on the translation of foreign company financial statements.

39. Trade receivables

Trade receivables are broken as follows:

Description Dec-31-2007 Dec-31-2006 Change Due from customers 917.5 737.9 179.7 Provision for doubtful accounts and returns (118.9) (107.6) (11.3) Due from customers - net 798.6 630.3 168.4 Due from other companies 47 50.6 (3.6) Total 845.6 680.8 164.8

Amounts "due from customers" are shown net of €118.9 million in provisions (€107.6 million the previous year) covering doubtful accounts as well as the return of newspapers, magazines and partworks. The book value of trade receivables reflects their fair value. No interest is calculated on receivables paid within 180 days of the invoice issue date (120 days for receivables relating to advertising revenue). Interest of 5.40% is calculated on receivables paid after these dates.

Amounts "due from customers" have increased by €168.4 million, most of which due to Newspapers Spain (€101.6 million), also as a result of consolidating the Recoletos group, to the Advertising segment (€30.7 million), to the first-time consolidation of the Digicast group (€8.3 million), to the DADA group (€14.7 million), and to the Books segment (€20.7 million). Amounts "due from other companies" refer to trading transactions on an arm's length basis, most of which with the associated companies M-dis S.p.A. and Mach 2 Libri. For the purposes of the classification required by IFRS 7, the amounts reported below fall within the scope of IAS 39; the provision for returns of €65.1 million does not fall within the scope of IAS 39. The book value of these assets reflects their fair value.

The financial assets component of this balance is presented below and is reported in the table presented in note 11 in compliance with IFRS 7.

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Book value Change Description Dec-31-2007 Dec-31-2006 Due from customers 917.1 737.5 179.6 Due from customers: non-current portion 0.4 0.4 (0.0) Due from associated companies 46.7 50.4 (3.7) Due from other affiliated companies 0.3 0.2 0.1 Provision for doubtful accounts (53.8) (50.4) (3.4) Total 910.7 738.1 172.6

40. Other current receivables and assets

Description Dec-31-2007 Dec-31-2006 Change Author advances 118.6 111.3 7.3 Provision for doubtful author advances (65.6) (60.2) (5.4) Net author advances 53.0 51.1 1.9 Agent advances 31.0 33.6 (2.6) Provision for doubtful agent advances (1.4) (2.1) 0.7 Net agent advances 29.6 31.5 (1.9) Sundry receivables 31.0 33.4 (2.4) Provision for doubtful sundry receivables (12.3) (12.3) 0.0 Net sundry receivables 18.7 21.1 (2.4) Tax credits 75.3 29.5 45.8 Prepayments 33.8 37.1 (3.4) Supplier advances 8.1 7.1 1.0 Receivables from employees 2.4 2.1 0.3 Receivables from social security institutions 0.7 0.8 (0.1) Advances to freelance staff 0.8 1.8 (1.1) Total 222.2 182.1 40.1

"Tax credits" mostly refer to Newspapers Spain (€51.9 million), the Books segment (€11.7 million) and Corporate Functions (€4.5 million). The increase in tax credits is basically due to Newspapers Spain (€44.3 million), also reflecting the first-time consolidation of the Recoletos group, and to the consolidation of the Digicast group (€1.4 million). The decrease of €3.3 million in prepayments is mostly attributable to the DADA group and arise as a result of matching the costs of acquiring subscribers to consumer division services with the associated revenues. This matching is determined on the historic LTV (life time value) of payment service users. This amount has been prudently estimated for a six-month period (based on acquisition period). The book value of other receivables is considered to reflect their fair value. For the purposes of the classification required by IFRS 7, the amounts reported below fall within the scope of IAS 39. Tax credits, receivables from social security institutions (€76 million) and author advances (€53 million) and prepayments (€33.8 million) have not been considered for the purposes of IFRS 7. The book value of these assets reflects their fair value. The financial assets component of this balance is presented below and is reported in the table presented in note 11 in compliance with IFRS 7.

Book value Change Description Dec-31-2007 Dec-31-2006 book value Receivables from employees 2.4 2.1 0.3 Sundry receivables 31 32 (1.0) Provision for doubtful sundry receivables (12.3) (12.4) 0.1 Supplier advances 8.1 7.1 1.0 Advances to freelance staff 0.8 1.8 (1.1) Agent advances 29.6 31.5 (2.0) Total 59.4 62.1 (2.7)

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41. Net financial position

Details of the net debt position are provided below at book and fair value.

Comparison of book vs fair value

Notes Book value Fair value Dec-31-2007 Dec-31-2006 Dec-31-2007 Dec-31-2006 Financial assets Cash and cash equivalents 11 70.8 259.8 70.8 256.4 Other financial assets 11 6.3 10.8 6.3 10.8 Financial receivables 11 26.6 22.2 26.6 22.2 Investment funds 11 0.6 6.7 0.6 10.1 Current and non-current financial assets for derivatives 5.8 1.6 5.8 1.6 Held-for-trading securities 11 26.4 0.0 26.4 Total FINANCIAL ASSETS 110.1 327.5 110.1 327.5

Financial liabilities Short-term bank loans and overdrafts (119.5) (18.3) (119.5) (18.3) Other financial liabilities (27.5) (28.4) (27.5) (28.4) Loans: Fixed-rate loans (0.6) (2.2) (0.6) (2.1) Long-term floating-rate loans (789.2) (134.5) (789.2) (134.5) Current and non-current financial liabilities for derivatives (0.5) (0.2) (0.5) (0.2) Floating-rate finance lease payables (130.1) (129.1) (130.1) (129.1) Fixed-rate finance lease payables (8.9) (9.1) (12.2) (13.0) Total FINANCIAL LIABILITIES (1,076.3) (321.8) (1,079.6) (325.6) Total net financial position (1) (966.2) 5.7 (969.5) 1.9 Net financial position with related parties (27.4) (27.1) (27.4) (26.7) % total (2.8)% n.a. (2.8)% n.a.

(1) Indicator of financial structure, calculated as current financial payables less both cash and cash equivalents and current financial assets.

The methods of measuring fair value are summarized below for the principal classes of financial instrument to which they have been applied:

• derivatives: the standard calculation models have been used, based on market interest rates by maturity and currency and on the corresponding exchange rates; • asset and liability positions: the calculation methods used for interest rate derivatives have been used with appropriate adaptations.

The following table analyzes by maturity the book value at December 31, 2007 of the Group's financial instruments that are exposed to interest rate risk:

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Interest rate risk

FIXED RATE <1 year >1<2 >2<3 >3<4 >4<5 >5 Total

Loans (0.6) (0.6) Finance leases (0.2) (0.2) (0.3) (0.3) (0.3) (7.6) (8.9)

Total liabilities (0.8) (0.2) (0.3) (0.3) (0.3) (7.6) (9.5)

Financial receivables 2.9 2.4 2.4 2.4 2.4 0.4 12.8

Total assets 2.9 2.4 2.4 2.4 2.4 0.4 12.8

TOTAL fixed rate 2.1 2.2 2.1 2.1 2.1 (7.2) 3.4

FLOATING RATE <1 year >1<2 >2<3 >3<4 >4<5 >5 Total

Loans (110.0) (206.6) (24.7) (49.7) (7.7) (500.5) (899.2) Other borrowing positions (0.3) (0.3) Bank overdrafts (36.6) (36.6) Finance leases 15.5 (5.0) (17.8) (18.4) (19.0) (85.5) (130.1)

Total liabilities (131.5) (211.6) (42.5) (68.1) (26.7) (586.0) (1,066.3)

Cash 70.8 70.8 Other lending positions 3.4 3.4 Financial receivables 26.6 26.6 Investment funds 0.5 0.5 Held-for-trading securities Government bonds and securities 0.1 0.1

Total assets 101.5 0.0 0.0 0.0 0.0 0.0 101.5

TOTAL floating rate (30.0) (211.6) (42.5) (68.1) (26.7) (586.0) (964.8)

The amounts shown in this table, unlike those reported in net financial position, exclude the fair value of derivatives (€5.3 million) and include the interest-bearing portion of non-current financial receivables (€10 million).

It is also reported that €13 million in without-recourse financial receivables transferred to RCS Factor are exposed to fluctuations in interest rates.

The amount relating to lease payables, exposed to market risk for changes in interest rates, includes the lease of the premises in Pessano, which has been recognized in accordance with IAS 17 since it meets the conditions for being treated as a finance lease. Given its nature, the associated payable is exposed to rises in the rate of inflation.

Average rates on financial positions at December 31, 2007 are reported below. The rate of return on investments includes the return on investment funds, particularly those invested in short-term financial instruments and in hedge and similar funds. The cost of borrowing reflects the effect of outstanding hedging derivatives and excludes the related cost of the building in Pessano described earlier.

Dec-31-2007 Dec-31-2006 Return on investment 2.49% 3.27% Cost of borrowing 4.74% 4.08%

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Finance lease payables

The RCS Group's lease agreements mostly refer to machinery and printing presses at Newspapers Italy and Spain, to buildings in the Flammarion group and to the Newspapers Italy plant in Pessano, Milan, whose rental agreement is treated in accordance with IAS 17. More specifically, assets purchased under lease and used for printing Italian newspapers in color account for most of the amount recorded in the financial statements in application of IAS 17. A project is underway for replacing nearly all the plant and machinery used to print the newspaper El Mundo, and the printing presses of Gazzetta dello Sport. The project relating to El Mundo commenced in 2005 and has involved various stages of negotiation, implementation and testing. These activities started for Gazzetta dello Sport during 2007 and will complete in the early part of 2008. In both cases, the last stage will involve formalizing and defining financial amortization schedules underlying the various lease agreements. As a result, the minimum lease payments have been calculated at December 31, 2007 on the basis of estimated amortization schedules (including some €38 million in commitments for investments not yet made). The agreements have been made with major financial institutions and generally last for 10 years, with a period of around 2 years in which no repayments are made. The underlying amortization schedules involve constant repayments, of which a growing proportion relates to principal and which are adjusted for any interest-rate changes.

Present value of Present value Minimum lease Minimum lease Interest minimum lease Interest of minimum payments payments payments lease payments Dec-31-2007 Dec-31-2006 Finance lease payables: - due within 1 year 18.3 4.3 14.0 11.0 4.5 6.5 - due within 5 years 94.1 19.8 74.3 70.7 14.1 56.6 - due after 5 years 102.3 13.4 88.8 85.5 10.4 75.1 Total 214.7 37.6 177.1 167.2 29.0 138.2

The fair value of finance leases contracted by the Group reflects their book value, except for the lease of the building in Pessano, whose related financial payable has been recognized by discounting the future rent payments to present value using the rates in force at the date of entering into the contract. The fair value calculated using current rates is higher than this amount. However, the terms of the lease agreement must be regarded as market ones, since any renegotiation would reconfirm the existing conditions, also in view of the higher market value that the buildings now have.

42. Share capital and reserves

Share capital is made up of 732,669,457 ordinary shares and 29,349,593 savings shares with a par value of €1.00 each and all of which are fully paid up.

At December 31, 2007 a total of 4,578,448 ordinary treasury shares were held, worth €14.5 million, corresponding to an average carrying value of €3.175 each and representing 0.62% of ordinary share capital and 0.60% of total share capital.

Outstanding Number of shares issued Treasury shares Savings shares Total ordinary shares At Dec-31-2006 713,239,232 19,430,225 29,349,593 762,019,050 At Dec-31-2007 728,091,009 4,578,448 29,349,593 762,019,050

The main features of the two classes of share making up share capital are summarized as follows:

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• The ordinary shares carry full voting rights. They entitle their owners to attend ordinary and extraordinary shareholders' meetings and to participate in the apportionment of net income and net assets, if the company is wound up. These shares are registered shares.

• The savings shares do not carry any voting rights or right to attend ordinary and extraordinary shareholders' meetings, but are entitled to share in net assets under the conditions, limits, procedures and terms summarized in the company's by-laws. These shares are entitled to a minimum guaranteed dividend (annual minimum dividend of 5% of par value) which shall nonetheless be 2% higher than that paid to the ordinary shares. If the company does not distribute any earnings, the owners of savings shares are entitled to receive the minimum dividend in the two subsequent years. If the company is wound up, these shareholders shall have priority in the repayment of capital over the ordinary shareholders. In the event of capital increases, the owners of these shares may exercise rights to subscribe to shares of the same kind. Savings shares are bearer shares.

The nature and purpose of the equity reserves is summarized below:

• Other equity instruments: these reflect the payroll costs accruing in respect of the Group's stock option plans.

• Share premium reserve: this represents a capital reserve that contains sums received by the company for issuing shares at a price above their par value.

• Legal reserve: this reserve, amounting to €152.4 million, is increased through the compulsory allocation of at least one-twentieth of net annual income, until reaching an amount corresponding to one-fifth of share capital.

• Treasury shares: these are deducted from the company's capital and reserves.

• Equity transaction reserve: this represents the goodwill arising from the acquisition of minority interests in companies over which the investor already has control.

• Cash flow hedge reserve: this contains the effects directly recognized in equity of the fair value measurement of derivative financial instruments taken out to hedge the risk of fluctuations in exchange rates and interest rates.

• Valuation reserve: this includes the effects recognized directly in equity of the fair value measurement of financial instruments, excluding cash flow hedges, as well as the translation reserve, used to record exchange differences arising on the translation of foreign subsidiary company financial statements into euro.

Details of and movements during the year in the equity reserves can be found in the statement of changes in consolidated capital and reserves.

The following table provides details of the cash dividends per share that were declared and paid in the year and of dividends being submitted for the approval of the shareholders, details of which can be found in the proposed resolutions presented in the RCS MediaGroup S.p.A. report.

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2007 2006 Per share Total (1) Per share Total Dividends declared and paid in year Ordinary shares 0.03 21.4 0.11 78.5 Savings shares 0.05 1.5 0.13 3.8 Total 22.9 82.3 Dividends proposed for shareholder approval Ordinary shares 0.11 80.1 0.03 21.4 Savings shares 0.13 3.8 0.05 1.5 Total 83.9 22.9 (1) A total of 14,851,777 ordinary shares in RCS MediaGroup S.p.A., held by the company, were granted to shareholders by way of a dividend during 2007, in the ratio of two ordinary shares for every 100 ordinary and/or saving shares held.

43. Provisions for employee benefits

Actuarial Balance at Increases in Balance at Description Utilizations valuation Dec-31-2006 provisions Dec-31-2007 adjustment Employee termination indemnities and executive termination benefits 99.0 6.1 (8.4) (2.7) 94.0 Provision for other employee benefits 5.1 (2.2) 1.1 4.0 Total 104.1 6.1 (10.6) (1.6) 98.0

These include the actuarial value of the Group's effective payable to all employees calculated using the methods envisaged by IAS 19.

Employee termination indemnities (€90.9 million) represent a type of employee remuneration, whose payment is deferred until termination of employment. This indemnity accumulates in proportion to the length of service and represents an additional employment cost for the company. The actuarial valuation adjustments include €2.1 million in gains arising on the adoption of a different actuarial calculation of the provision for employee termination indemnities, in compliance with IAS 19, following the recent changes in the law regarding the destination of such indemnities.

The executive termination benefits (€3.1 million) refer to the payment due under the national contract for newspaper-industry executives, calculated on the basis of length of service and with reference to the employee's remuneration in the last twenty-four months. Payment of this amount is deferred until termination of employment.

The provision for other employee benefits chiefly reflects the actuarial value of a pension plan for one of Unidad Editorial's shareholders. This plan is based on two types of insurance policy:

• the first relates to a retirement age of 60 to 65 years, and involves an insurance policy in the company's name and of which it is also beneficiary, and consequently responsible for making payment to the beneficiary shareholder;

• the second type of insurance policy relates to a post-65 retirement age; although its cost is borne by Unidad Editorial, the latter is not responsible for making payment to the beneficiary, who receives the associated benefits directly from the insurance company.

Independent actuaries have valued these provisions in accordance with the requirements of IAS 19.

The amounts booked to the income statement in respect of the above employee benefits are as follows:

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2007 Current service cost Financial Actuarial gains Total charges (losses) Increase in provision for employee termination indemnities 5.6 (2.4) 3.2 Increase in provision for executive termination benefits 0.5 (0.3) 0.2 Other defined-benefit plans 0.2 0.9 1.1 Total 6.1 0.2 (1.8) 4.5

2006 Current service cost Financial Actuarial gains Total charges (losses) Increase in provision for employee termination indemnities 17.6 0.8 18.4 Increase in provision for executive termination benefits 0.2 0.4 0.6 Other defined-benefit plans 0.1 0.3 (1.6) (1.2) Total 17.9 0.3 (0.4) 17.8

The RCS Group recognizes the full amount of actuarial gains (losses) in its payroll costs, as required by IAS 19. The principal actuarial assumptions used for the calculation are as follows:

Description 2007 2006 Discount rate 4.5% 4.0% Expected wage inflation 3.0% 3.0%

44. Provisions for risks and charges

Movements during the period were as follows:

Increase Other Adjustment Balance at Balance at Utilizatio Change in scope Reclassificati Description in provisions: to present Dec-31- Dec-31-2006 ns of consolidation ons provisions payroll costs value 2007

Non-current: Legal disputes provision 23.0 2.4 (3.3) (1.7) (1.8) 18.6 Other provisions for risks and 17.4 1.5 (2.6) 0.3 2.2 (1.5) 17.3 charges Total non-current portion 40.4 3.9 (5.9) (1.4) 2.2 (3.3) 35.9 Current: Legal disputes provision 4.6 0.8 0.4 (3.0) 1.8 4.6 Other provisions for risks and 26.0 1.2 6.7 (46.1) 40.3 (4.9) 23.2 charges Total current portion 30.6 2.0 7.1 (49.1) 0.0 40.3 (3.1) 27.8 TOTAL PROVISIONS FOR 71.0 5.9 7.1 (55.0) (1.4) 42.5 (6.4) 63.7 RISKS

"Other provisions for risks and charges", totaling €40.5 million, include:

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• €16.9 million in charges for personnel departures and terminations; • €3.8 million in provisions for agent termination indemnities, payable to agents at the end of their mandate; • €2.7 million in provisions for environmental decontamination; • €9.2 million in provisions for risks booked by Unidad Editorial, mostly for different kinds of operating risk; • the balance of €7.9 million includes provisions for risks of various kinds.

New provisions of €9.4 million, of which €6.7 million classified in payroll costs, mostly refer to the Newspapers and Magazines segments mainly in relation to corporate reorganization, as well as to agent termination indemnities payable at the end of agency mandates (€1 million).

Utilizations of €48.7 million related to ongoing corporate reorganization mainly at Newspapers Spain (€31 million), Newspapers Italy (€6.3 million), in the Advertising segment (€1.9 million), in the Magazines segment (€1.5 million), at the parent company (€0.7 million) and in the Books segment (€0.4 million).

The changes in the scope of consolidation refer to the first-time consolidation of the Recoletos group (€41.9 million) and the Digicast group (€0.5 million) and the deconsolidation of Play Radio (-€0.4 million).

Reclassifications mostly refer to Newspapers Spain after €6.2 million was reclassified to a provision for doubtful accounts.

The legal disputes provision amounts to €23.2 million at year end, having used €6.3 million during the year, particularly in relation to disputes with third parties by the Books segment (€2.8 million), Newspapers Italy (€1.9 million) and the Magazines segment (€1.2 million). New provisions of €3.6 million include €1 million for the Books segment, €1 million for Newspapers Italy, €1.1 million for the Magazines segment and €0.2 million for the parent company. The legal disputes provision relates to outstanding disputes with third parties mostly in relation to publishing activities and also includes provision for the related legal costs. There are no particularly significant legal disputes in progress.

In compliance with international accounting standards, the non-current portion of these provisions has been discounted using a rate of 4.55% to take account of the effect of the time value of money.

45. Other non-current liabilities

This balance, totaling €49.8 million (€22.4 million at December 31, 2006), includes the recognition of call options over minority shareholdings in group companies. The increase since the prior year is attributable to the payable relating to the put option given to minority shareholders in Digicast (€19.6 million), the adjustment to the put option given by the subsidiary RCS International Newspaper BV to a minority shareholder in Unidad Editorial over 1.2% of the company's share capital (€3 million), the payable for the put option contracted to buy the remaining shares in Automobili.com (€2 million), the payable contracted by Newspapers Spain to buy 51% of the share capital in Last Lap and the adjustment of the value of call options held in Rey Sol (€4.9 million). This increase had been partly offset by a decrease of €2.2 million after discharging the payable relating to the operating lease over the property in Via Rizzoli, Milan.

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46. Trade payables

Description Notes Dec-31-2007 Dec-31-2006 Change Due to suppliers 588.0 434.2 153.8 Due to authors 58.1 60.0 (1.9) Due to agents 50.2 51.7 (1.5) Due to freelance staff 23.9 20.9 3.0 Due to associated companies 28.3 32.4 (4.1) Due to affiliated companies 1.0 0.4 0.6 Advances from subscribers 20.2 15.0 5.2 Advances from customers 9.2 5.3 3.9 Bills payable 1.0 0.9 0.1 Total 11 779.9 620.8 159.1

"Trade payables" have increased by €159 million since December 31, 2006. The main changes refer to Newspapers Spain, also as a result of consolidating the Recoletos group, and to the consolidation of the Digicast group, which accounted for €120 million of the overall increase. The rest of the increase is attributable to the growth in business by the DADA group (€16.2 million) and higher payables in the Magazines segment (€10 million) due to different payment terms, as partially absorbed by a reduction in payables at Newspapers Italy (€8.3 million) and the deconsolidation of RCS Broadcast, transferred to Gruppo Finelco in July.

The amounts "due to associated companies" include trading transactions mostly relating to M-dis S.p.A, Eurogravure S.p.A. and IGPDecaux S.p.A.. The decrease relative to December 31, 2006 is mostly due to a reduction of €2 million in amounts owed by RCS Periodici S.p.A. to Eurogravure and to a reduction of €1.1 million in amounts owed by RCS Quotidiani S.p.A. to M-dis. The book value of trade payables, usually settled at 120 days, reflects their fair value. Payables due after more than 120 days have been discounted to present value using an interest rate of 5.40%. For the purposes of IFRS 7 disclosure, the book value of payables reported in the balance sheet is equal to their fair value at December 31, 2007.

47. Other current payables and liabilities

Description Dec-31-2007 Dec-31-2006 Change Payables to employees 85.8 66.7 19.1 Taxes payable 85.8 36.8 49.0 Payables to social security institutions 27.6 20.0 7.6 Deferred income 28.3 39.5 (11.2) Sundry payables 20.8 46.8 (26.0) Security deposits received 0.5 0.5 0.0 Total 248.8 210.3 38.5

"Payables to employees" refer to liabilities for unused holiday entitlement, standard bonuses and social security charges thereon, as well as the payable relating to stock options granted on November 11, 2005 waived by their beneficiaries, while "taxes payable" refer to amounts owed for VAT and other withholdings. The decrease in deferred income refers to Newspapers Italy in relation to the investment tax credit (under Law 62/2001) earned on investments made as part of the full-color project at Corriere della Sera. The decrease in "sundry payables" mostly refers to the Advertising segment after exercising the option to buy 49% of Blei (€25.2 million).

The book value of these payables reflects their fair value.

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The liabilities for the unused holiday entitlement of journalists, which are expected to be used over the long term, have been discounted at a rate of 4.72%. For the purposes of the classification required by IFRS 7, the amounts reported below fall within the scope of IAS 39. Taxes payable and amounts due to social security institutions (€113.4 million) have not been considered for the purposes of IFRS 7. The book value of these liabilities reflects their fair value.

The financial liability component of this balance is presented below and is reported in the table presented in note 11 in compliance with IFRS 7.

book value Change Description Dec-31-2007 Dec-31-2006 book value Payables to employees 56.1 38.8 17.3 Sundry payables 20.9 46.9 (26.0) Security deposits received 0.5 0.5 0.0 Total 77.5 86.2 (8.7)

Payables to employees for IFRS 7 purposes differ from those reported in the balance sheet because IFRS 7 ignores unused holiday entitlement of €29.7 million.

48. Grant of stock options

As required by IFRS 2, the following information relates to the two stock option plans reflected in the Group's consolidated financial statements involving payments in the shares of the Group's two listed companies: RCS MediaGroup S.p.A. and DADA S.p.A..

A) RCS MediaGroup S.p.A.

In execution of the shareholders' resolution passed on April 29, 2005, the Board of Directors of RCS MediaGroup S.p.A. approved on November 11, 2005 the Regulations for a stock option plan involving a divisible cash increase in share capital, in one or more stages, for a maximum period of five years and a maximum amount of €25,740,704 at par. The Board of Directors voted in the same meeting to grant a first block of 13,599,416 options to subscribe to an equal number of RCS MediaGroup S.pA. ordinary shares (corresponding to around 1.85% of ordinary share capital) to approximately 70 key employees of the company and its subsidiaries in Italy and abroad. The options granted refer to ordinary shares in the parent company RCS MediaGroup S.p.A., which are exercisable in specified periods between June 16, 2008 and June 15, 2012. The options may be exercised at the end of the related "vesting period", which is June 15, 2008 for the first block of options granted in 2005, and carry conditions relating to achievement of the consolidated earnings per share target for 2005-2007, as set out in the related Strategic Plan approved by the Board of Directors of RCS MediaGroup S.p.A. in December 2004. If the beneficiary ceases to be a group employee, any unexercised rights shall be forfeited unless the employee is placed in early retirement. The fair value of these options, calculated using the binomial model, is €0.80. In its meeting of April 27, 2007 the RCS MediaGroup Board of Directors resolved, at the recommendation of the Group Compensation Committee, to offer each employee of the company and its subsidiaries that received stock options on November 11, 2005 the choice of taking part, subject to waiving their respective options, in a cash-based incentive scheme reserved specially for them. The 56 such beneficiaries owning approximately 10 million options to subscribe to a corresponding number of the company's ordinary shares, corresponding to around 1.3% of ordinary share capital, all subsequently took up this offer. The incentive scheme involves paying a fixed cash amount of €0.80 per option, calculated using the "binomial model" to value the options already granted. The receipt of this amount, scheduled for June 30, 2008, is subject to achievement of the same performance goals for the Group that applied to the stock options waived. On July 14, 2006 the Board of Directors of RCS MediaGroup S.p.A. approved the grant to six employees with key positions in RCS Group companies of a total of 744,662 stock options to subscribe to a corresponding quantity of new-issue ordinary shares at a price of €3.990, corresponding to the average official price of RCS MediaGroup S.p.A. ordinary shares during the period between June 14, 2006 and July 14, 2006. This grant was approved in implementation of the stock option plan authorized by the shareholders in their meeting on April 29th, 2005. The newly-granted options may be exercised between June 15, 2009

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and June 15, 2013, in fixed periods and subject to achieving a performance objective relating to cumulative consolidated earnings per share in the period 2005-2007, as specified in the related Strategic Plan approved by the RCS MediaGroup S.p.A. Board of Directors in December 2004. The fair value of these options, calculated using the binomial model, is €0.87. In addition, on November 13, 2006, the Board of Directors of RCS MediaGroup S.p.A. approved the grant to approximately 70 employees with key positions in RCS MediaGroup S.p.A. and its subsidiaries, of a total of 14,274,763 stock options, to subscribe to a corresponding quantity of new-issue ordinary shares (around 1.95% of ordinary share capital) at a price of €3.616, corresponding to the average official price of RCS MediaGroup S.p.A. ordinary shares in the month preceding the grant. This grant supplemented the one already made during 2006 and completed the execution of the stock option plan, authorized by the shareholders in their meeting on April 29th, 2005. The Plan Regulations were amended to extend the vesting period end date for the options granted in 2006 from June 15, 2009 to three years from the grant date. Under the Regulations the options may be exercised three years after the end date of the related vesting period during pre-determined periods up until June 15, 2013 subject to the achievement of certain cumulative performance goals in terms of consolidated earnings per share in the three-year period 2004-2007 as contained in the Strategic Plan approved by the RCS MediaGroup S.p.A. Board of Directors in December 2004. The fair value of these options, calculated using the binomial model, is €0.79. The terms and conditions of the stock option plans at December 31, 2007 are as follows:

No. options Options Options Unexercised Unit subscription Grant date Exercise period granted exercised cancelled options price Nov-11-2005 13,599,416 06.16.2008-06.15.2012 - 13,599,416 - 4.286 Jul-14-2006 744,662 07.15.2009-06.15.2013 - 46,348 698,314 3.990 Nov-13-2006 14,274,763 11.14.2009-06.15.2013 - 259,044 14,015,719 3.616 TOTAL 28,618,841 13,904,808 14,714,033

The grant dates correspond to the date of the meetings of the Board of Directors which approved the respective grants of stock options. The options relating to the plan granted on November 11, 2005 have been waived by their beneficiaries and so the plan's full remaining cost has been recognized in the year.

The following table reports the number and average strike price of the RCS MediaGroup S.p.A. options in the periods under review:

Dec-31-2007 Dec-31-2006 Average subscription Average subscription No. options No. options price price Unexercised options at start of year 25,435,277 3.902 13,599,416 4.286 Options granted during period - - 15,019,425 3.635 Options cancelled during period 10,721,244 4.267 3,183,564 4.286 Unexercised options at end of year 14,714,033 3.635 25,435,277 3.902 Vested options at end of year - - - -

The average expected remaining life of the options is 3.55 years.

The following table outlines the features of plans existing within the Group and the related expense recorded under "payroll costs", analyzed according to the company which employs the beneficiary:

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No. options No. options at end Grant date Company Vesting period Payroll cost granted of year Nov-11-2005 RCS MediaGroup S.p.A. 4,129,129 0 11.11.2005 - 06.15.2008 1.00 Nov-11-2005 RCS Quotidiani S.p.A. 3,072,394 0 11.11.2005 - 06.15.2008 1.11 Nov-11-2005 Unedisa Editorial S.A. 1,680,527 0 11.11.2005 - 06.15.2008 0.77 Nov-11-2005 RCS Pubblicità S.p.A. 1,193,807 0 11.11.2005 - 06.15.2008 0.38 Nov-11-2005 RCS Libri S.p.A. 1,149,686 0 11.11.2005 - 06.15.2008 0.48 Nov-11-2005 Flammarion S.A. 942,921 0 11.11.2005 - 06.15.2008 0.36 Nov-11-2005 RCS Periodici S.p.A. 741,779 0 11.11.2005 - 06.15.2008 0.03 Nov-11-2005 RCS Broadcast S.p.A. 539,840 0 11.11.2005 - 06.15.2008 0.17 Nov-11-2005 Sfera Editore S.p.A. 149,333 0 11.11.2005 - 06.15.2008 0.07 TOTAL 1st BLOCK 13,599,416 0 4.37 (1)

Jul-14-2006 RCS Quotidiani S.p.A. 476,404 476,404 07.14.2006-07.14.2009 0.20 Jul-14-2006 RCS Pubblicità S.p.A. 268,258 175,562 07.14.2006-07.14.2009 0.07 Jul-14-2006 RCS Periodici S.p.A. 46,348 07.14.2006-07.14.2009 0.02 TOTAL 2nd BLOCK 1st GRANT 744,662 698,314 0.29 (2)

Nov-13-2006 RCS MediaGroup S.p.A. 4,410,177 4,494,595 11.13.2006-11.13.2009 1.15 Nov-13-2006 RCS Quotidiani S.p.A. 3,069,671 3,094,545 11.13.2006-11.13.2009 0.92 Nov-13-2006 Unedisa Editorial S.A. 2,013,704 2,013,704 11.13.2006-11.13.2009 0.51 Nov-13-2006 RCS Pubblicità S.p.A. 744,461 860,546 11.13.2006-11.13.2009 0.25 Nov-13-2006 RCS Libri S.p.A. 1,763,038 1,759,862 11.13.2006-11.13.2009 0.48 Nov-13-2006 Flammarion S.A. 895,081 895,081 11.13.2006-11.13.2009 0.23 Nov-13-2006 RCS Periodici S.p.A. 435,403 392,582 11.13.2006-11.13.2009 0.10 Nov-13-2006 AGR Srl 637,303 378,259 11.13.2006-11.13.2009 0.10 Nov-13-2006 Sfera Editore S.p.A. 176,325 126,545 11.13.2006-11.13.2009 0.04 Nov-13-2006 Rizzoli International Publications 129,600 11.13.2006-11.13.2009 TOTAL 2nd BLOCK 2nd GRANT 14,274,763 14,015,719 3.78 (2)

TOTAL OPTIONS 28,618,841 14,714,033 8.44

(1): Cost of options waived by beneficiaries. The total cost of the first block of options of €7.8 million, also including the reserve recognized in previous years of €3.5 million, has been reported in payables to employees. (2): Non-monetary cost adjusting cash flows from operating activities in the cash flow statement.

The fair value of the stock options at the grant date is estimated using the binomial model which takes account of dividends. Expected volatility reflects the assumption that past volatility is indicative of future performance. Past volatility is calculated as the annualized standard deviation over a significant period of time ie. more than two years. The risk free discount rate is estimated on the basis of the return on Italian government securities whose remaining term is equal to the expected term of the option being valued. No other element of the stock option plan is considered for the purposes of measuring fair value. The following table sets out the assumptions made and the results obtained from valuing the options granted by RCS MediaGroup S.p.A and still outstanding at year end:

2006 Plan 2006 Plan 2nd block 2nd block 2nd grant 1st grant Value of option at grant date 0.79 0.87 Value of share at grant date 3.653 3.873 Strike price 3.616 3.990 % volatility 27% 29% Discount rate 3.80% 3.92% Average expected life of option (in years) 4.68 5.08 % dividend 3.10% 3.10%

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B) DADA S.p.A.

The nature of each of the stock option plans still open at December 31, 2007 is described below:

Plan dated June 20, 2005: DADA's extraordinary shareholders' meeting voted on April 28, 2005 to grant the company's Board of Directors the power, under articles 2443 and 2441.8 of the Italian Civil Code, to increase share capital, in one or more stages, for a maximum period of five years and by a maximum amount of €79,922.95 at par, by issuing ordinary shares with a par value of €0.17 each to service an incentive and retention scheme for employees of DADA S.p.A. and its subsidiaries. In execution of this authority, the Board of Directors voted on June 20, 2005 to increase share capital to service the issue of a new three-year stock option plan for employees of DADA S.p.A. and its subsidiaries. This plan involves issuing a total of 441,406 shares, which will be split into three annual issues and will be offered to group employees to subscribe at a strike price of €10.82 per share, in the period from January 18 to February 6 in each of the following three years, ie. 2006-2008:

• 1st block: vesting period from June 20, 2005 to January 17, 2006, exercise period from January 18, to February 6, 2006; • 2nd block: vesting period from February 7, 2006 to January 17, 2007, exercise period from January 18 to February 6, 2007; • 3nd block: vesting period from February 7, 2007 to January 17, 2008, exercise period from January 18 to February 6, 2008.

The subscription price has been determined as the arithmetic mean of the DADA share price in the month preceding the plan's introduction, taking account of the average share price in the last six months. The subscription of the options in this plan, like in the one dated March 16, 2006, is not subordinate to the achievement of predetermined results, nor are the shares restricted in any way. As required by IFRS 2, the actuarial valuation of the stock option plan introduced by the DADA group on June 20, 2005 was carried out by an independent actuary using the binomial method. This model is based on a discrete approach, in which the time running to the option's expiry date is divided into periods, during which the underlying share price can have only two alternative values determined on the basis of one that is lower and one that is higher than the price in the previous period. This method has established the value of stock options at June 20, 2005 (the plan's issue date) as €1.3 for options in the first block, €1.967 for options in the second block and €2.18 for options in the third block. These values have been revised since last year, although without involving any major changes.

Plan dated February 3, 2006: DADA's extraordinary shareholders' meeting voted on December 30, 2005 to grant the company's Board of Directors the power, under articles 2443 and 2441.8 of the Italian Civil Code, to increase share capital, in one or more stages, by a maximum amount of €136,000 at par, by issuing 800,000 new ordinary shares with a par value of €0.17 each to service an incentive and retention scheme for directors vested with particular authority or management responsibility and/or chief operating officers and/or managers and heads of division at DADA S.p.A. and/or its subsidiaries. In execution of this authority, the Board of Directors voted on February 3, 2006 to increase share capital to service the issue of a new three-year stock option plan for directors vested with particular authority or management responsibility and/or chief operating officers and/or managers and heads of division at DADA S.p.A. and/or its subsidiaries. At the proposal of the company's Compensation Committee, the Board of Directors approved the plan's regulations and granted 700,700 options to subscribe to a corresponding number of DADA ordinary shares to 10 directors with special responsibilities and top managers of the group, also voting to increase share capital by a maximum of €119,119 to service these options. The stock option plan is designed to retain and incentivize top management which is why the Board has made the exercise of the options conditional, within the limits specified in the regulations, on the achievement of 90% of the consolidated EBITDA target for 2008, as established by the DADA Board of Directors. The shares subscribed will not carry restrictions of any sort. As a general rule, the options may be exercised from the date of approving the DADA group's consolidated financial statements for the year ended December 31, 2008 in the following periods of every year up until

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November 11, 2012: from January 15 to January 31, from February 16 to February 28, from June 1 to June 15, from September 15 to September 30 (extended to October 15 just for 2012) and from November 15 to November 30. In compliance with the principles established by the shareholders' meeting, the company's Board of Directors has set the subscription price at €14.782, corresponding to the arithmetic mean of the DADA share price in the month preceding the option grant and nonetheless taking account of the average share price in the last six months. As required by IFRS 2, the actuarial valuation of this plan has been carried out by an independent actuary using the binomial method, resulting in a unit value of €4.232 per option.

Plan dated March 16, 2006: Still in execution of the shareholders' resolution dated April 28, 2005, the Board of Directors voted on March 16, 2006 to increase share capital to service the issue of a new three-year stock option plan for new employees of DADA S.p.A. and its subsidiaries. This plan involves issuing a total of 33,000 shares, split into three annual issues, which will be offered to group employees to subscribe at a strike price of €16.92 per share, corresponding to the average official price of DADA shares in the month preceding the option grant and nonetheless taking account of the average share price in the last six months. These options may be exercised in the period from January 18 to February 6 in each of three years 2007-2008-2009. As required by IFRS 2, the actuarial valuation of this plan has been carried out by an independent actuary using the binomial method.

Plan dated July 28, 2006: On July 28, 2006 the DADA S.p.A. Board of Directors also voted to increase share capital for cash by a maximum of €9,350, by issuing up to 55,000 new shares to service an incentive and retention scheme for two new top managers, in partial execution of the authority granted to the DADA Board in the shareholders' resolution dated December 30, 2005 and filed at the Florence Companies Register on January 9, 2006. The DADA Board of Directors has set the share subscription price at €15.47, inclusive of premium and par value, corresponding to the arithmetic mean of the official price of DADA ordinary shares in the calendar month ending on the option grant date, also taking account of the average share price in the last six months. This plan has the same characteristics as the one dated February 3, 2006 described above. As required by IFRS 2, the actuarial valuation of this plan has been carried out by an independent actuary using the binomial method, resulting in a unit value of €4.3192 per option.

Plan dated February 12, 2007: Again in execution of the authority granted to the Board of Directors under the extraordinary shareholders' resolution dated December 30, 2005, on February 12, 2007 the Board granted 25,000 options to subscribe to a corresponding number of DADA ordinary shares to 3 of the group's managers in the USA and approved the related regulations, therefore voting on May 11, 2007 to increase share capital by up to €4,250 to service this plan. This plan has the same characteristics as the one dated February 3, 2006 described above. In compliance with the principles established by the shareholders' meeting, the company's Board of Directors has set the subscription price at €16.99, corresponding to the arithmetic mean of the DADA share price in the month preceding the option grant and nonetheless higher than the average share price in the last six months. Movements in the stock option plans are set out in the following table:

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Dec-31-2007 Dec-31-2006 Average Average No. options No. options subscription price subscription price Unexercised options at start of year 1,064,465 441,406 Options granted during period: Feb-3-2006 700,700 14.78 Mar-16-2006 33,000 16.92 Jul-28-2006 55,000 15.47 Feb-12-2007 25,000 16.990 Options exercised in year (128,954) 10.820 (132,217) 10.820 Options exercised in year (67) 16.920 Options expiring in year (25,151) (33,424) 10.820 Unexercised options at end of year 935,293 1,064,465

OPTIONS GRANTED AT DEC-31-2007 OF WHICH VESTED Remaining contractual life STRIKE PRICE Average remaining TOTAL TOTAL < 1 YEAR 1-2 YEARS contractual life

€10.82 134,864 134,864 4 years €14.78 700,700 700,700 €16.92 9,871 9,858 19,729 €15.47 55,000 55,000 €16.99 25,000 25,000 TOTAL 144,735 790,558 935,293 4 years

49. Capital (gains) losses and other non-monetary items reported in cash flow statement

Details of this item which adjusts cash flows from operating activities, reported in the cash flow statement, are provided below:

Description Notes Dec-31-2007 Dec-31-2006 Capital gains on sale of equity investments 24 (52.1) (62.2) Capital gains (losses) on disposal of property, plant and equipment and (4.0) (5.2) intangible assets Share of income (losses) from investments valued using equity method 25 (9.3) (3.2) Total (65.4) (70.6)

Capital gains from the disposal of property, plant and equipment and intangible assets include €2.2 million earned by the Flammarion group on the sale of its property in Dijon. Details of capital gains on the disposal of equity investments and the share of income (losses) from investments valued using the equity method can be found in notes 24 and 25 respectively.

50. Impairment (revaluation) of equity investments reported in cash flow statement

This amount is analyzed as follows:

Description Notes Dec-31-2007 Dec-31-2006 Impairment of equity investments 24 7.1 2.2 Other income (charges) from financial assets (0.3) Total 7.1 1.9

These refer to non-monetary components of income that adjust cash flow from operating activities in the cash flow statement. More details can be found in note 24.

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51. Increase (decrease) in provisions for employee benefits and for risks and charges reported in cash flow statement

The change reported in the cash flow statement excludes the effect of consolidating the Recoletos and Digicast groups line-by-line upon acquisition, as well as the effect of discounting provisions to present value, which, being a non-monetary item, has also been reversed out of net interest received/paid.

Adjustments to Change in scope Dec-31-2006 Dec-31-2007 present value of consolidation Change Provisions for employee benefits 104.1 98.0 0.1 6.0 Provisions for risks and charges 71.0 63.7 1.4 (40.9) 46.8 Total 175.1 161.8 1.4 (40.8) 52.7

52. Changes in working capital reported in cash flow statement

Description Dec-31-2007 Dec-31-2006 Change in working capital 21.7 (41.1) Non-monetary change in finance lease payables reclassified 13.4 28.4 from trade payables Payment of Blei put option 25.2 Adjustment for Digicast put option (19.6) Adjustment for Last Lap / Rey Sol put option (4.9) Adjustment for Automobili.com put option (2.0) Adjustment for Unidad Editorial put option (3.0) (4.7) Change in scope of consolidation 5.1 Investment adjustments for cash outflows (36.6) Other changes 4.9 (19.9) Total 4.2 (37.3)

The change in working capital has been adjusted by reversing non-monetary movements, specifically involving the recognition of purchase obligations for certain investments (see note 45) and the changes arising from the line-by-line consolidation of the Recoletos and Digicast groups, the changes in trade payables for capital expenditure not settled in cash during the year, and the reclassification to "purchase of investments" of capital reimbursed and dividends paid to third parties in relation to Edition d’Art Albert Skirà and Blei respectively.

53. Purchase of equity investments reported in cash flow statement

This amounts to €1,238.7 million (€64 million in 2006) and refers to outlays to purchase the Recoletos group (€1,124.1 million), Namesco by the DADA group (€36.4 million), 12.86% of Gruppo Finelco (€20.8 million), the Digicast group (€15.9 million), 3% of the DADA group (€10.8 million), Automobili.com (€1.5 million), DADA Entertainment (€3.9 million), E-box (€0.8 million), another interest in Mach 2 (€3.2 million) and investments in other minor companies in the DADA and Unidad Editorial groups. The purchase of equity investments also includes payments for capital increases by Editoriale Bologna (€1 million), MB Venture Capital (€0.8 million) and Alice Lab (€0.4 million), for incorporating RCS DBGames (€0.8 million), for settling the obligation to buy another 49% of Blei (€25.2 million) and for reimbursing share capital and paying dividends to third-party shareholders of Edition d’Art Albert Skirà and Blei respectively (€3.5 million). The cash absorbed by these investments was partly funded by the receipt of dividends from Intesa Sanpaolo (€11.2 million), Poligrafici Editoriale (€0.4 million), Raisat (€0.1 million), minor companies in the Unidad Editorial group (€0.2 million) and companies valued using the equity method (€6.2 million).

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54. Purchase of property, plant and equipment and intangible assets reported in cash flow statement

This amounts to €1,368.2 million and refers to the investments made during 2007, minus purchases not affecting cash flow and goodwill arising on the consolidation of equity investments, whose cost is reflected in the cash flow statement in the form of the full amount of the outlay incurred. The amount of capital expenditure carried out in the prior year but paid in the year under review has been added back to the total amount reported in the cash flow statement and adjusted to exclude assets purchased under finance lease. The capital expenditure reported in the balance sheet at December 31, 2007 is reconciled to that included in the cash flow statement as follows:

Notes Dec-31-2007 Dec-31-2006 Capital expenditure on intangible assets 32 (1,262.8) (67.8) Capital expenditure on property, plant and equipment 31 (105.4) (50.3) Total Adjustments to capital expenditure for cash outflows 36.6 10.9 Goodwill arising on consolidation 1,224.2 30.2 Capitalized asset dismantling costs 0.3 Total (107.4) (76.7)

55. Proceeds from the sale of equity investments reported in cash flow statement

Proceeds from the sale of equity investments amount to €175.4 million (€129.9 million in 2006) and include the proceeds from the sale of Intesa Sanpaolo shares (€160 million), the sale of 3Italia shares (€16.8 million) and the sale of Neo-Sky 2000 SA, a Unidad Editorial group company (€0.3 million).

56. Proceeds from sale of property, plant and equipment and intangible assets reported in cash flow statement

These proceeds amount to €7.4 million (€11.2 million in 2006) and include receipts from the sale of property, plant and equipment and intangible assets.

57. Net change in financial payables and other financial assets reported in cash flow statement

This amounts to €746.8 million (€40.9 million in 2006) and mostly refers to new equity investments, as described in note 12. Payables contracted to purchase assets under finance lease are not included in the cash flow statement, since they do not represent monetary movements, while, as required by international accounting standards, bank overdrafts form part of the change in cash and cash equivalents. The reconciliation with the changes in the net financial position is provided below:

Notes Dec-31-2007 Dec-31-2006

Change in net financial position 41 971.9 (53.4)

Change in cash and cash equivalents (217.2) 131.7 Non-monetary change in derivatives 1.7 1.1 Non-monetary change in finance lease payables (13.4) (28.3) Non-monetary change in results of financing activities 1.6 (5.4) Change in scope of consolidation 2.2 (1.2) Other non-monetary changes (3.6) Total 746.8 40.9

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58. Net interest received/paid reported in cash flow statement

This amount of €39 million (€3.9 million in 2006) has been adjusted to exclude items without any monetary consequences, such as unrealized exchange gains and losses, interest expense on finance leases, discounts to present value in application of international accounting standards, and the fair value measurement of held- for-trading securities.

59. Change in equity reserves reported in cash flow statement

Changes in equity reserves included in the cash flow statement amount to €9.6 million and ignore movements originating from events not giving rise to monetary consequences, such as the fair value measurement of available-for-sale investments and derivatives.

60. Commitments and contingencies

The principal guarantees given are listed below:

• Sureties given amount to €58.2 million. The sureties at the end of 2007 refer to those given to advertising brokers, to the Ministry of Trade & Industry and other public entities for tenders and competitive bids, to sureties for lease and loan agreements, sureties given by the Flammarion group upon the sale of Librairies du Savoir and sureties given by the DADA group following the acquisition of Cotei and Namesco.

• Endorsements of €45 million mostly refer to those given to third parties by Newspapers Spain, mainly for investments in new media.

• Other unsecured guarantees amount to €105 million and mainly refer to guarantees given by the parent company to the tax authorities on behalf of subsidiaries for VAT credits offset under the group VAT settlement for the years 2004, 2005 and 2006.

• Commitments of €18.5 million mostly relate to the parent company, RCS Quotidiani S.p.A. and the Digicast group as follows:

- €15 million for contractual commitments relating to personnel, including the parent company's Chief Executive Officer & Chief Operating Officer; - €0.8 million for the commitment to purchase shares in the MB Venture Capital Fund; - €2.7 million in commitments for new television programs.

The main operating leases refer to building rentals, electronic equipment and company vehicles. The amount of outstanding lease payments still owed by the Group at the balance sheet date for non- cancelable operating leases is as follows:

Minimum lease payments Dec-31-2007 Dec-31-2006 Future operating lease payments: - due within 1 year 35.8 22.5 - due within 5 years 129.1 64.2 - due after 5 years 303.0 98.1 Total 467.9 184.8

The increase in this amount mainly reflects the new 24-year lease agreement entered by the parent company for the building in Via Rizzoli, to which part of the Group's Milan offices have now been transferred, and a new 10-year lease agreement entered by Unidad Editorial.

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The subsidiary Rizzoli International Publications has taken over the building leases in the USA previously held by GFT USA and expects to collect a total of €16.8 million in the future from sub-leasing such property.

61. Information required by art.149-duodecies of the CONSOB Issuer Regulations

The following table, prepared in accordance with art. 149-duodecies of the CONSOB Issuer Regulations, reports the fees earned in 2007 for auditing and other services provided by the independent auditors and members of their network.

(€/millions) Party performing the service Recipient Fees earned in 2007

Auditing Reconta Ernst & Young S.p.A. Parent company 0.3 Reconta Ernst & Young S.p.A. Italian subsidiaries 1.0 Ernst & Young Foreign subsidiaries 1.0 Other firms Foreign subsidiaries 0.1

Certification services Reconta Ernst & Young S.p.A. -

Other services Reconta Ernst & Young S.p.A. (1) 0.8

Total 3.2

(1) The other services comprise: €0.3 million for auditing the pro-forma consolidated figures of RCS Mediagroup S.p.A. for the year ended December 31, 2006 included in the Information Circular prepared in accordance with art. 71 of the Issuer Regulations adopted by CONSOB in Resolution 11971 of May 14, 1999 and subsequent amendments and additions, published as a result of acquiring all the share capital in Recoletos Grupo de Comunicacion by Unidad Editorial, a transaction qualifying as a significant acquisition; €0.2 million for performing specific audit procedures on the accounting treatment of the significant transaction involving acquisition of all the share capital in Recoletos Grupo de Comunicaciòn S.A., with particular reference to the provisions of IFRS 3 regarding Purchase Price Allocation, carried out as part of the audit of the consolidated financial statements of the subsidiary Unidad Editorial S.A. for the purposes of their inclusion in the consolidated financial statements of RCS Mediagroup at December 31, 2007; €0.2 million for methodological support and assistance when testing controls for the purposes of issuing the certification required by art. 154-bis of Decree 58/1998 and art. 81 of the CONSOB Issuer Regulations; €0.1 million for tax advice and advice on the application of accounting standards.

The above fees are inclusive of expenses and other related costs.

62. SIGNIFICANT SUBSEQUENT EVENTS

Significant subsequent events are described in the Report on operations.

Milan, March 14, 2008 on behalf of the Board of Directors:

Chairman Piergaetano Marchetti

Chief Executive Officer

Antonio Perricone

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CERTIFICATION

of the consolidated financial statements at December 31, 2007 pursuant to art. 81-ter of CONSOB Regulation 11971 dated May 14, 1999 and subsequent amendments and additions

• The undersigned, Antonio Perricone, Chief Executive Officer, and Riccardo Stilli, Head of Financial Reporting for RCS MediaGroup SpA, attest, also taking account of the provisions of paragraphs 3 and 4, art. 154-bis of Decree 58 dated February 24, 1998: - that the accounting and administrative processes for preparing the consolidated financial statements during 2007 are adequate in relation to the enterprise's characteristics and - have been effectively applied.

• It is also certified that the consolidated financial statements at December 31, 2007: - correspond to the underlying accounting records and books of account; - have been prepared in accordance with the International Financial Reporting Standards adopted by the European Union and with the measures implementing art. 9 of Decree 38/2005, and, based on our knowledge, are able to provide a true and fair view of the issuer's balance sheet, results of operations and financial position and of all the companies included in the consolidation.

Milan, March 14, 2008

RCS MediaGroup SpA RCS MediaGroup SpA Chief Executive Officer Head of Financial Reporting Antonio Perricone Riccardo Stilli

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RCS MEDIAGROUP S.p.A. FINANCIAL STATEMENTS AND NOTES

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DIRECTORS' REPORT ON PARENT COMPANY OPERATIONS

The year closed with net income of €96.9 million, compared with €166.2 million in 2006. This result reflects €16.1 million in losses from discontinuing and discontinued operations (€6.4 million in 2006), relating to RCS Broadcast, transferred to Gruppo Finelco in July, after demerging the AGR and CNR businesses. The company's reclassified income statement, together with prior year comparatives, is presented below:

Reference to Year ended Year ended Difference (€/millions) financial Dec-31-2007 % Dec-31-2006 % statements (2) ABA-B Net revenues I 7.9 100% 9.2 100% (1.3) Operating costs II (8.8) (111)% (8.3) (90)% (0.5) Payroll costs III (17.5) (222)% (21.9) (238)% 4.4 Increases in provisions for risks IV (0.4) (5)% (0.1) (1)% (0.3) EBITDA (1) (18.8) (238)% (21.1) (229)% 2.3 Amortization of intangible assets V (0.1) (1)% 0.0 0% (0.1) Depreciation of property, plant and equipment VI (0.8) (10)% (0.4) (4)% (0.4) Depreciation of investment property VII (1.1) (14)% (1.1) (12)% 0.0 Impairment of fixed assets VIII (0.3) (4)% - 0% (0.3) EBIT (21.1) (267)% (22.6) (246)% 1.5 Net financial income (charges) IX (5.9) (75)% 15.7 171% (21.6) Income (charges) from financial assets/liabilities X 125.1 1,584% 154.6 1,680% (29.5) Earnings before tax 98.1 1,242% 147.6 1,604% (49.5) Income taxes XI 14.9 189% 25.0 272% (10.1) Net income (loss) from continuing operations 113.0 1,430% 172.6 1,876% (59.6) Net income (loss) from discontinuing and discontinued operations XII (16.1) (204)% (6.4) (70)% (9.7) Net income (loss) for the year 96.9 1,227% 166.2 1,807% (69.3)

(1): Earnings before interest, tax, depreciation, amortization and impairment. (2): These references relate to the corresponding headings in the income statement.

Net revenues, arising from the provision of centralized corporate services to subsidiary companies, amounted to €7.9 million in 2007, reporting a decrease of €1.3 million on last year's figure of €9.2 million. Operating costs were higher, up from €8.3 million in 2006 to €8.8 million in 2007. This increase largely related to non-recurring charges incurred in the year (+€1.3 million) for the penalty payable on termination of the lease on the Via Rizzoli premises. Operating costs included €1 million in non-recurring charges in 2006.

Payroll costs were €4.4 million lower at €17.5 million (€21.9 million in 2006). This decrease is mostly explained by non-recurring charges, which amounted to €5.6 million in 2006 but only €0.8 million in 2007. This year's non-recurring charges refer to the cost of stock options granted on November 11, 2005 and now waived by their beneficiaries, while the prior year charges of €5.6 million related to top management changes involving the Chief Executive Officer and other company managers.

Amortization and depreciation charges increased by €0.5 million, mostly in relation to depreciation of new audiovisual equipment and the alteration work at the new Via Rizzoli premises.

The debt taken on to finance the Recoletos group's acquisition meant that net financial income of €15.7 million in 2006 became net financial charges of €5.9 million in 2007. Financial charges were €26.5 million higher mainly because of higher interest on loans, while financial income was €4.8 million higher as a result of loans given to group companies. Financial income in 2006 had also benefited from €5 million in gains arising on the partial sale of hedge funds managed by Duemme Sgr. Lastly, financial income from derivatives was up by €0.9 million on the prior year.

Other income (charges) from financial assets/liabilities amounted to €125.1 million in 2007, having decreased by €29.5 million from €154.6 million in 2006. This decrease mainly reflects €14.7 million in fewer dividend receipts from group companies (€81.3 million versus €96.0 million in 2006), €7.6 million in fewer capital

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gains on the disposal of equity investments (Intesa Sanpaolo for €51.8 million, less €1.7 million in related charges, and 3 Italia for €1.8 million versus €59.6 million on the sale of Intesa Sanpaolo shares in 2006) and €7.0 million in higher writedowns to equity investments, of which €3.6 million relating to AGR and €4.5 million to Poligrafici Editoriale, adjusting the latter's carrying amount to reflect its share price at December 31, 2007. In 2006 only Poligrafici Editoriale was written down by an amount of €1.1 million.

Earnings before tax were a positive €98.1 million compared with a similarly positive figure of €147.6 million the previous year. Net income for the year from continuing operations came to €113.0 million, having benefited from €14.9 million in income arising on the recognition of deferred tax assets on tax losses for the year that can now be offset under the group income tax election. This tax income was €10.1 million lower than in 2006.

The loss of €16.1 million from discontinuing and discontinued operations (€6.4 million in 2006) refers to the capital loss realized on transferring the interest in RCS Broadcast (now renamed Virgin Radio Italy) to Gruppo Finelco in July 2007, as well as taxes and other costs relating to the operation transferred, while the loss from discontinuing and discontinued operations in 2006 related to the writedown against RCS Broadcast's carrying value to adjust it to fair value at December 31, 2006.

Highlights from the company's balance sheet are reported below:

(€/millions) Reference to %% financial statements (3) Dec-31-2007 Dec-31-2006 Property, plant and equipment XIII 9.9 1% 3.8 0% Intangible assets XIV 0.1 0% 0.2 0% Investment property XV 103.3 6% 92.0 10% Non-current financial assets XVI 1,545.7 93% 785.8 86% Non-current assets 1,659.0 99% 881.8 97% Trade receivables XVII 3.4 0% 3.8 0% Trade payables XVIII (10.7) (1)% (6.4) (1)% Other assets/liabilities XIX 31.2 2% 45.3 5% Net working capital 23.9 1% 42.7 5% Provisions for risks and charges XX (4.0) (0)% (5.8) (1)% Deferred tax liabilities XX (8.2) (0)% (5.9) (1)% Provision for employee benefits XXI (2.4) (0)% (2.8) (0)% Non-financial liabilities held for sale XXII (0.9) (0)% - 0% Net capital employed 1,667.4 100% 910.0 100% Equity XXIII 1,274.2 76% 1,258.2 138% Net debt (cash) (4) XXIV 393.2 24% (348.2) (38)% Total sources of financing 1,667.4 100% 910.0 100%

(3): These references relate to the corresponding headings in the balance sheet. (4): Indicator of financial structure, calculated as current and non-current financial payables less both cash and cash equivalents and current financial assets.

Property, plant and equipment were €6.1 million higher than at December 31, 2006 reflecting alteration work on the new premises at no. 8, Via Rizzoli, Milan, as well as the purchase of furniture and fittings for the new offices.

Investment property, comprising the property in Via Solferino, Milan and the property in Via Reiss Romoli, Turin, amounted to €103.3 million, having increased by €11.3 million since December 31, 2006 after buying the property in Turin from the subsidiary GFT NET (in liquidation) for €12.5 million in October 2007. Non-current financial assets increased by €759.9 million, reflecting opposing factors amongst which: • the sale of the remaining 29,443,120 Intesa Sanpaolo shares, which had a carrying value of €170.3 million and generated a net capital gain of €51.8 million, less €1.7 million in related costs;

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• the transfer on July 26, 2007 of the entire interest in RCS Broadcast (now renamed Virgin Radio Italy) to Gruppo Finelco, having demerged the AGR and CNR businesses and paid in €11.6 million to increase its capital, for €53.7 million. During the same month of July RCS MediaGroup also purchased shares in Gruppo Finelco S.p.A. from MPS Venture SGR for €20.7 million. The overall investment of €75.0 million, including related costs, relates to 34.6% of Gruppo Finelco's post-increase share capital; • the sale of the entire interest in 3 Italia (formerly H3G Italia), with a carrying value of €15.0 million, which generated a capital gain of €1.8 million; • the purchase of 51% of Digicast for €17.1 million, inclusive of related costs; • the purchase of another 481,533 shares in DADA, in various stages over the second half of the year, for a total of €10.8 million, taking the total holding to 46.9%; • the payment of €900 million to RCS Investimenti against future capital increases, allowing it to provide Unidad Editorial with the necessary financial resources to buy the Recoletos group; • the payment of €0.4 million in capital to Alice Lab Netherlands.

Net working capital was €23.9 million at year end, having come down by €18.8 million since December 31, 2006. This decrease reflects a reduction of €7.8 million in tax credits, used to settle advance and final tax payments during 2007, also by transferring these credits to subsidiaries, an increase of €7.1 million in the payable for IRES (Italy's corporate income tax) for the year in relation to the Italian tax group headed by RCS MediaGroup, and an increase of €4.3 million in trade payables.

Provisions for risks and charges were €1.8 million lower at €4.0 million, down from €5.8 million at December 31, 2006. This decrease was mainly due to utilizations in the year for redevelopment of the site in Via Rizzoli, Milan (€1.4 million) and corporate reorganization (€0.7 million).

Deferred tax liabilities increased by €2.3 million on 2006, going from €5.9 million to €8.2 million. This change is due to a reclassification to deferred tax assets.

The provisions for employee benefits include the provision for employee termination indemnities (€2.2 million) and the provision for executive termination benefits (€0.3 million). The decrease of €0.4 million on the prior year reflects utilizations in the period and the effects of the reform of employee leaving indemnities introduced in 2007.

The net financial position reported net debt of €393.2 million compared with net cash of €348.2 million at the end of 2006. This change is basically due to the financing needed to purchase the Recoletos group; to purchase shares in Gruppo Finelco for €20.7 million; to purchase Digicast for €17.2 million; to purchase DADA shares for €10.8 million; to purchase the property in Turin from GFT NET (in liquidation) for €12.5 million; and to pay €22.9 million in dividends to shareholders. These outlays were only partly offset by net receipts of €158.2 million from the sale of the Intesa Sanpaolo shares and €16.8 million from the sale of the interest in 3 Italia. The company's equity climbed by €16.0 million from €1,258.2 million at the end of 2006 to €1,274.2 million at the end of 2007, reflecting net income for the year, less dividends paid and cancellation of the fair value reserve after selling the Intesa Sanpaolo shares.

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SIGNIFICANT EVENTS DURING THE YEAR

Significant events during the year are described in the Group's report on operations.

SIGNIFICANT SUBSEQUENT EVENTS

Significant subsequent events are described in the Group's report on operations.

OUTLOOK FOR THE CURRENT YEAR

Positive performance by the subsidiaries and the resulting dividends distributed to the parent company, together with the benefits of the group tax election, mean that we can expect a positive net result for the current year.

In the absence of currently unforeseeable events, these factors, combined with persistent attention to costs, confirm the projected improvements in profitability for the year.

TREASURY SHARES

At December 31, 2007 a total of 4,578,448 ordinary treasury shares were held, worth €14.5 million, corresponding to an average carrying value of €3.177 each and representing 0.62% of ordinary share capital and 0.60% of total share capital.

TRANSACTIONS WITH RELATED PARTIES

Details of related-party transactions can be found in the notes to the financial statements.

MANAGEMENT OF FINANCIAL RISKS

The objectives and policies of RCS MediaGroup S.p.A. regarding financial risk management, including its hedging policy and exposure to credit, price, liquidity and cash flow risks, are discussed in detail in the notes to the financial statements. The disclosures required by art. 18-quinquies of the Market Regulations can be found in note 8 on the Management of financial risks.

PERSONAL DATA PROTECTION PLAN

In compliance with the provisions of Decree 196/2003 ( the "Personal data protection code"), it is reported that RCS MediaGroup S.p.A. has drawn up a Personal Data Protection Plan, which will be updated within the legal term of March 31, 2008.

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SHARES HELD BY DIRECTORS AND STATUTORY AUDITORS

(Art. 79 of CONSOB Resolution 11971 dated May 14, 1999)

NUMBER SHARES INVESTMENT NUMBER SHARES NUMBER SHARES NUMBER SHARES HELD AT END 2007 HELD IN HELD AT END 2006 (1) PURCHASED SOLD (1) Raffaele Agrusti Roberto Bertazzoni RCS MediaGroup 11.056.419 ord. shares(ii) 221.128 11,277,547

Claudio De Conto Diego Della Valle RCS MediaGroup 35.231.698 ord. shares(i) 2,616,005 37,847,703

John P. Elkann Giorgio Fantoni Gabriele Galateri di Genola Franzo Grande Stevens Berardino Libonati Jonella Ligresti Piergaetano Marchetti Paolo Merloni Andrea Moltrasio Renato Pagliaro Corrado Passera Alessandro Pedersoli Antonio Perricone Carlo Pesenti Virginio Rognoni Pietro Manzonetto Gianrenzo Cova Giorgio Silva

(1) or start/end of office if not coinciding with the periods of reference shown; (i) interest held via company under his control; (ii) interest partly held via companies under his control.

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PROPOSED RESOLUTIONS

Shareholders, We submit for your approval the financial statements for the year ended December 31, 2007 - comprising the balance sheet, income statement, cash flow statement, statement of changes in capital and reserves and the explanatory notes, together with related attachments - which close with net income of €96,900,638.00, and the accompanying report on operations, along with our proposal for allocating net income as follows:

> €83,905,458.08 in dividends, to be split - bearing in mind the 4,578,448 treasury shares held by the company, whose dividends are allocated proportionately to the other shares - as follows:

• €0.13 to each of the outstanding 29,349,593 savings shares, for a total of €3,815,447.09;

• €0.11 to each of the outstanding 728,091,009 ordinary shares, for a total of €80,090,010.99;

payable, gross of any withholdings required by law, from May 22, 2008, with the shares going ex-div on May 19, 2008, and

> €12,995,179.92 to retained earnings.

Given the above, you are invited to pass the following resolution:

"The shareholders' meeting of RCS MediaGroup S.p.A. > has examined the directors' report on operations; > acknowledges the reports of the Board of Statutory Auditors and the independent auditors Reconta Ernst & Young S.p.A.; > has examined the financial statements for the year ended December 31, 2007 which close with net income of €96,900,638.00; and hereby resolves I. to approve:

a) the directors' report on operations; b) the financial statements presented by the Board of Directors for the year ended December 31, 2007, which close with net income of €96,900,638.00, as a whole and in their individual parts, together with the proposed provisions and allocations; c) the allocation of net income for the year of €96,900,638.00 as follows: > €83,905,458.08 in dividends, to be split - bearing in mind the 4,578,448 treasury shares held by the company, whose dividends are allocated proportionately to the other shares - as follows: • €0.13 to each of the outstanding 29,349,593 savings shares, for a total of €3,815,447.09; • €0.11 to each of the outstanding 728,091,009 ordinary shares, for a total of €80,090,010.99, payable, gross of any withholdings required by law, from May 22, 2008, with the shares going ex-div on May 19, 2008, and > €12,995,179.92 to retained earnings”.

Milan, March 14, 2008 on behalf of the Board of Directors:

Chairman Piergaetano Marchetti

Chief Executive Officer Antonio Perricone

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PARENT COMPANY FINANCIAL STATEMENTS

188

Income statement

(in euro) Notes Dec-31-2007 Dec-31-2006 I Net revenues 10 7,863,471 9,190,880 - of which with related parties 11 7,848,471 9,170,080 II Raw materials and services consumed 12 (29,142,265) (19,716,337) - of which with related parties 11 (6,043,711) (5,941,943) - of which non-recurring 21 (1,345,000) (1,000,000) III Payroll costs 13 (17,548,409) (21,921,748) - of which with related parties 11 (2,008,755) (9,307,551) - of which non-recurring 21 (843,749) (5,627,720) II Other operating revenues and income 14 22,020,895 12,981,157 - of which with related parties 11 17,127,083 12,551,111 II Other operating expenses 15 (1,698,783) (1,537,590) IV Increases in provisions for risks 33 (358,862) (145,978) V Amortization of intangible assets 16 (87,517) (42,077) VI Depreciation of property, plant and equipment 16 (843,212) (340,524) VII Depreciation of investment property 16 (1,134,542) (1,068,591) VIII Impairment of fixed assets 16 (194,171) - - of which non-recurring 21 (194,171) - EBIT (21,123,395) (22,600,808) IX Financial income 17 26,553,934 21,712,503 - of which with related parties 11 21,935,807 9,578,990 - of which non-recurring 21 - 4,972,984 IX Financial charges 18 (32,473,070) (6,020,893) - of which with related parties 11 (4,683,212) (3,116,113) X Other income (charges) from financial assets/liabilities 19 125,144,577 154,553,453 - of which with related parties 11 65,979,340 79,535,978 - of which non-recurring 21 51,975,127 59,597,124 Earnings before tax 98,102,046 147,644,255 XI Income taxes 20 14,945,863 24,978,976 Net income (loss) from continuing operations 113,047,909 172,623,230 Net income (loss) from discontinuing and discontinued XII operations 22 (16,147,271) (6,400,000) Net income (loss) for the year 96,900,638 166,223,230

The notes form an integral part of this report.

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Balance sheet

(in euro) Notes Dec-31-2007 Dec-31-2006 ASSETS XIII Property, plant and equipment 23 9,857,625 3,812,232 XV Investment property 24 103,312,287 91,966,228 XIV Intangible assets 25 137,931 210,448 XVI Investments in subsidiary and associated companies 26 1,514,972,719 569,445,579 - of which in related parties 11 1,514,972,719 569,445,579 XVI Available-for-sale financial assets 27 23,364,867 212,673,412 XXIV Financial assets recognized for derivatives 31 2,723,771 4,471 XVI Other non-current assets 28 393,615 451,356 XVI Deferred tax assets 20 6,981,860 3,195,530 Total non-current assets 1,661,744,675 881,759,255 XVII Trade receivables 29 3,458,820 3,797,719 - of which with related parties 11 3,330,633 3,612,636 XIX Other current receivables and assets 30 5,370,855 5,682,991 - of which with related parties 11 321,315 16,345 XIX Current tax assets 20 63,211,009 71,398,313 - of which with related parties 11 2,838,589 3,187,796 XXIV Financial assets recognized for derivatives 31 147,555 - XXIV Current financial receivables 31 324,032,449 287,791,281 - of which with related parties 11 324,032,449 263,876,485 XXIV Cash and cash equivalents 31 10,071,064 197,625,348 Total current assets 406,291,752 566,295,653 Non-current assets held for sale 00 TOTAL ASSETS 2,068,036,427 1,448,054,908 EQUITY AND LIABILITIES XXIII Share capital 32 762,019,050 762,019,050 XXIII Other equity instruments 32-38 4,451,305 4,242,641 - of which with related parties 11 3,111,889 3,593,268 XXIII Reserves 32 229,349,606 287,734,807 XXIII Treasury shares 32 (14,543,553) (61,697,945) XXIII Earnings (losses) carried forward 196,046,891 99,649,053 XXIII Net income (loss) for the year 96,900,638 166,223,230 Total equity 1,274,223,937 1,258,170,836 XXIV Non-current financial payables 31 520,842,109 35,842,109 XXI Provisions for employee benefits 33 2,406,040 2,781,460 XX Provisions for risks and charges 34 1,572,219 2,492,719 XX Deferred tax liabilities 20 8,153,673 5,933,625 XIX Other non-current liabilities 35 - 2,164,987 Total non-current liabilities 532,974,041 49,214,900 XXIV Bank loans and overdrafts 31 30,284,749 3,094,110 XXIV Current financial payables 31 178,934,996 98,296,653 - of which with related parties 11 128,243,559 97,810,132 XXIV Financial liabilities recognized for derivatives 31 117,966 15,171 XIX Current tax liabilities 20 29,306,346 21,076,923 - of which with related parties 11 13,539,787 12,157,004 XVIII Trade payables 36 10,722,648 6,341,039 - of which with related parties 11 2,169,025 1,456,885 XX Current portion of provisions for risks and charges 34 2,517,622 3,276,264 XIX Other current payables and liabilities 37 8,954,122 8,569,013 - of which with related parties 11 34,972 1,059,331 Total current liabilities 260,838,449 140,669,172 Liabilities associated with assets held for sale 0 0 TOTAL EQUITY AND LIABILITIES 2,068,036,427 1,448,054,908

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Cash flow statement

(€/millions) Notes Dec-31-2007 Dec-31-2006

A) Cash flows from operating activities Net income (loss) for the year 97.0 166.2 Amortization, depreciation and impairment 16 2.3 1.5 Capital (gains) losses and other non-monetary items 19 (37.3) (59.6) Impairment (revaluation) of equity investments 19 8.0 7.5 - of which with related parties 11 6.4 Grant of stock options 38 1.1 0.8 - of which with related parties 11 0.4 0.2 Net financial income (charges) including dividend income 17-18-19 (85.4) (111.8) - of which with related parties 11 (94.5) (92.4) Increase (decrease) in provisions 39 (2.2) (4.2) Increase (decrease) in deferred tax liabilities/assets recognized in income statement 20 (2.3) 2.9 Changes in working capital 40 19.8 19.6 - of which with related parties 11 1.4 18.5 Total 1.0 22.9 B) Cash flows from investing activities Purchase of equity investments (net of dividends received) 41 (882.0) 17.5 - of which with related parties 11 (870.4) 61.2 Purchase of property, plant and equipment and intangible assets 42 (7.9) (2.4) Proceeds from sale of equity investments 43 178.4 125.9 Total (711.5) 141.0 Free cash flow (A+B) (710.5) 163.9 C) Cash flows from financing activities Net change in financial payables and other financial assets 44 525.4 25.4 - of which with related parties 11 (29.7) (27.9) Net interest received/paid 45 (6.8) 13.4 - of which with related parties 11 17.3 6.4 Dividends paid 32 (22.9) (82.3) Total 495.7 (43.5) Net increase (decrease) in cash and cash equivalents (A+B+C) (214.8) 120.4 Opening cash and cash equivalents 194.5 74.1 Closing cash and cash equivalents (20.3) 194.5 Increase (decrease) for the period (214.8) 120.4

RECONCILIATION OF CASH AND CASH EQUIVALENTS

(€/millions) Dec-31-2007 Dec-31-2006

Opening cash and cash equivalents consist of: 194.5 74.1 Cash and cash equivalents 197.6 89.3 Current bank loans and overdrafts (3.1) (15.2) Closing cash and cash equivalents consist of: (20.3) 194.5 Cash and cash equivalents 10.0 197.6 Current bank loans and overdrafts (30.3) (3.1) Increase (decrease) for the period (214.8) 120.4

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Statement of changes in capital and reserves

Earnings Other equity Share premium Treasury Valuation Cash flow hedge (losses) Net income Total capital (€/millions) Share capital Legal reserve instruments reserve shares reserve reserve carried (loss) for year and reserves forward Note 32 Note 32-38 Note 32 Note 32 Note 32 Note 32 Note 31 Note 32 Note 32 Note 32 Balance at Dec-31-2005 762.0 0.7 71.2 152.4 (61.7) 80.9 0.0 82.1 99.8 1,187.4

Allocation of net income for year ended Dec-31-2005 - to carried forward earnings 99.8 (99.8) 0.0 - to dividends (82.3) (82.3) Grant of stock options 3.5 3.5 Fair value measurement of financial assets 26.5 26.5 Fair value measurement of current financial receivables 0.3 0.3 Release of reserve after sale of securities carried at fair value (3.9) (3.9) e of reserve after sale of equity investments carried at fair value (39.6) (39.6) Net income for year 166.2 166.2 Balance at Dec-31-2006 762.0 4.2 71.2 152.4 (61.7) 64.2 0.0 99.6 166.2 1,258.2

Balance at Dec-31-2006 762.0 4.2 71.2 152.4 (61.7) 64.2 0.0 99.6 166.2 1,258.2

Allocation of net income for year ended Dec-31-2006 - to carried forward earnings 166.2 (166.2) 0.0 - to dividends (22.9) (22.9) Bonus grant of treasury shares 47.1 (47.1) 0.0 Grant of stock options 9.9 9.9 Termination of stock option plan (9.6) (9.6) Fair value measurement of financial instruments (0.3) 1.0 0.7 Release of reserve after sale of equity investments carried at fair value (59.0) (59.0) Release of reserve to adjust provisions (0.2) 0.2 0.0 Net income for year 96.9 96.9 Balance at Dec-31-2007 762.0 4.5 71.2 152.4 (14.6) 4.7 1.0 196.0 96.9 1,274.2

Distributable reserves 71.2 4.7 181.4 257.3 Treasury shares (14.6) 14.6 0.0

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EXPLANATORY NOTES

193

FORM, CONTENT AND OTHER INFORMATION ON THE FINANCIAL STATEMENTS

1. Corporate information

The financial statements of RCS MediaGroup S.p.A. for the year ended December 31, 2007 were approved and authorized for publication by the Board of Directors on March 14, 2008, and will be submitted for approval by the shareholders in the Annual General Meeting convened for April 28, 2008 in first call and April 29, 2008 in second call. As a holding company, RCS MediaGroup S.p.A.'s sole business is the direction and co-ordination of the companies under its control, along with the provision of centralized services and financial management.

2. Form and content

The financial statements for 2007 represent the separate financial statements of the parent company RCS MediaGroup S.p.A. prepared under the international financial reporting and accounting standards (IFRS/IAS) issued or revised by the International Accounting Standards Board and adopted by the European Union. The financial statements are audited by Reconta Ernst & Young S.p.A..

The presentation currency of these financial statements is the euro, which is also used to present the Group's consolidated financial statements. Unless otherwise specified, all amounts reported in these explanatory notes are stated in millions of euro.

3. Reporting formats

RCS MediaGroup has adopted: • the balance sheet format in which assets and liabilities are separately classified as current and non- current; • the income statement format in which costs are classified by nature; • the cash flow statement using the indirect method, whereby net income for the year is adjusted for the effects of non-monetary items, of any deferral or provision of past or future operating receipts or payments and revenues or costs associated with cash flows from investing or financing activities.

With reference to Consob Resolution 15519 of July 27, 2006, significant transactions with related parties and non-recurring items have been reported separately on the face of the balance sheet and income statement.

4. Accounting policies

The financial statements have been prepared on the basis of historical cost, amended as required for the valuation of certain financial instruments. This section summarizes the more important accounting policies adopted by the company:

Revenues

Revenues are recognized on an accrual basis when their value can be reliably measured and the associated consideration is likely to be collected. Revenues from the recharge of centralized services are recognized on the date they are earned, as defined in the respective contracts. Dividends are recognized on the date the dividend is declared. Rental income from investment property is recognized on a straight-line basis over the terms of the related leases.

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Costs

Costs and other operating expenses are recognized when they are incurred under the accrual basis of accounting, and when they do not produce future economic benefits, meaning that they do not meet the conditions for being recorded as assets in the balance sheet. Payroll costs include benefits received in the form of share-based remuneration.

Financial income and charges

Financial income and charges are recorded in the income statement on a time proportion basis using the applicable effective rate.

As required by IFRS 7, financial income and charges are presented in note 8 on the basis of the categories defined in IAS 39.

Income taxes

These include both current and deferred taxes. The charge or income relating to current income taxes for the period is determined using the tax rules actually in force. As part of the Group's tax management, RCS MediaGroup S.p.A. has renewed the three-year Italian group tax election, as allowed by Decree 344 dated December 12, 2003. It acts as the head of this tax group. This election makes it possible to obtain a group benefit by directly offsetting its own tax losses against the taxable income transferred by the Italian companies in this tax group. In addition, the company, together with M-dis, has renewed the three-year fiscal transparency election for 2007-2009, as allowed by article 115 of the Income Tax Consolidation Act. As a result of this election, the taxable income received from M-dis also forms part of the company's taxable base for the purposes of calculating IRES (Italian corporate income tax). Deferred tax assets and liabilities are determined on the basis of temporary differences between the value of assets and liabilities reported for accounting purposes and the corresponding amounts that are applicable for tax purposes. Deferred tax assets are recognized only to the extent that it is probable that taxable income will be available against which the deductible temporary difference can be utilized, while deferred tax liabilities must be recognized for all taxable temporary differences. They are calculated at the tax rates that are expected to apply to the period when the tax asset is realized or the tax liability is settled.

Property, plant and equipment

Items of property, plant and equipment are reported at historical cost if purchased separately or at fair value on the acquisition date if purchased through a business combination, and are systematically depreciated over their remaining useful lives. If any assets classified in this category are destined for sale, they are reclassified to non-current assets held for sale. Assets held for sale are no longer depreciated. If their fair value is lower than their carrying amount, the latter is written down accordingly. Depreciation is calculated on a straight-line basis using rates considered to reflect the estimated useful lives of the assets; assets acquired during the year are depreciated on a pro-rata basis, taking account of the asset's effective use during the year. Improvement expenditure is added to the value of the assets concerned only when it is clearly separable and identifiable and can be recovered through expected future economic benefits. Items of property, plant and equipment are periodically reviewed to identify any impairment losses as described in the paragraph on "Impairment of assets".

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Investment property

Investment property is recorded at cost, inclusive of any directly attributable expenditure, and is held to earn rentals or for capital appreciation or both. Investment property is systematically depreciated on a straight-line basis in each individual period to take account of its remaining useful life, except for the value of land classified in this category. Depreciation is calculated on a straight-line basis using rates considered to reflect the estimated useful lives of the assets. Improvement expenditure is added to the value of the assets concerned only when the related cost can be reliably determined and it is probable that this expenditure will produce future economic benefits. Assets acquired during the year are depreciated on a pro-rata basis, taking account of the asset's effective use during the year. Transfers to investment property are made when, and only when, there is a change in use evidenced by events like: the end of owner-occupation, the commencement of an operating lease to another party or the end of construction or development. Transfers from investment property are made when, and only when, there is a change in use evidenced by events like: the commencement of owner-occupation or the commencement of development with a view to sale. Investment property is periodically reviewed to identify any impairment losses as described in the paragraph on "Impairment of assets".

Intangible assets

These are recorded at purchase cost if purchased separately or capitalized at fair value on the acquisition date if purchased through a business combination. Intangible assets have a finite useful life and are systematically amortized on a straight-line basis over that life. Advertising costs, start-up and expansion costs and research costs are not capitalized. Intangible assets are periodically reviewed to identify any impairment losses as described in the paragraph on "Impairment of assets".

Impairment of assets

IAS 36 requires impairment testing to be carried out for property, plant and equipment, intangible assets and equity investments whenever there are any signs that they may be impaired. In the case of equity investments and other intangible assets with an indefinite useful life or assets not available for use, this test must be carried out at least once a year. The recoverability of the values recorded is tested by comparing the book value with the higher of the net selling price, if an active market exists, and the asset's value in use. The value in use is defined as the present value of estimated future cash flows expected to arise from the continuing use of an asset, or from its cash generating unit, and from its disposal at the end of its useful life. The cash generating units have been identified in keeping with the organizational structure and business of the parent company and its equity investments. They consist of groups of like assets that generate cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.

Investments in subsidiary and associated companies

Investments in subsidiaries, associates and joint ventures are stated at cost and periodically tested for impairment to ensure that they have not suffered any losses in value. These tests are carried out at least once a year, or whenever any investments display evidence that they might be impaired. These investments are valued using the Discounted Cash Flow model, adopting the methods described in "Impairment of assets". If it is necessary to recognize an impairment loss, this is debited to the income statement in the period in which it is identified. If the reasons for the impairment loss no longer apply, the carrying amount of the investment is increased but to no more than its original cost. Such a writeback is recognized in the income statement.

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Financial assets and receivables

Financial assets and receivables are initially recognized at fair value, which basically corresponds to purchase price, plus any related purchase costs. Purchases and sales of financial assets are recognized on their trade date, ie. the date when the company assumes an obligation to buy/sell these assets.

As required by IFRS 7, financial assets have been identified and classified in note 8 on the basis of the definitions contained in IAS 39. Management determines upon initial recognition how financial assets are to be classified in the categories defined by IAS 39 and repeated in IFRS 7. After initial recognition, financial assets are valued on the basis of their classification under IAS 39. More specifically: - "Financial assets, designated upon initial recognition, at fair value through profit or loss" are measured at market value on the reporting date; in the case of unquoted instruments, this value is determined using valuation techniques based on market information. Gains and losses arising on the fair value measurement of assets held for trading are recognized in the income statement.

- "Held-to-maturity investments" are measured at amortized cost using the effective interest method, in other words adopting a rate that exactly discounts the financial asset's estimated future cash flows to its net carrying amount. If there is objective evidence of impairment, the value of the assets is reduced to the present value of estimated future cash flows: the resulting losses are recognized in the income statement. If, in a subsequent period, the amount of a previous impairment loss decreases, the value of the assets is reinstated but to no more than what their amortized cost would have been had the impairment not been recognized. The company currently does not own any financial instruments with the intent of holding them to maturity.

- "Loans and receivables" are measured at amortized cost, with interest calculated using the effective interest rate recognized in the income statement. Gains and losses are recognized in income when the loans and receivables are removed from the balance sheet or when they become impaired. Impaired receivables are stated at their estimated realizable value (fair value) by means of the provision for doubtful accounts, which is directly deducted from their gross value. Receivables are written down when there is objective evidence that the receivable is unlikely to be collected (for example, when more than 5% of the total receivable is past due). If, in a subsequent period, the amount of previous impairment losses decreases, the value of the assets is reinstated but to no more than what their amortized cost would have been had the impairment not been recognized. The company mainly reports in this category assets due within twelve months, which are therefore recorded at face value as an approximation of amortized cost. If, however, the terms of payment are longer than normal market ones and the receivable does not earn interest, the amount recognized in the balance sheet contains an implicit financial component and so must be discounted to present value by debiting the discount to the income statement. Loans and receivables expressed in foreign currencies are translated at period-end exchange rates, and the gains or losses from their conversion are charged to the income statement.

- Available-for-sale financial assets" are measured at fair value; gains and losses arising from changes in the fair value of these assets are recognized directly in an equity reserve for as long as these assets are held in the portfolio. This reserve is also used to absorb any negative adjustments to fair value; once the reserve has been used up, any additional negative adjustments, representing an impairment loss, will be recorded in the income statement. If such additional negative adjustment represents a market fluctuation, it is reflected in the equity accounts.

In the case of securities traded on active markets, fair value is determined with reference to the closing price on the last trading day of the reporting period. In the case of assets for which there is no active market, fair value is determined on the basis of the price used in recent transactions between independent parties in instruments that are substantially the same, or

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using valuation techniques based on discounted cash flow analysis. Only if no future plans for the underlying asset are available, is the valuation maintained at cost. At the reporting date, the company has classified less than 20% of its equity investments in this category.

Derivative financial instruments Derivatives are classified as "Hedging derivatives" when they qualify for hedge accounting, otherwise, even if they have been taken out with the intent of managing exposure to risks, they are reported as "Held-for- trading financial assets". In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when their relationship with the hedged item is formally documented and the hedge effectiveness is high (effectiveness test). The effectiveness of hedging transactions is documented both at the inception of the hedge and periodically thereafter (at least at every annual or interim reporting date) and is measured by comparing changes in the hedging instrument's fair value with those in the hedged item (dollar offset method). Fair value hedges, which hedge the exposure to changes in the fair value of the item being hedged, are recorded at fair value with any gains/losses recognized in the income statement. Changes in the fair value of cash flow hedges, which hedge the exposure to changes in cash flow for the items hedged, are initially recorded in equity and subsequently booked to the income statement, to match the effects of the transaction being hedged. Fair value changes relating to the ineffective portion are immediately recognized in the income statement. If the derivative instrument is sold or no longer qualifies as an effective hedge of the risk for which it was taken out or if the underlying transaction is no longer highly probable, the related portion of the cash flow hedge reserve is immediately reversed to the income statement. Changes in the fair value of derivatives that do not satisfy the criteria for being treated as hedging derivatives are recorded in the income statement. Regardless of classification, all derivatives are stated at fair value, determined using valuation techniques based on market data (such as discounted cash flow, forward exchange rate method, Black-Scholes model and its offshoots). In particular, this value is determined by the Group Finance department, using specific pricing instruments based on market parameters (i.e. interest rates, exchange rates and volatilities), reported on individual valuation dates.

Cash and cash equivalents Cash and cash equivalents include cash on hand, bank and post office sight deposits and investments in securities carried out as part of the treasury management function which have a short-term maturity, are highly liquid and subject to an insignificant risk of changing value. They are stated at face value. For the purposes of the disclosures required by IFRS 7 and presented in note 12, in which financial instruments are classified on the basis of the definitions contained in IAS 39, cash and cash equivalents have been classified in the category "Loans and receivables", while in the cash flow statement, they are presented as cash and cash equivalents, as defined above, less bank overdrafts.

Payables and other liabilities

Financial payables and liabilities are initially recognized at fair value, which is basically the consideration payable, less any related transaction costs. Purchases and sales of financial liabilities are recognized on their trade date, ie. the date when the company assumes an obligation to buy/sell these liabilities. As required by IFRS 7, financial liabilities have been identified and classified in note 8 on the basis of the definitions contained in IAS 39. Management determines upon initial recognition how financial liabilities are to be classified in the categories defined by IAS 39 and repeated in IFRS 7. After initial recognition, financial liabilities are valued on the basis of their classification under IAS 39. More specifically:

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- "Financial liabilities at fair value through profit or loss" are measured at market value on the reporting date; in the case of unquoted instruments (eg. derivative financial instruments), this value is determined using valuation techniques based on market information. Gains and losses arising from changes in the fair value of liabilities held for trading are recognized in the income statement. - "Financial liabilities at amortized cost" due within twelve months are stated at their face value as an approximation of amortized cost. Payables may be classified in one of the above categories, defined by IAS 39, depending on their characteristics. Payables expressed in foreign currencies are translated at period-end exchange rates, and the gains or losses from their conversion are charged to the income statement. The company has included in this category trade payables, financial payables, bank loans and overdrafts and other liabilities. These mostly fall due within twelve months and so are stated at face value.

Treasury shares

Treasury shares are recorded as a deduction from equity. The original cost of the treasury shares and the income arising on any subsequent sales are reported as movements in equity.

Provisions for employee benefits

The provision for employee termination indemnities and the provision for executive termination benefits are recorded at the actuarial value of the company's effective liability to all employees, determined by applying existing statutory and regulatory provisions. The actuarial valuation, based on financial and demographic assumptions, is carried out by outside professional actuaries. The actuarial gains and losses are recognized in the income statement and classified under payroll costs. The provision for employee termination indemnities reported by Italian companies until December 31, 2006 used to be treated like a defined benefit plan. The rules applying to this provision were revised by Law 296 of December 27, 2006 (2007 Finance Act) and subsequent enacting decrees and regulations issued in the early part of 2007. Further to these changes, companies with at least 50 employees must now treat only that part of the provision accruing before January 1, 2007 (and not yet paid out at the balance sheet date) like a defined benefit plan, while amounts accruing thereafter must be treated like a defined contribution plan. The effects on the financial statements of applying these new rules are described in note 33.

Provisions for risks and charges

The provisions for risks and charges relate to certain or probable liabilities of a specific nature whose amount and/or timing is unknown. Provisions are recognized when (i) an enterprise has a present obligation, deriving from a past event, (ii) it is probable that an outflow of resources will be required to settle the obligation and (iii) a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the expenditure that the company would rationally pay to settle the obligation at the balance sheet date or to transfer it to a third party at that time. The estimate implicitly reflects a financial component associated with the assumption that the obligation will be settled in the long term. If this component is material and the date of paying the obligation may be reliably estimated, the provision is therefore discounted to its present value; the increase in the provision associated with the time value of money is recorded in the income statement under "Financial charges".

Assets and liabilities held for sale

Assets and liabilities held for sale include non-current assets (or disposal groups) and the associated liabilities that the company intends to sell on the basis of a specific plan. These balances are valued at the lower of the net book value at which these assets and liabilities were recorded and their fair value less any foreseeable disposal costs. Any losses arising from this valuation are reported in "Net income (loss) from discontinuing and discontinued operations".

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Share-based remuneration plans

The company gives additional benefits to certain executives in the form of stock option plans which are classified as equity-settled since they involve the physical delivery of shares. Under IFRS 2 (Share-based payment) stock options for key employees are measured at their fair value on the grant date, determined using the binomial model. This model takes account of all the option's characteristics (life of the option, strike price and vesting conditions etc.), as well as the value of the underlying shares on the grant date and the expected volatility of these shares. If the right to exercise the option is exercisable after the end of a vesting period and after satisfying specific performance conditions, the overall cost of the options is recognized evenly over this period in a specific line item known as "Other equity instruments", with the matching entry going to "Payroll costs" in the income statement. At the end of each year the fair value of options determined in the past is not revised; instead, the estimated number of options that will vest up until their expiry is updated. The changes in this estimate are recorded as an adjustment to "Other equity instruments" with the matching entry going to "Payroll costs" in the income statement. When the options expire the amount recorded in the equity account is reclassified as follows: the portion of equity relating to exercised options is reclassified to the "Share premium reserve", while the portion relating to unexercised options is reclassified to "Earnings (losses) carried forward". If the right to exercise options is cancelled or settled during the vesting period (except for grants cancelled by forfeiture when the vesting conditions are not satisfied), the cancellation or settlement is accounted for as an acceleration of vesting and the cost that otherwise would have been recognized for services received over the remainder of the vesting period is therefore recognized immediately.

5. Changes in international accounting standards

Details can be found in note 7 of the "Explanatory notes" to the consolidated financial statements.

6. IFRSs and IFRIC interpretations not yet in force

Details can be found in note 8 of the "Explanatory notes" to the consolidated financial statements.

7. Main decisions when applying accounting standards and key sources of estimation uncertainty

Details can be found in note 9 of the "Explanatory notes" to the consolidated financial statements.

8. Management of financial risks

RCS MediaGroup holds most of its investments in media-sector subsidiaries and associates, details of which can be found in the review of segment performance contained in the report on group operations; RCS MediaGroup provides these companies with finance under a centralized treasury management service and so also manages the Group's financial risks, as discussed below.

RCS MediaGroup is exposed to a variety of financial risks in different degrees: market risks (interest rate risk, price risk and occasionally currency risk), liquidity risk and credit risk. After a formal process of review and approval, RCS MediaGroup uses different types of derivative to manage its exposure to interest rate and currency risk; the types of contract currently in existence are: interest rate swaps, forward rate agreements and interest rate caps. Derivatives are used solely for hedging purposes. Even if a financial instrument has been designated for hedging purposes, whenever it fails to satisfy the formal conditions of the hedge effectiveness test required by IAS 39, it will be classified as held-for-trading.

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RCS MediaGroup provides a centralized treasury service to group companies, including through the use of a zero-balance cash pooling system. This means that the cash needs of group companies are duly satisfied by RCS MediaGroup. This arrangement means that RCS MediaGroup is responsible for controlling and managing the Group's financial risks.

Interest rate risk Interest rate risk refers to the risk of higher financial charges because of an adverse, unexpected fluctuation in interest rates. The company is exposed to this risk in relation to its floating-rate financial liabilities. Interest rate risk is managed using specific policies defining the risk management objectives, limits, roles and responsibilities within the process. In detail: • it is the company's objective to mitigate exposure to interest rate risk by establishing an adequate mix between floating-rate and fixed-rate liabilities, using derivatives where necessary; • interest rate risk is managed by the Finance department within the permitted operating limits; this department draws up strategies for hedging exposure and presents them for top management approval; • it is not allowed to use derivatives for speculative purposes, ie. not in pursuit of the stated objective, unless previously authorized by the Board of Directors in cases of proven opportunity; • the Finance department informs top management of its work and results in different ways, including the report on the status of the derivatives portfolio and the report analyzing changes in net financial position. Exposures to interest rate risk are managed by duly analyzing the Group's exposure. As far as the position at December 31, 2007 is concerned, this objective was pursued using interest rate swaps (IRS), forward rate agreements (FRA) and interest rate caps taken out with highly-rated leading financial institutions. IRS transform the floating rate into a fixed one through the periodic swap, with the financial counterparty, of the difference between the fixed-rate interest (swap rate) and floating-rate interest, both calculated on the notional contractual amount; the mechanism applying to FRA is essentially the same. In the case of interest rate caps, only if the interest rate rises above the contractual one, does the financial counterparty pay the company the difference between the contractual rate and the market floating rate in such a way as to bring the company's financial cost back to its contractual level. Note 31 contains detailed information about the fair value of financial instruments at the balance sheet date as well as the table summarizing interest rate risks.

Sensitivity analysis

(€/millions)

Increase/ Impact on Sensitivity analysis of interest rate risk Impact on Underlying amount Decrease in interest income on floating-rate financial instruments equity rates statement

2007 (393.2) 1% (0.7) 9.3 2006 348.2 1% 2.4 0.1

2007 (393.2) -1% (0.5) (4.6) 2006 348.2 -1% (2.4) 0

Floating-rate financial instruments are generally analyzed separately from fixed-rate ones when identifying the potential impact of positive and negative shifts in the rate curve. In the case of floating-rate instruments, the sensitivity analysis looks at cash flows; in the case of fixed-rate financial instruments, the analysis looks at changes in fair value. RCS Mediagroup held only floating-rate financial instruments at December 31, 2007.

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As far as floating-rate financial instruments are concerned, these include cash and cash equivalents, non- current financial receivables and payables and any interest rate derivatives held. The sensitivity analysis takes account of: − the change in interest income and expense during the year attributable to any reasonable changes in interest rates applying to floating-rate assets and liabilities held at the balance sheet date; − the impact in terms of fair value changes in interest rate derivatives recognized in equity (for the hedge) and in the income statement, assuming an instantaneous change in the rate curve at the balance sheet date. As far as risk factors generating significant exposures to risk were concerned, the sensitivity analysis revealed that an increase in interest rates would cause a potential loss of €0.7 million in the income statement at December 31, 2007 (gains of €2.4 million in 2006) and an increase of €9.3 million in equity (€0.1 million in 2006). A decrease in interest rates would cause a potential loss of €0.5 million in the income statement (gain of €2.4 million in 2006) and a decrease of €4.6 million in equity (zero in 2006).

Currency risk RCS MediaGroup does not have a trading exposure to currency risk. RCS MediaGroup hedges foreign currency positions using forward purchase/sale agreements and/or purchase options. Currently it does not have any currency hedging derivatives. The exposure to currency risk for net investments in a foreign entity is not hedged. Given the small amount of foreign currency balances, the results of the associated sensitivity analysis were immaterial.

Liquidity risk Liquidity risk can arise in relation to difficulties in obtaining finance in due time to support operating activities. The Finance department has central responsibility for fund-raising and investment activities (using cash management systems) in compliance with the objectives and policies defined by management. The company's objective is to keep a balance between continuity of financing and flexibility of management by: • investing surplus cash in short-term operations (usually lasting between one and three months) that can be easily and quickly unwound, such as money-market instruments; • using different types of finance, such as revolving committed credit facilities, with several banks, lasting between seven and eleven years for a total of €800 million. Drawdowns of short-term credit lines generally cover only a minimal part of the capital employed. The Finance department prepares a periodic report for top management containing an analysis of changes in the net financial position of the company and of the Group as a whole.

Liquidity analysis The following table presents a maturity analysis of the company's financial and trade liabilities at December 31, 2007 and December 31, 2006, based on undiscounted contractually agreed payments (including principal and interest). In the absence of an agreed repayment date, the payments have been included on the basis of the first date when payment could be requested. This is why bank overdrafts have been included in the first repayment range.

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Dec-31-2007 (€/millions) Contractual due date (interest and principal) Book Maturity analysis val ue on demand 1 year 1-2 years2-5 years >5 years Total

Non-derivative financial instruments

Trade payables (10.7) (10.7) (10.7) Financial payables due to third parties (601.8) (30.3) (76.7) (24.2) (108.0) (496.6) (735.8) Intercompany payables (128.2) (128.2) (128.2) Other payables (trade or financial) (7.1) (7.1) (7.1) Non-hedging derivatives (0.1) (0.1) (0.1) Total (747.9) (176.4) (76.7) (24.2) (108.0) (496.6) (881.9)

Dec-31-2006 (€/millions) Contractual due date (interest and principal) Book Maturity analysis val ue on demand 1 year 1-2 years2-5 years >5 years Total

Non-derivative financial instruments

Trade payables (6.3) (6.3) (6.3) Financial payables due to third parties (39.4) (3.6) (1.5) (1.6) (39.8) (46.5) Intercompany payables (97.8) (97.8) (97.8) Other payables (trade or financial) (5.7) (5.7) (5.7) Total (149.2) (113.4) (1.5) (1.6) (39.8) (156.3)

Credit risk

RCS MediaGroup's exposure to credit risk refers to financial receivables and to a lesser extent trade receivables. As far as financial receivables are concerned, investments of surplus cash and derivative transactions are carried out solely with highly reputable banking counterparties, for maximum amounts that are set internally for each individual counterparty. In addition, there are financial receivables in the form of loans to group companies as part of the Group's centralized treasury management. RCS MediaGroup does not have any areas of particularly significant risk where its trade receivables are concerned.

The maximum exposure to credit risk is reported below:

Maximum exposure to credit risk Book value Notes Dec-31-2007 Dec-31-2006 FINANCIAL ASSETS Financial assets at fair value through profit or loss Held-for-trading securities 31 - 23.9 Loans and receivables Trade receivables 29 3.4 3.8 Current financial receivables 31 324.0 263.7 Cash and cash equivalents 31 10.1 197.6 Other current receivables and assets 30 0.4 0.2 Non-current financial receivables (hedging derivatives) 31 2.7 - Hedging derivatives 31 0.1 - Financial guarantees given 9.4 1.4

TOTAL 350.1 490.8

No collateral is held in relation to financial assets.

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Trade receivables are reported in the balance sheet after deducting impairment. Under the company's writedown procedures, individual impairment losses are recognized for large, individual trade positions which are objectively in default, reflected in the fact that more than 5% of the total receivable is past due. The applicable writedown percentage is established according to the past due age range, and periodically reviewed to take account of credit ratings given by the Group to individual counterparties. The following table presents the average writedown percentages applied to past due receivables at December 31, 2007:

Past due Writedown applied

Receivables put into legal hands are generally written down by at least 80%. The following table provides information about the credit quality of financial assets held at December 31, 2007 and December 31, 2006, classifying trade receivables not past due and not impaired on the basis of the credit rating assigned to the individual counterparties and the size of past due amounts.

Receivables ageing Book Receivables not past Receivables past due Notes value due and not impaired 1-30 days 180-360 days 360-540 days At Dec-31-2007 Trade receivables 29 3.4 3.3 0.1 Current financial receivables 31 324.0 324.0

Other current receivables and assets 30 0.4 0.4

At Dec-31-2006 Trade receivables 29 3.8 3.5 0.1 0.1 0.1 Current financial receivables 31 263.9 263.9

Other current receivables and assets 30 0.2 0.2

The receivables reported in this table do not have a rating because they almost all refer to amounts owed by subsidiaries and associates.

Price risk Price risk refers to the uncertainty associated principally with changes in the market prices of equity instruments.

Sensitivity analysis

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9. Financial instruments: disclosures

Book value (€/millions) Notes Dec-31-2007 Dec-31-2006 FINANCIAL ASSETS Financial assets at fair value through profit or loss Held-for-trading securities 31 - 23.9 Available-for-sale financial assets Equity investments 27 23.4 212.6 Loans and receivables Trade receivables 29 3.4 3.8 Current financial receivables 31 324.0 263.9 Cash and cash equivalents 31 10.1 197.6 Other current receivables and assets 30 0.4 0.2 Non-current financial receivables (hedging derivatives) 31 2.7 - Hedging derivatives 31 0.1 -

TOTAL FINANCIAL ASSETS 364.1 702.0

FINANCIAL LIABILITIES Financial liabilities at amortized cost Trade payables 36 10.7 6.3 Bank loans and overdrafts 31 30.3 3.1 Current financial payables 31 178.9 98.3 Other current payables and liabilities 37 7.1 6.8 Non-current financial payables 31 520.8 35.8 Non-hedging derivatives 31 0.1 -

TOTAL FINANCIAL LIABILITIES 747.9 150.3

The following have been classified as "Financial assets at fair value through profit or loss": • financial assets designated upon initial recognition as at fair value through profit or loss; • financial assets held for trading if they are: − classified as held for trading or acquired or incurred for the purpose of selling or reselling in the near term; − part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; − derivatives (except for derivatives that are designated and effective hedging instruments), details of which can be found in the note on "Derivatives". "Loans and receivables" comprise financial assets with fixed or determinable payments that are not quoted in an active market, except for those designated as held for trading or available for sale. "Available-for-sale financial assets" include all those assets not classified in the preceding categories. "Financial liabilities at fair value through profit or loss" include financial liabilities designated by the company upon initial recognition as at fair value with changes in fair value through the income statement and financial liabilities held for trading. "Financial liabilities at amortized cost" include all financial liabilities, except for those previously designated as held for trading. In compliance with IFRS 7, the following table presents the effects on the income statement and equity of each category of financial instruments held by the company in 2006 and 2007. These mainly consist of gains and losses arising on the purchase and sale of financial assets and liabilities as well as changes in the value of

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the financial instruments measured at fair value and the interest income/expense relating to financial assets/liabilities measured at amortized cost.

Impact of financial instruments on income statement and equity, in compliance with IFRS 7

Dec-31- Notes Dec-31-2007 2006

Net gains/ losses recognized on financial instruments

Financial assets/liabilities held for trading (0.3) 5.0 Hedging derivatives 1.9 __ of which gains/losses booked to equity 31 1.0 __ of which gains/losses booked to income statement 0.9 Gains/losses on available-for-sale financial assets 136.3 183.3 __ of which change in fair value booked to equity 3.3 28.8 __ of which gains/losses for period reversed from equity and booked to income statement 19 51.9 59.6 __of which dividends from equity investments 81.3 96.1 Gains/losses on loans/receivables (0.2) (1.0)

Interest income/expense (at internal rate of return) earned on financial assets/liabilities not at FVTPL Interest income on __ Loans/receivables 24.3 (15.7) __ Available-for-sale assets Interest expense on __ Financial liabilities at amortized cost (32.1) (4.8)

Interest income earned on impaired financial instruments __ Loans/receivables __ Available-for-sale assets

Provisions for impairment of financial assets (4.5) (1.1) __ Loans/receivables __ Available-for-sale assets 27 (4.5) (1.1)

More details on the characteristics of financial instruments held and the associated gains and losses can be found in the specific explanatory notes.

10. Net revenues

Net revenues amount to €7.9 million in 2007 compared with €9.2 million in 2006. The parent company's revenues basically consist of recharges to group companies for services it provides mainly in the areas of legal affairs, communication, corporate affairs and planning.

11. Transactions with related parties

The transactions and balances between RCS MediaGroup S.p.A. and subsidiary and associated companies mostly refer to:

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• transactions associated with agreements for the centralized provision of services (communication, corporate and legal affairs and planning) to group companies; • commercial transactions involving the letting of offices and work space by the parent company to its subsidiaries; • financial transactions, involving loans and current account transactions undertaken as part of the centralized treasury management service.

All these transactions are carried out in the ordinary course of business and conducted on an arm's length basis. The following table shows the amount and proportion of related-party transactions and balances included in each relevant heading of the balance sheet and income statement:

Balance sheet: Investments in Current Current subsidiary and Trade Current tax Other equity Current tax Trade financial financial associated receivables assets instruments liabilities payables receivables payables companies

Subsidiary companies 1,428.0 3.3 2.8 324.0 2.7 101.1 13.5 2.1 Associated companies 87.0 - - - 27.1 -

Total related parties 1,515.0 3.3 2.8 324.0 2.7 128.2 13.5 2.1 Reported total 1,515.0 3.5 63.2 324.0 4.5 178.9 29.3 10.7 % of reported total 100% 94% 4% 100% 60% 72% 46% 20%

Income statement: Raw Other Other income materials and operating Financial Financial (charges) from Net revenues services revenues and income charges financial consumed income assets/liabilities

Subsidiary companies 7.8 4.1 16.6 21.9 2.9 60.7 Associated companies - 0.2 0.5 1.8 5.3

Total related parties 7.8 4.3 17.1 21.9 4.7 66.0 Reported total 7.9 29.1 22.0 26.5 32.5 125.1 % of reported total 99% 15% 78% 83% 14% 53%

Note 14 to the consolidated financial statements contains details of related-party transactions concerning the group income tax and VAT elections and the intragroup transfer of tax credits.

As required by IAS 24, key management personnel have been identified as the directors, statutory auditors and Chief Executive Officer & Chief Operating Officer of RCS MediaGroup, details of whose remuneration in the various forms received are provided in the following table:

Cost of services Payroll costs Other equity instruments Board of Directors - emoluments 1.6 - - Board of Statutory Auditors - emoluments 0.1 - - Chief Executive Officer & Chief Operating Offer - other remuneration - 2.0 0.4 Total related parties 1.7 2.0 0.4 Reported total 23.4 17.5 4.5 % of reported total 7% 11% 9%

"Payroll costs" also include €1 million in company bonuses earned in 2007, and €0.4 million for the 2007 cost of stock options granted to the Chief Executive Officer in his capacity as Chief Operating Officer. "Other equity instruments" report the overall cost of stock options granted to the Chief Executive Officer & Chief Operating Officer as from the start of the vesting period.

The additional disclosures required by IAS 24 can be found in note 14 to the consolidated financial statements.

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The total amount of compensation paid to the directors, statutory auditors and the Chief Operating Officer during the year is reported in the following table: DESCRIPTION OF OFFICE REMUNERATION (€/thousands)

OfficePeriod in office End of Emoluments Bonuses and Other Name and surname held from to office of office other incentives remuneration AGM to approve 2008 Piergaetano Marchetti Chairman *^ 01/01/2007 12/31/2007 750 18 ◊ annual report AGM to approve 2008 Gabriele Galateri Di Genola Deputy Chairman 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 Antonio Perricone CEO & COO * 01/01/2007 12/31/2007 350 (1) 1,000 (1) 650 (1) annual report AGM to approve 2008 Raffaele Agrusti Director ** 01/01/2007 12/31/2007 38 5 (2) annual report AGM to approve 2008 Roberto Bertazzoni Director 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 Claudio De Conto Director 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 Diego Della Valle Director 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 John P. Elkann Director * 01/01/2007 12/31/2007 38 annual report AGM to approve 2008 Giorgio Fantoni Director ^ 01/01/2007 12/31/2007 0 (3) annual report AGM to approve 2008 Franzo Grande Stevens Director 01/01/2007 12/31/2007 15 (4) annual report AGM to approve 2008 Berardino Libonati Director 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 Jonella Ligresti Director 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 Paolo Merloni Director 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 Andrea Moltrasio Director ** ^ 01/01/2007 12/31/2007 57 annual report AGM to approve 2008 Renato Pagliaro Director *^ 01/01/2007 12/31/2007 57 annual report AGM to approve 2008 Corrado Passera Director 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 Alessandro Pedersoli Director ** ^ 01/01/2007 12/31/2007 57 annual report AGM to approve 2008 Carlo Pesenti Director * 01/01/2007 12/31/2007 38 annual report AGM to approve 2008 Virginio Rognoni Director 01/01/2007 12/31/2007 19 annual report AGM to approve 2008 Pietro Manzonetto Chairman of Board of Stat. Auditors 01/01/2007 12/31/2007 62 annual report AGM to approve 2008 Gianrenzo Cova Statutory auditor 01/01/2007 12/31/2007 41 annual report AGM to approve 2008 Giorgio Silva Statutory auditor 01/01/2007 12/31/2007 41 5 (a) annual report

* MEMBER OF THE EXECUTIVE COMMITTEE (5 members) ^ MEMBER OF THE GROUP COMPENSATION COMMITTEE (5 members) ** MEMBER OF THE INTERNAL CONTROL COMMITTEE (3 members)

During 2007 companies in the RCS Group booked a total of €18,253 in professional fees from the Studio notarile associato Marchetti (the ◊ Marchetti notary partnership). (1) Earns gross annual remuneration of €650,000 for the position of Chief Operating Officer and a gross annual fixed fee of €350,000 for the position of Chief Executive Officer. In addition, a results-related bonus estimated at €1,000,000 has been recognized for 2007. In addition, in the event of terminating Mr. Perricone's engagement, he will receive not only employee termination indemnity and 7.41% of the overall emoluments of office paid during his term in office, but also an all-inclusive amount of 2.5 times the sum of annual fixed and variable remuneration (the latter calculated as the average in the last three years or his period in office, if shorter) as established by the agreement between the company and Mr. Perricone and reported in the commitments in note 46.

(2) The director Raffaele Agrusti is a member of the company's Supervisory Board, established under Decree 231/2001, for which he receives an annual fee of €5,000.

(3) The director Giorgio Fantoni has waived all emoluments as a director and member of the Group Compensation Committee.

(4) The director Franzo Grande Stevens was suspended from office from February 2, 2007 until April 7, 2007 and from December 5, 2007 until February 13, 2008. a) The acting auditor Giorgio Silva is a member of the company's Supervisory Board, established under Decree 231/2001, for which he receives an annual fee of €5,000.

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12. Raw materials and services consumed

These amount to €29.1 million and consist of €0.7 million in costs for "Raw materials and goods", €23.4 million in "Services" and €5.1 million in "Rentals and leasing".

These items are discussed below:

Raw materials and goods

These costs amount to €0.7 million in 2007 compared with €0.6 million the year before and basically refer to the purchase of office materials, printed matter and fuel.

Services

Description 2007 2006 Change Professional and consulting fees 13.3 7.1 6.2 Recharges from group companies 2.8 2.7 0.1 Other services 1.9 0.8 1.1 Directors' and statutory auditors' fees 1.7 2.6 (0.9) Advertising services and corporate 1.3 0.2 1.1 communication Travel and accommodation 0.7 0.5 0.2 Staff services 0.6 0.6 - Maintenance and refurbishing 0.4 0.2 0.2 Insurance 0.3 0.4 (0.1) Freelance staff and reporters 0.3 0.1 0.2 Bank charges and fees 0.1 0.1 - Total 23.4 15.3 8.1

The increase of €8.1 million is mainly attributable to the rise of €6.2 million in professional and consulting fees, most of which due to the acquisition of the Recoletos group (of which €8.7 million recharged to Unidad Editorial), and to the higher cost of other services (€1.1 million). Ignoring the amounts recharged to Unidad Editorial, professional and consulting fees would have been €2.5 million lower than in 2006. The decrease in directors' fees is due to the fact that the prior year figure included a non-recurring amount of €1 million relating to the top management change involving the Chief Executive Officer.

Rentals and leasing

These costs, totaling €5.1 million, mostly refer to rent paid for the operating leases of the premises in Via Rizzoli, Milan. The increase of €1.3 million on the prior year figure of €3.8 million is mostly attributable to the penalty of €1.3 million paid for early termination of the lease on the premises at nos. 2-4 Via Rizzoli.

13. Payroll costs

These amount to €17.5 million in 2007 compared with €21.9 million in 2006. The decrease of €4.4 million mostly reflects the fact that the prior year figure included €5.6 million in costs associated with top management changes involving the Chief Executive Officer and other company managers, as partially offset by an increase of €1 million for costs relating to stock options granted on November 11, 2005 since waived by their beneficiaries.

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Description 2007 2006 Change Wages and salaries 11.1 11.1 - Social security charges 3.4 3.4 - Employee benefits 0.7 0.9 (0.2) Other costs 2.3 6.5 (4.2) Total 17.5 21.9 (4.4)

"Employee benefits" include the provisions for the defined-benefit plans described in note 34.

The average workforce during the year is broken down by category as follows:

Category 2007 2006 Average Year end Average Year end Senior managers 28302625 Middle managers 33363536 Office staff 52 52 60 62 Journalists 1 2 1 1 Total 115 120 122 124

14. Other operating revenues and income

Description 2007 2006 Change Cost recharges 10.4 0.8 9.6 Rental income 10.2 11.3 (1.1) Revenues for seconded staff 1.3 0.8 0.5 Ordinary out-of-period income 0.1 0.1 - Total 22.0 13.0 9.0

Other operating revenues and income amount to €22 million in 2007, having increased by €9 million on the figure of €13 million reported in 2006. This line item basically reports rental income paid by the subsidiary RCS Quotidiani S.p.A. for the operating lease of the building in Via Solferino, Milan as well as the recharge to group companies of costs incurred for services, up €9.6 million, of which €8.7 million recharged to Unidad Editorial in relation to consulting and advisory fees incurred for the Recoletos group's acquisition.

15. Other operating expenses

These are detailed as follows:

Description 2007 2006 Change Other overheads 1.4 1.4 0.0 Taxes 0.3 0.1 0.2 Total 1.7 1.5 0.2

"Other overheads" mostly refer to entertaining, corporate compliance costs and gifts.

16. Amortization, depreciation and impairment

These amount to €2.2 million, having increased by €0.7 million since the prior year, reflecting higher depreciation for furniture, fittings and office machinery purchased for the Milan offices at no. 8, Via Rizzoli, as well as the recognition of impairment losses against leasehold improvements following early termination of the lease on the premises at nos. 2-4, Via Rizzoli.

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2007 2006 Change Amortization of intangible assets 0.1 0.0 0.1 Depreciation of property, plant and equipment 0.8 0.4 0.4 Depreciation of investment property 1.1 1.1 - Impairment of fixed assets 0.2 - 0.2 Total 2.3 1.5 0.8

17. Financial income

Description 2007 2006 Change Interest income on short-term funding of group 21.9 9.6 12.3 companies Interest income on bank deposits 2.4 4.1 (1.7) Other interest income 1.1 3.0 (1.9) Gains on derivatives 0.9 - 0.9 Income from trading marketable securities 0.2 5.0 (4.8) Total 26.5 21.7 4.8

The increase reflects the growth in interest income on short-term loans given to subsidiary and associated companies under the centralized cash pooling arrangements (+€12.3 million), as partially offset by lower interest income on bank deposits (-€1.7 million) and the decrease in trading income which last year included the capital gain of €5 million on the partial sale of units in hedge funds managed by Duemme Sgr.

18. Financial charges

Description 2007 2006 Change Interest expense on loans (26.5) (1.3) (25.2) Interest expense on intragroup balances (4.7) (3.1) (1.6) Interest expense due to banks (0.8) (0.2) (0.6) Other interest expense (0.4) (1.3) 0.9 Losses on derivatives (0.1) - (0.1) Exchange losses - (0.1) 0.1 Total (32.5) (6.0) (26.5)

The increase mainly reflects financial charges on the loan to acquire the Recoletos group, as well as higher interest expense on intragroup current accounts managed on a cash-pooling basis.

19. Other income (charges) from financial assets/liabilities

Description 2007 2006 Change Dividends 81.3 96.1 (14.8) Capital gains on sale of equity investments 51.9 59.6 (7.7)

Equity investment impairment (8.1) (1.1) (7.0) Total 125.1 154.6 (29.5)

These include €69.6 million in dividends received from group companies, primarily RCS Quotidiani S.p.A.(€50 million), RCS Periodici S.p.A. (€8 million), GFT NET S.p.A. in liquidation (€5.9 million), M-Dis S.p.A. (€2.8 million), Inimm Due S.a.r.l. (€2.5 million) and RCS Factor S.p.A. (€0.4 million), and €11.7 million in dividends received from other companies, namely Intesa Sanpaolo (€11.2 million), Poligrafici Editoriale S.p.A. (€0.3 million) and Raisat S.p.A. (€0.1 million). The capital gains on sale of equity investments include €51.8 million, less €1.7 million in related costs, on the sale of 29,443,120 Intesa Sanpaolo shares and €1.8 million on the sale of the investment in 3 Italia S.p.A.. Equity investment impairment relates to Poligrafici Editoriale S.p.A. (€4.5 million) and Agenzia Giornalistica RCS S.r.l. (€3.6 million).

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Last year's impairment loss of €6.4 million recognized against the investment in RCS Broadcast S.p.A. has now been reclassified to "Net income (loss) from discontinuing and discontinued operations".

20. Income taxes

The income taxes reported in the income statement are as follows:

2007 2006 Change Prior year taxes: 0.2 0.5 (0.3) - Ires (Italian corporate income tax) 0.1 0.4 (0.3) - Irap (Italian regional business tax) 0.1 0.1 0.0 Current taxes: 16.1 28.1 (12.0) - Ires (Italian corporate income tax) 16.1 28.9 (12.8) - Irap (Italian regional business tax) - (0.8) 0.8 Change in deferred tax assets/liabilities: (1.4) (3.6) 2.2 - Assets 3.8 (3.1) 6.9 - Liabilities (5.2) (0.5) (4.7) Total taxes 14.9 25.0 (10.1)

Income taxes do not include €0.6 million relating to RCS Broadcast (now Virgin Radio Italy), now transferred to Gruppo Finelco, which have been classified in net income (loss) from discontinuing and discontinued operations. More details can be found in note 22. Current tax assets and current tax liabilities are analyzed below:

Dec-31-2007 Dec-31-2006 Change Current tax assets 63.2 71.4 (8.2) Current tax liabilities 29.3 21.1 8.2

"Current tax assets" of €63.2 million consist of: • €46 million in credits for IRPEG (Italy's former corporate income tax), for which a refund was requested in the tax return for 1998. This figure includes €9.8 million in interest, calculated at the currently applicable rate. • €1.2 million in carried forward credits for IRES (Italy's new corporate income tax) and IRAP (Italy's regional business tax) compared with €10.6 million in 2006. During the year RCS MediaGroup transferred its carried forward IRES credit to the group tax position and to individual group companies for the purposes of settling IRAP and other taxes and contributions as well as using it to settle its own IRAP. • €13 million in tax credits transferred to the head of the tax group, by way of payments on account of IRES and withholding taxes incurred (€12.5 million in 2006). • €2.8 million in receivables from subsidiaries, booked in respect of IRES, net of advance payments, payable on their taxable income and transferred to the head of the tax group under the group tax election pursuant to articles 117 et seq of the Income Tax Consolidation Act (€3.3 million in 2006).

"Current tax liabilities" mostly refer to €15.7 million in tax due on current-year income (€8.9 million in 2006), €11.3 million in advance payments of IRES transferred to the group tax position (€7.1 million in 2006), and €2 million in payables to subsidiaries arising from the group tax election (€4.9 million in 2006).

Deferred tax assets and deferred tax liabilities are analyzed as follows:

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Recognized in Dec-31-2006 income Recognized in equity Dec-31-2007 statement Deferred tax assets -Provisions for risks and charges 3.1 (1.9) 1.3 -Costs with deferred deductibility 0.1 0.1 -Deferred tax arising from tax transparency criteria 0.0 0.8 0.8 -Measurement of derivatives 0.1 0.1 -Derecognition of Via Solferino premises - 4.9 4.9 -Discounting of provisions for risks and charges (0.2) (0.2) Total deferred tax assets 3.2 3.8 0.0 7.0 Deferred tax liabilities -Deferred tax arising from tax transparency criteria 0.0 (0.1) (0.1) -Net equity investments (3.3) 3.3 0.0 -Actuarial valuation of employee benefit provisions (0.1) (0.1) -Measurement of derivatives 0.0 (0.3) (0.3) -Derecognition of Via Solferino premises (2.0) (5.1) (7.1) -Available-for-sale securities (0.6) (0.6) Total deferred tax liabilities (6.0) (5.2) 3.0 (8.2)

Net total (2.8) (1.4) 3.0 (1.2)

The actual tax charge reported in the financial statements is reconciled to the theoretical tax charge, resulting from the application of current rates, as follows:

2007 2006 Earnings before tax 98.1 141.2 Theoretical income tax 32.4 46.6 Tax effect of permanent differences (35.6) (45.0) Net effect of temporary deductible and taxable differences (12.9) (30.5) Taxes relating to prior years (0.2) (0.5) Current taxes (16.3) (29.4) IRES - deferred tax before rate change 0.9 3.5 IRES - effect of rate change on deferred tax 0.2 0.0 IRES - total deferred tax 1.1 3.5 Income taxes reported in the financial statements, excluding current & deferred IRAP (15.2) (25.9) IRAP - current tax 0.0 0.8 IRAP - deferred tax before rate change 0.3 0.1 IRAP - effect of rate change on deferred tax 0.0 0.0 IRAP - total deferred tax 0.3 0.1 Income taxes reported in the financial statements (current & deferred) (14.9) (25.0)

21. Non-recurring income (charges)

Details of the non-recurring income and charges included in the results for 2007 are shown below:

Other income (charges) Impairment of fixed Cost of services Payroll costs from financial assets assets/liabilities

Non-recurring income (0.2) 52.0 Non-recurring charges 1.3 1.0 0.2 Reported total 23.4 17.5 0.2 125.1 % of reported total 6% 7% 100% 42%

Non-recurring income amounts to €52.2 million and comprises €51.8 million in capital gains, less €1.7 million in related costs, on the sale of 29,443,120 Intesa Sanpaolo shares, €1.8 million in capital gains on the sale of the investment in 3 Italia S.p.A. and €0.2 million in actuarial gains arising from changes in the law regarding the destination of employee termination indemnities. Non-recurring charges of €2.6 million comprise €1.3 million in penalties for terminating the lease on the property at nos. 2-4 Via Rizzoli, €1 million in costs for the waiver by beneficiaries of stock options granted

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on November 11, 2005 and €0.2 million for writing down the leasehold improvements at the Via Rizzoli premises after terminating the lease.

22. Net income (loss) from discontinuing and discontinued operations

2007 2006

Net income (loss) from discontinuing and discontinued operations (16.1) (6.4)

The interest in RCS Broadcast (now Virgin Radio Italy), corresponding to 98.99% of its share capital, was transferred to Gruppo Finelco S.p.A. in July 2007. In the first half of 2007 this subsidiary comprised the operations of three specific businesses: PlayRadio (a national radio station), the CNR network and the AGR news agency. The two business units of CNR and AGR were transferred in June to CNR S.r.l. and AGR S.r.l. respectively, two newcos which remained under the direct control of RCS Broadcast. Before being transferred to Gruppo Finelco S.p.A., RCS Broadcast sold both AGR S.r.l. and CNR S.r.l.. AGR S.r.l. was sold to RCS MediaGroup S.p.A. and CNR S.r.l. to RCS Pubblicità S.p.A.. The interest in RCS Broadcast, now only representing the PlayRadio business, was treated like a discontinuing operation. In fact, it was subsequently discontinued with its transfer to Gruppo Finelco S.p.A., which generated a capital loss of €14.7 million.

Net income (loss) from discontinuing and discontinued operations are analyzed in the following table:

2007 2006

Capital loss on transfer (14.7) 0.0 Equity investment impairment 0.0 (6.4) Taxes (0.9) 0.0 Income (loss) before tax (15.6) (6.4) Income taxes (0.6) 0.0 Net income (loss) from discontinuing and discontinued operations (16.1) (6.4)

The other taxes of €0.9 million refer to liabilities of the discontinued operation. The income taxes of €0.6 million reflect the tax calculated on the income of the discontinued and discontinuing operations. In 2006 the investment in RCS Broadcast was written down by €6.4 million to adjust its carrying amount to fair value at December 31, 2006.

RCS Mediagroup S.p.A. acquired 25% of Gruppo Finelco S.p.A, valued at €53.7 million in exchange for its interest in RCS Broadcast. At the same time as this transfer, RCS MediaGroup S.p.A. acquired additional shares in Gruppo Finelco S.p.A. from MPS Venture SGR for €20.7 million, taking its overall interest to 34.6%.

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23. Property, plant and equipment

Movements over the year were as follows:

Leasehold Assets under DESCRIPTION Plant Equipment Other assets Total improvements construction HISTORICAL COST AT 12/31/06 0.5 0.0 2.7 0.7 1.5 5.4 Additions 0.1 0.2 3.6 1.6 1.5 7.0 Disposals - - (0.2) - - (0.2) Impairment losses - - - (0.1) - (0.1) Other movements 0.4 - - 0.6 (1.0) - HISTORICAL COST AT 12/31/07 1.0 0.2 6.1 2.8 2.0 12.1 ACC. DEPRECIATION AT 12/31/06 (0.1) 0.0 (1.4) (0.1) 0.0 (1.6) Depreciation (0.1) - (0.5) (0.2) - (0.8) Disposals 0.0 0.0 0.2 - - 0.2 ACC. DEPRECIATION AT 12/31/07 (0.2) 0.0 (1.7) (0.3) 0.0 (2.2) NET BALANCE AT 12/31/06 0.4 0.0 1.3 0.6 1.5 3.8 Additions 0.1 0.2 3.6 1.6 1.5 7.0 Impairment losses - - 0.0 (0.1) - (0.1) Depreciation (0.1) - (0.5) (0.2) - (0.8) Other movements 0.4 - - 0.6 (1.0) - NET BALANCE AT 12/31/07 0.8 0.2 4.4 2.5 2.0 9.9

Property, plant and equipment recorded in the financial statements is being depreciated over the estimated useful life of each individual asset, using the following rates: Plant and machinery from 5% to 20% Other assets from 12% to 33% Leasehold improvements: over the term of the lease.

The net balance of €9.9 million at December 31, 2007 is €6.1 million higher than a year earlier, reflecting €7 million in additions during 2007 less €0.8 million in depreciation charges and €0.1 million in impairment losses. In detail, the additions of €3.6 million reported for "other assets" relate to the purchase of new office furniture (€2.7 million) and the installation of a new telephone system (€0.9 million). "Leasehold improvements" report the capitalization of €1.6 million in expenditure on altering the premises at no. 8, Rizzoli, Milan, rented under operating lease. Lastly, the assets under construction mostly refer to the capitalization of €1.5 million in building and alteration costs at the new premises at no. 8 Via Rizzoli. No financial expenses have been capitalized.

24. Investment property

Movements in investment property over the year are shown in the following table:

Description Investment property Land Buildings Total HISTORICAL COST AT 12/31/06 41.2 56.9 98.1 Additions 3.8 8.7 12.5 HISTORICAL COST AT 12/31/07 45.0 65.6 110.6 ACC. DEPRECIATION AT 12/31/06 0.0 (6.2) (6.2) Depreciation - (1.1) (1.1) ACC. DEPRECIATION AT 12/31/07 0.0 (7.3) (7.3) NET BALANCE AT 12/31/06 41.2 50.7 91.9 Additions 3.8 8.7 12.5 Depreciation - (1.1) (1.1) NET BALANCE AT 12/31/07 45.0 58.3 103.3

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This line item reports the value of the premises at no. 28, Via Solferino, Milan (€91.9 million) and the value of the premises in Via Reiss Romoli, Turin purchased in October 2007 from the subsidiary GFT NET S.p.A. in liquidation, for €12.5 million, of which €8.7 million relating to the building and €3.8 million to the land. The premises at no. 28 Via Solferino are let to RCS Quotidiani S.p.A. at an annual rent of €6.9 million, as adjusted each year for price inflation based on the index published by Italy's central statistics office (ISTAT). The lease agreement has a duration of 24 years commencing December 2000, and may be renewed for another six years. The building part of this property is being depreciated at a rate of 2% per annum, while the land on which it stands is not being depreciated at all. The value of the land and the building has been split on the basis of an appraisal by an independent expert. The entire premises are mortgaged against a loan contracted in February 2001, originally for €71.3 million, but now standing at €35.8 million. The premises in Via Reiss Romoli, Turin are being depreciated at an annual rate of 3%. The land is not being depreciated.

25. Intangible assets

Movements over the year were as follows:

DESCRIPTION Other intangible assets TOTAL

HISTORICAL COST AT 12/31/06 0.4 0.4 Additions - - Disposals - - HISTORICAL COST AT 12/31/07 0.4 0.4 ACC. AMORTIZATION AT 12/31/06 (0.2) (0.2) Amortization (0.1) (0.1) ACC. AMORTIZATION AT 12/31/07 (0.1) (0.3) NET BALANCE AT 12/31/06 0.2 0.2 Additions - - Disposals - - Amortization (0.1) (0.1) NET BALANCE AT 12/31/07 0.1 0.1

Intangible assets are being amortized over their useful life, estimated as 5 years. The balance basically refers to intangible assets associated with the development of software for the purposes of compliance with latest laws and regulations. The decrease in this balance reflects the amortization charge for the year.

26. Investments in subsidiary and associated companies

Movements over the year were as follows:

Subsidiary and associated companies Balance at Dec-31-2006 569.4 Additions 1,017.1 Disposals (68.7) Impairment losses (3.6) Other movements 0.8 Balance at Dec-31-2007 1,515.0

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The additions include: • the payment of €900 million to increase share capital of the subsidiary RCS Investimenti S.p.A. in order to give the company sufficient financial resources for investments, particularly the loan to Unidad Editorial for acquisition of the Recoletos group; • the recording of €75.0 million for acquiring 34.6% of Gruppo Finelco, after transferring it RCS Broadcast (now Virgin Radio Italy) and buying 53,843 shares from MPS Venture SGR S.p.A. for €20.7 million; • the purchase of 51% of Digicast S.p.A. in the first half of 2007 for €16.7 million; • the purchase of another 2.6% of Dada during 2007, for €10.8 million, taking the interest in this company to 46.9% of its share capital; • the purchase from RCS Broadcast (now Virgin Radio Italy) of 100% of Agenzia Giornalistica RCS S.r.l. for €0.5 million and the subsequent payment of €3 million in capital to cover losses.

Disposals include: • the transfer to Gruppo Finelco S.p.A. of the entire investment in RCS Broadcast S.p.A. for €68.4 million, realizing a capital loss of €14.7 million classified in "Net income (loss) from discontinuing and discontinued operations"; • the reduction of €0.3 million in the carrying value of the investment in Inimm Due S.a.r.l. after the distribution of reserves during the year.

The impairment loss of €3.5 million refers to the subsidiary Agenzia Giornalistica RCS S.r.l..

"Other movements" mostly relate to the capitalization of costs relating to acquistions made in the year and the increase in equity investments following the recognition of stock options granted to employees of RCS Group companies, matched by a corresponding amount in "Other equity instruments", in accordance with IFRS 2. More details can be found in note 36 of this report and in note 48 to the consolidated financial statements.

The list of equity investments can be found in one of the tables attached to this report.

27. Available-for-sale financial assets

Dec-31-2007 Dec-31-2006 Change Poligrafici Editoriale 14.7 19.2 (4.5) Istituto Europeo di Oncologia 4.1 4.1 - RAISAT 2.5 2.5 - Alice Lab 1.5 1.0 0.5 Mode et Finance 0.4 0.4 - Emittenti Titoli 0.1 0.1 - Audiradio S.r.l. 0.1 - 0.1 Intesa Sanpaolo - 170.3 (170.3) 3 Italia Spa - 15.0 (15.0) Total 23.4 212.6 (189.2)

Under IAS 39 securities and investments in companies which are not subsidiaries, associates or held for trading are defined as available-for-sale financial assets. Such assets amount to €23.4 million at December 31, 2007. These assets are stated at market ( fair value). The market value of investments in listed companies is their quoted price at year end. In contrast, investments in unlisted companies, for which a market value is not available, are tested for impairment. The results obtained have confirmed the book values. Only a few minor investments have been valued at cost, since no future business plans, required for performing the impairment test, were available. It has been assumed that cost approximates their fair value. Movements during 2007 have been as follows:

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• the sale of 29,443,120 Intesa Sanpaolo shares, which had a carrying value of €170.3 million at December 31, 2006; • the sale of the investment in 3 Italia S.p.A., which had a carrying value of €15 million at December 31, 2006; • the writedown of the investment in Poligrafici Editoriale (€4.5 million) in order to adjust its carrying amount to fair value at December 31, 2007; • the payment of €0.5 million to Alice Lab Netherland NV as the last installment of its capital increase; • the purchase of 7.5% of the share capital in Audiradio S.r.l. for €0.1 million.

28. Other non-current assets

These amount to €0.4 million at December 31, 2007 and are €0.1 million lower than the year before. They basically refer to prepaid fees on committed credit lines relating to the following year. The prepayments have not been considered for the purposes of IFRS 7. The book value of these assets reflects their fair value.

29. Trade receivables

Trade receivables are broken down as follows:

Description Dec-31-2007 Dec-31-2006 Change Due from customers 0.1 0.2 (0.1) Due from subsidiary companies 3.3 3.6 ( 0.3) Total 3.4 3.8 (0.4)

Trade receivables amount to €3.4 million at December 31, 2007, having decreased by €0.4 million on the prior year. The book value of trade receivables reflects their fair value.

30. Other current receivables and assets

Description Dec-31-2007 Dec-31-2006 Change Tax credits 4.3 3.7 0.6 Prepayments 0.4 0.4 - Sundry receivables due from group companies 0.4 0.1 0.3 Sundry receivables 0.3 1.5 (1.2) Total 5.4 5.7 (0.3)

The decrease of €0.3 million in other current receivables and assets since December 31, 2006 is explained by the reduction in sundry receivables after fewer insurance premiums were paid early for 2008, as partially offset by the increase in tax credits in relation to the VAT credit for December.

For the purposes of the classification required by IFRS 7, the amounts reported below fall within the scope of IAS 39. Tax credits, receivables from social security institutions and prepayments have not been considered for the purposes of IFRS 7. The book value of these assets reflects their fair value.

The financial assets component of this balance is presented below in compliance with IFRS 7:

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Description Dec-31-2007 Dec-31-2006 Change Sundry receivables due from group companies 0.4 0.1 0.3 Sundry receivables 0.0 0.1 (0.1) Total 0.4 0.2 0.2

31. Net financial position

Financial assets and liabilities recognized for derivatives

Dec-31-2007 Dec-31-2006 ASSETS LIABILITIES ASSETS LIABILITIES Interest rate caps for hedging cash flows 1.9 - - - Interest rate swaps for hedging cash flows 0.8 - - - Held-for-trading derivatives - 0.1 - - NON-CURRENT 2.7 0.1 - - Interest rate swaps for hedging cash flows 0.1 - - - CURRENT 0.1 - - -

TOTAL 2.8 0.1 - -

All the above instruments have been taken out for hedging purposes and have been submitted to the so-called effectiveness test to check that they meet the specific conditions required by international accounting standards for hedging accounting.

Details of the net debt position are provided below at book and fair value.

Book value Fair value Dec-31-2007 Dec-31-2006 Dec-31-2007 Dec-31-2006 Current financial assets Cash and cash equivalents 10.1 197.6 10.1 197.6 Other financial assets 207.9 215.0 207.9 215.0 Current financial receivables 116.1 48.9 116.1 48.9 Financial assets recognized for derivatives 2.8 - 2.8 - Held-for-trading securities - 23.9 - 23.9 Total FINANCIAL ASSETS 336.9 485.4 336.9 485.4

Financial liabilities Short-term bank loans and overdrafts (81.0) (3.6) (81.0) (3.6) Other financial liabilities (56.2) (44.8) (56.2) (44.8) Current financial payables (72.0) (53.0) (72.0) (53.0) Non-current financial payables (520.8) (35.8) (520.8) (35.8) Financial liabilities recognized for derivatives (0.1) - (0.1) - Total FINANCIAL LIABILITIES (730.1) (137.2) (730.1) (137.2)

Total net financial position (393.2) 348.2 (393.2) 348.2 Net financial position with related parties 195.8 166.1 195.8 166.1 % total 50% 48% 50% 48%

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The net financial position at December 31, 2007 reported net debt of €348.2 million compared with net cash of €393.2 million a year earlier. This change is basically due to debt need to finance the Recoletos group's acquisition.

The breakdown of the net financial position by currency is as follows:

Currency Dec-31-2007 Dec-31-2006 EUR (393.2) 347.8 USD 0.0 0.4 Total net financial position (393.2) 348.2

The asset and liability positions have been stated atfair value, adopting the calculation methods used for interest rate derivatives with appropriate adaptations.

The following table analyzes by maturity the book value at December 31, 2007 of the company's financial instruments that are exposed to interest rate risk:

FLOATING RATE <1 year >1<2 >2<3 >3<4 >4<5 >5 Total

Loans (1) (50.7) (35.8) (485.0) (571.5) Intercompany loans (128.2) (128.2) Bank overdrafts (30.3) (30.3) Total liabilities (209.2) 0.0 0.0 (35.8) 0.0 (485.0) (730.0) Cash 10.0 10.0 Other lending positions 324.0 324.0 Total assets 334.0 0.0 0.0 0.0 0.0 0.0 334.0 TOTAL floating 124.8 0.0 0.0 (35.8) 0.0 (485.0) (396.0)

(1) The debt exposure has been hedged with the following interest rate derivatives: interest rate caps and interest rate swaps totaling €580 million, of which €200 million forward start (at December 31, 2006 there were interest rate caps for €30 million).

The amounts shown in this table, unlike those reported in net financial position, exclude the fair value of derivatives (€2.8 million). RCS MediaGroup does not have any fixed-rate lending or borrowing positions.

Interest rate derivatives mature as follows at December 31, 2007:

Notional Parameter Description Range% <1 year >1<2 >2<5 >5 amount range

Cash flow hedge: swap from floating to fixed rate 230.0 Euribor 3m-6y 4,5% - 5% 15.0 15.0 200.0 CAP 230.0 15.0 15.0 200.0

Cash flow hedge: swap from floating to fixed rate 250.0 Euribor 3m 4,2% - 4,265% 100.0 150.0 IRS 250.0 100.0 150.0

Cash flow hedge: swap from floating to fixed rate 100.0 Euribor 3m 3,97% - 4,11% 100.0 FRA 100.0 100.0 TOTAL 580.0 115.0 115.0 350.0

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In compliance with IFRS 7, details of the cash flow hedge reserve are provided below: Cash Flow Hedge (€/millions) Fair Value Type of Amount in Hedged item Hedged risk Dec-31- Dec-31- hedge Change equity 2007 2006 Committed credit facilities IRS Interest rate risk 0.9 0.9 0.9 Committed credit facilities CAP Interest rate risk 1.9 1.9 0.1 Total 2.8 2.8 1.0

The following table shows movements in the cash flow hedge reserve during the year, reporting separately the amounts recognized in equity for increases/decreases in hedge effectiveness in the period and corresponding amounts transferred to the income statement. This reserve was formed during 2007. Derivatives in the prior year consisted of inactive CAPs, whose change in timing value was recognized in the income statement.

(€/millions) Total Opening balance + increases for recognition of new positive effectiveness 1.2 - decreases for reversal of positive effectiveness from equity and recognition of income in profit or loss (0.2) Closing balance 1.0

The cash flow hedge reserve is designed to hedge expected cash flows of underlying loans, whose payments and related effect on the income statement fall in the following periods:

Dec-31-2007

(€/millions)

Actual impact of underlying flows Expected flows 1 year 1-2 years 2 - 5 years Interest rate risk Expected outflows for floating-rate interest (local currency) (70.5) (21.5) (17.1) (31.9)

Dec-31-2006

(€/millions)

Actual impact of underlying flows Expected flows 1 year 1-2 years 2 - 5 years

Interest rate risk Expected outflows for floating-rate interest (local currency) (2.6) (1.2) (1.0) (0.3)

Average rates on financial positions at year end are as follows:

Dec-31-2007 Dec-31-2006 Return on investment 5.36% 3.82% Cost of borrowing 4.68% 3.49%

32. Share capital and reserves Share capital is made up of 732,669,457 ordinary shares and 29,349,593 savings shares with a par value of €1.00 each and all of which are fully paid up.

At December 31, 2007 a total of 4,578,448 ordinary treasury shares were held, worth €14.5million, corresponding to an average carrying value of €3.177 each and representing 0.62% of ordinary share capital and 0.60% of total share capital. Following the ordinary shareholders' resolution of April 27, 2007, the

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shareholders were granted a bonus of 14,851,777 ordinary shares in the ratio of 2 ordinary shares for every 100 ordinary and/or savings shares held; the reserve for treasury shares was accordingly reduced from €61.7 million to €14.5 million.

Outstanding Number of shares issued Treasury shares Savings shares Total ordinary shares At Dec-31-2006 713,239,232 19,430,225 29,349,593 762,019,050 Bonus grant to shareholders 14,851,777 (14,851,777) 0 At Dec-31-2007 728,091,009 4,578,448 29,349,593 762,019,050

The main features of the two classes of share making up share capital are summarized as follows:

The nature and purpose of the equity reserves is summarized below:

• Other equity instruments: these reflect the amounts accruing in respect of the company's stock option plans.

• Share premium reserve: this represents a capital reserve that contains sums received by the company for issuing shares at a price above their par value.

• Legal reserve: this reserve is increased through the compulsory allocation of at least one-twentieth of net annual income, until reaching an amount corresponding to one-fifth of share capital.

• Treasury shares: these are deducted from the company's capital and reserves.

• Valuation reserve: this primarily includes the effects recognized directly in equity for the fair value measurement of financial instruments. The undistributable amount of this reserve is €0.7 million.

• Carried forward earnings (losses): these include the results from prior years after distributing dividends and the reserve for treasury shares, which has been reclassified in accordance with IAS 32.

Details of and movements during the year in the equity reserves can be found in the statement of changes in capital and reserves.

Details of cash dividends per share declared and paid in the year and the dividends being submitted for shareholder approval are contained in note 42 to the consolidated financial statements, as well as in the proposed resolutions.

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The statements of changes in capital and reserves reports the distributable amount of each component of equity, as defined by articles 6 and 7 of Decree 38/2005.

33. Provisions for employee benefits

These include the actuarial value of the company's effective payable to all employees calculated using the methods envisaged by IAS 19.

Employee termination indemnities (€2.1 million) represent a type of employee remuneration, whose payment is deferred until termination of employment. Actuarial gains of €0.2 million were recognized during the year as a result of adopting a different actuarial calculation for employee termination indemnities, in compliance with IAS 19, following the recent changes introduced by Decree 252/2005. These gains were offset by corresponding losses arising on the actuarial valuation of the provision for executive termination benefits.

The executive termination benefits (€0.3 million) refer to the payment due under the national contract for newspaper-industry executives, calculated on the basis of length of service and with reference to the employee's remuneration in the last twenty-four months. Payment of this amount is deferred until termination of employment.

The actuarial valuation of these provisions has been performed by an independent actuary.

The amounts booked to the income statement in respect of the above employee benefits are as follows:

2007 Current service cost Financial Actuarial gains Total charges (losses) Increase in provision for employee termination indemnities (0.8) 0.1 0.1 (0.6) Increase in provision for executive termination benefits - 0.0 0.0 0 Total (0.8) 0.1 0.1 (0.6)

2006 Current service cost Financial Actuarial gains Total charges (losses) Increase in provision for employee termination indemnities 0.9 - - 0.9 Increase in provision for executive termination benefits - - - - Total 0.9 0.0 0.0 0.9

The principal actuarial assumptions used for the calculation are as follows:

Description 2007 2006 Discount rate 4.5% 4.0% Expected wage inflation 3.0% 3.0%

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34. Provisions for risks and charges

Movements over the year were as follows:

Adjustment Balance at Increase in Reclassificatio Balance at Description Utilizations to present Dec-31-2006 provisions ns Dec-31-2007 value Non-current: Legal disputes provision - 0.2 - - - 0.2 Other provisions for risks and charges 2.5 0.1 - 0.1 (1.3) 1.4 Total non-current portion 2.5 0.3 0.0 0.1 (1.3) 1.6 Current: Other provisions for risks and charges 3.3 - (2.1) - 1.3 2.5 Total current portion 3.3 0.0 (2.1) 0.0 1.3 2.5 TOTAL PROVISIONS FOR RISKS 5.8 0.3 (2.1) 0.1 0.0 4.1

Utilizations of the current portion of provisions for risks refer to continued corporate reorganization (€0.7 million), and redevelopment of the site in Via Rizzoli, Milan (€1.4 million). In compliance with international accounting standards, the non-current portion of these provisions has been discounted using a rate of 4.55% to take account of the effect of the time value of money.

35. Other non-current liabilities

This balance has decreased by €2.2 million following full settlement of payments due under operating leases for certain buildings used by the company.

36. Trade payables

Description Dec-31-2007 Dec-31-2006 Change Due to suppliers 8.4 4.9 3.5 Due to subsidiary companies 2.0 1.4 0.6 Due to associated companies 0.2 - 0.2 Due to freelance personnel 0.1 - 0.1 Total 10.7 6.3 4.1

Trade payables have increased by €4.1 million since December 31, 2006, reflecting a rise €3.5 million in amounts due to third-party suppliers. The book value of trade payables, usually settled at 120 days, reflects their fair value.

37. Other current payables and liabilities

Description Dec-31-2007 Dec-31-2006 Change Payables to employees 5.8 5.0 0.8 Sundry payables to third parties 1.7 1.1 0.6 Taxes payable 0.7 0.8 (0.1) Payables to social security institutions 0.6 0.5 0.1 Deferred income 0.1 0.1 - Sundry payables to group companies - 1.1 (1.1) Total 8.9 8.6 0.3

The balance of other current payables and liabilities is virtually the same as at December 31, 2006. They reflect the complete disappearance of sundry payables to group companies for VAT under the group VAT filing, and an increase in payables to employees mainly as a result of the waiver of stock options granted on November 11, 2005 by their beneficiaries.

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The financial liability component of this balance is presented below in compliance with IFRS 7.

Description Dec-31-2007 Dec-31-2006 Change Payables to employees 5.4 4.6 0.8 Sundry payables to third parties 1.7 1.1 0.6 Sundry payables to group companies 0.0 1.1 (1.1) Total 7.1 6.8 0.3

Payables to employees reported in the tables required by IFRS 7 exclude the payable for unused holiday entitlement.

38. Grant of stock options

Details of stock option plans and a breakdown by company can be found in note 48 to the consolidated financial statements. The overall cost of stock options granted to senior managers of RCS MediaGroup is €2.1 million. Details of the stock options granted to the Chief Executive Officer in his capacity as Chief Operating Officer are shown below:

Options held at start of yearOptions granted during year Options exercised during year Options Options held at end of year Name and Office held Average strike Average Average Average Average strike Average cancelled Average strike Average surname Number Number Number Number price expiry strike price expiry price expiry during year price expiry Chief Executive Antonio Officer & Chief 1,404,494 3.616 4.68 ------1,404,494 3.616 4.68 Perricone Operating Officer

39. Increase (decrease) in provisions for employee benefits and for risks and charges reported in cash flow statement

This excludes the effect of discounting these provisions to present value in 2007 (€0.1 million), which, being a non-monetary item has also been reversed out of net interest received/paid.

Adjustment to Release of past present value in adjustments to present Dec-31-2006 Dec-31-2007 2007 value Change Provisions for employee benefits 2.8 2.4 0.0 (0.4) Provisions for risks and charges 2.5 1.6 (0.1) (1.0) Current portion of provisions for risks and charges 3.3 2.5 (0.8) Total 8.6 6.5 (0.1) 0.0 (2.2)

40. Changes in working capital reported in cash flow statement

This amounts to €19.8 million and excludes the reclassification of payables for capital expenditure made in 2007 but not yet paid in cash, as well as the increase in receivables relating to interest on tax refunds not yet received. The following table provides a breakdown of the changes in working capital:

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Dec-31-2007 Dec-31-2006 Change in trade receivables 0.4 0.8 Change in trade payables 4.3 (1.1) Change in other assets/liabilities 14.1 20.7 Total 18.8 20.4 Reclassification of expenditure on equity investments 0.0 (0.5) Investments not settled in cash during year 0.0 (1.2) Interest income on uncollected tax refunds 1.0 0.9 Total 19.8 19.6

41. Purchase of equity investments reported in cash flow statement

This amounts to €882.0 million (-€17.5 million in 2006) and refers to outlays to increase the capital of RCS Investimenti (€900 million), to purchase 53,843 shares in Gruppo Finelco (€20.7 million), to increase the capital of RCS Broadcast prior to its transfer to Gruppo Finelco (€11.6 million), to purchase 51% of Digicast (€16.7 million), to purchase more shares in DADA (€10.8 million), to purchase 100% of AGR (€3.5 million, of which €0.5 million by way of purchase price and €3 million to increase its capital to cover future losses). The cash absorbed by these investments was partly offset by the parent company's dividend receipts from its equity investments (€81.3 million).

42. Purchase of property, plant and equipment and intangible assets reported in cash flow statement

This amounts to €7.9 million and refers to the investments made during 2007, minus purchases not affecting cash flow. The capital expenditure reported in the balance sheet is reconciled to that included in the cash flow statement as follows:

Notes Dec-31-2007 Dec-31-2006 Capital expenditure on property, plant and equipment 23-24 19.6 3.4 Capital expenditure on intangible assets 25 - 0.2 Total 19.6 3.6 Purchases not settled in cash during year (11.7) (1.2) Total 7.9 2.4

43. Proceeds from the sale of equity investments reported in cash flow statement

These principally refer to the sale of Intesa Sanpaolo shares (€160 million) and the sale of the investment in 3 Italia (€16.8 million).

44. Net change in financial payables and other financial assets reported in cash flow statement

This amounts to €525.4 million and mostly refers to new bank loans and borrowings needed to finance the Recoletos group's acquisition. As required by international accounting standards, bank overdrafts form part of the change in cash and cash equivalents.

The reconciliation with the changes in the net financial position is provided below:

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Notes Dec-31-2007 Dec-31-2006

Change in net financial position 31 741.4 (93.3)

Change in cash and cash equivalents (214.8) 120.4 Non-monetary change for revaluation of Duemme securities 0.0 (2.0) Non-monetary change in results of financing activities (1.2) 0.3 Total 525.4 25.4

45. Net interest received/paid reported in cash flow statement

The amount of €6.8 million refers to net financial income (charges) as adjusted to exclude non-monetary movements during the year. This figure is reconciled with the amount reported in the income statement as follows:

Notes Dec-31-2007 Dec-31-2006

Net financial income (charges) 17-18 5.8 15.7

Non-monetary change for revaluation of Duemme securities 0.0 (2.0) Non-monetary charge for interest on tax receivables 1.0 (0.9) Non-monetary change for discounting (0.1) 0.4 Non-monetary change for fees on committed credit lines 0.1 0.2 Total 6.8 13.4

46. Commitments and contingencies

The principal guarantees given are listed below:

• Sureties given amount to €2.0 million, all relating to sureties given to third parties for property leases; the increase of €1 million since the end of 2006 refers to sureties given to Iniziativa Immobiliare Due S.r.l. for the new lease agreements relating to the Via Rizzoli premises.

• Other unsecured guarantees amount to €164.3 million and include €92.0 million in guarantees given to the tax authorities on behalf of subsidiaries for VAT credits offset under the group VAT settlement for the years 2004, 2005 and 2006; €59.3 million in guarantees given to the subsidiary RCS Livres, in relation to medium-term borrowing positions and €3.4 million in guarantees given to the tax authorities on behalf of RCS Broadcast (now Virgin Radio Italy) for VAT credits offset in 2005 and 2006.

• Commitments of €4.1 million refer to contractual obligations to the Chief Executive Officer & Chief Operating Officer.

• Third-party assets held by the company, amounting to €465.4 million, relate to the shares belonging to the shareholder syndicate placed under RCS MediaGroup's management. These shares are deposited at Monte Titoli.

• The main operating leases refer to building rentals and company vehicles. The amount of outstanding lease payments still owed by the parent company at December 31, 2007 for non-cancelable operating leases is as follows:

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Minimum lease payments Dec-31-2007 Dec-31-2006 Future operating lease payments: - due within 1 year 8.1 3.9 - due within 5 years 38.6 14.9 - due after 5 years 196.7 23.7 Total 243.4 42.5

The significant increase in minimum payments in 2007 mainly reflects the new lease agreement for the building at no. 8 Via Rizzoli, Milan.

The company expects to collect a total of €22 million in the future from sub-letting the buildings in Via Rizzoli, Milan and Viale Rossini, Rome under six-year renewable leases.

47. Information required by art.149-duodecies of the CONSOB Issuer Regulations

(€/thousands) Party performing the service Fees earned in 2007

Auditing Reconta Ernst & Young S.p.A. 268.4

Certification services Reconta Ernst & Young S.p.A. -

Other services Reconta Ernst & Young S.p.A. (1) 645.0 Studio Legale Tributario (2) 21.6 Total 935.0 (1) The other services comprise: €255 thousand for auditing the pro-forma consolidated figures of RCS Mediagroup S.p.A. for the year ended December 31, 2006 included in the Information Circular prepared in accordance with art. 71 of the Issuer Regulations adopted by CONSOB in Resolution 11971 of May 14, 1999 and subsequent amendments and additions, published as a result of acquiring all the share capital in Recoletos Grupo de Comunicacion by Unidad Editorial, a transaction qualifying as a significant acquisition; €165 thousand for performing specific audit procedures on the accounting treatment of the significant transaction involving acquisition of all the share capital in Recoletos Grupo de Comunicaciòn S.A., with particular reference to the provisions of IFRS 3 regarding Purchase Price Allocation, carried out as part of the audit of the consolidated financial statements of the subsidiary Unidad Editorial S.A. for the purposes of their inclusion in the consolidated financial statements of RCS Mediagroup at December 31, 2007; €190 thousand for methodological support and assistance when testing controls for the purposes of issuing the certification required by art. 154-bis of Decree 58/1998 and art. 81 of the CONSOB Issuer Regulations; €35 thousand for advice on the application of accounting standards. (2) Fees for tax advice.

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48. Significant subsequent events

Significant subsequent events are described in the Report on operations.

Milan, March 14, 2008 on behalf of the Board of Directors:

Chairman Piergaetano Marchetti

Chief Executive Officer Antonio Perricone

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CERTIFICATION

of the financial statements at December 31, 2007 pursuant to art. 81-ter of CONSOB Regulation 11971 dated May 14, 1999 and subsequent amendments and additions

The undersigned, Antonio Perricone, Chief Executive Officer, and Riccardo Stilli, Head of Financial Reporting for RCS MediaGroup SpA, attest, also taking account of the provisions of paragraphs 3 and 4, art. 154-bis of Decree 58 dated February 24, 1998: • that the accounting and administrative processes for preparing the company's financial statements during 2007 are adequate in relation to the enterprise's characteristics and • have been effectively applied.

It is also certified that the financial statements at December 31, 2007: • correspond to the underlying accounting records and books of account; • have been prepared in accordance with the International Financial Reporting Standards adopted by the European Union and with the measures implementing art. 9 of Decree 38/2005, and, based on our knowledge, are able to provide a true and fair view of the issuer's balance sheet, results of operations and financial position.

Milan, March 14, 2008

RCS MediaGroup SpA RCS MediaGroup SpA Chief Executive Officer Head of Financial Reporting Antonio Perricone Riccardo Stilli

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ATTACHMENTS

231

LIST OF GROUP EQUITY INVESTMENTS AT DECEMBER 31, 2007

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RCS Group – List of equity investments at December 31, 2007

Companies consolidated line-by-line

% SHARE% held CONSOLIDA TED BY COMPANY NAME HEAD OFFICE BUSINESS CURRENCY CAPITAL HELD BY directly GROUP

Dada S.p.A. Florence Multimedia Euro 2,736,503 46.9 RCS MediaGroup SpA 46.87 Digicast SpA Rome Television Euro 103,200 51.0 RCS MediaGroup SpA 51.00 GFT NET SpA (in liquidation) Milan Apparel Euro 900,000 100.0 RCS MediaGroup SpA 100.00 AGR Srl Milan Publishing Euro 463,700 100.0 RCS MediaGroup SpA 100.00 RCS Factor S.p.a. Milan Factoring Euro 2,000,000 90.0 RCS MediaGroup SpA 90.00 RCS Investimenti SpA Milan Investment holding Euro 39,129,066 99.5 RCS MediaGroup SpA 99.53 RCS International Magazines B.v. Amsterdam Publishing Euro 2,300,000 100.0 RCS MediaGroup SpA 100.00 RCS Libri S.p.a. Milan Publishing Euro 42,405,000 100.0 RCS MediaGroup SpA (1) 99,99 RCS Periodici S.p.a. Milan Publishing Euro 5,000,000 100.0 RCS MediaGroup SpA 100.00 RCS Produzioni Spa Milan Services Euro 1,000,000 100.0 RCS MediaGroup SpA 100.00 RCS Pubblicità SpA Milan Advertising Euro 40,000,000 100.0 RCS MediaGroup SpA 100.00 RCS Quotidiani SpA. Milan Publishing Euro 40,000,000 100.0 RCS MediaGroup SpA 100.00 Adelphi Edizioni S.p.a. Milan Publishing Euro 1,040,000 58.0 RCS MediaGroup SpA 10.00 RCS Libri S.p.a. 48.00

Companies in the RCS PUBBLICITA' group Blei S.p.a. Milan Advertising Euro 1,548,000 100.0 RCS Pubblicità SpA 100.00 RCS International Advertising B.v. Amsterdam Advertising Euro 5,000,000 51.0 RCS Pubblicità SpA 51.00 Companies in the DADA group Register.it S.p.A. Bergamo Multimedia Euro 1,913,477 46.87 Dada SpA (2) 100,00 Cotei SL Barcelona Multimedia Euro 23,128 46.87 Register.it S.p.A. 100.00 Nominalia S.L. Barcelona Multimedia Euro 3,005 35.15 Register.it S.p.A. 75.00 Dada.net S.p.A. Florence Multimedia Euro 9,933,000 46.87 Dada SpA 100.00 Clarence S.r.l. Florence Multimedia Euro 21,000 46.87 Dada.net S.p.A. 100.00 Dada Iberia SL (già Register Iberia SL) Barcelona Multimedia Euro 3,006 46.87 Dada.net S.p.A. 100.00 Media Dada Science and Development CO. Ltd Beijing Multimedia USD 759,000 46.87 Dada SpA 100.00 Dada Brasil Serviços de Tecnologia Ltda San Paolo (Brazil) Multimedia BRL 163,000 46.87 Dada.net S.p.A. 98.00 Dada USA Inc 2.00 Dada USA Inc New York (USA) Multimedia USD 100 46.87 Dada.net S.p.A. 100.00 Upoc Networks Inc. New York (USA) Multimedia USD 17,248 46.87 Dada USA Inc 100.00 Namesco Ltd. Worchester Multimedia GBP 100 46.87 Register.it S.p.A. 100.00 Simply.com Ltd. Worchester Multimedia GBP 10 46.87 Namesco Ltd. 100.00 NDO Ltd. Worchester Multimedia GBP 1 46.87 Namesco Ltd. 100.00

Companies in the DIGICAST group Canali Digitali Srl Rome Television Euro 12,750 50.6 Digicast SpA 99.20 Digital Factory Srl Rome Television Euro 12,750 51.0 Digicast SpA 100.00 Sailing Channel SpA Rome Television Euro 300,000 51.0 Digicast SpA 100.00 Seasons Srl Rome Television Euro 12,750 51.0 Digicast SpA 100.00

Notes (1) Percentage refers to total share capital. Share of ordinary capital held: 100% (2) Total percentage also includes the 10% held by the company itself in treasury shares.

233

Companies consolidated line-by-line %% SHARE CONSOLIDATED held COMPANY NAME HEAD OFFICE BUSINESS CURRENCY CAPITAL BY GROUP HELD BY directly

Companies in the RCS LIBRI group Delagrave Edition S.a.s. Paris Publishing Euro 800,000 99.99 Flammarion S.a 100.00 Editions Arthaud S.a. (In liquidation) Paris Publishing Euro 270,000 99.49 Flammarion S.a 99.50 Editions Audie S.a.s. Paris Publishing Euro 1,220,000 87.22 Flammarion S.a 70.00 Editions J'ai Lu S.a. 30.00 Editions Casterman S.a. Brussels Publishing Euro 3,000,000 99.95 Flammarion S.a 100.00 Edition d'Art Albert Skirà S.a. Geneva Publishing CHF 100,000 48.00 RCS International Books B.v. 48.00 Editions Fabbri S.a.r.l. Paris Publishing Euro 576,000 99.99 RCS Livres S.a.s. 100.00 Editions Flammarion Ltee (Canada) Montreal Publishing CAD 6,500 99.99 Flammarion S.a 100.00 Editions J'ai Lu S.a. Paris Publishing Euro 420,000 57.53 Flammarion S.a 57.54 Editoriale Firenze S.p.a. (in liquidation) Scandicci (Fi) Publishing Euro 910,000 99.28 RCS Libri S.p.a. (3) 99,29 Fabbri Lapkiado' Kft (in liquidation) Budapest Publishing HUF 3,000,000 99.99 RCS International Books B.v. 96.67 RCS Libri S.p.a. 3.33 Fabbri Prima O.o.d. Corp. (in liquidation) Sofia Publishing BGL 20,000 69.99 RCS International Books B.v. 70.00 Fabbri Publishing Ltd. London Publishing GBP 1,820,000 51.09 Ge Fabbri Ltd. 100.00 Flammarion Centre S.a.r.l. Paris Publishing Euro 10,000 99.59 Flammarion S.a 99.60 Flammarion Inc. New York Publishing USD 100 99.99 Flammarion S.a 100.00 Flammarion S.a. Paris Publishing Euro 10,758,310 99.99 RCS Livres S.a.s. 100.00 GE Fabbri Ltd. London Publishing GBP 685,033 51.09 RCS International Books B.v. 51.10 GE Fabbri Editions Rus Ltd. Mosow Publishing Rub 10,000 51.09 Ge Fabbri Ltd. 100.00 GE Fabbri Editions Ukr Ltd. Kiev Publishing Uah 26,200 51.09 Ge Fabbri Ltd. 100.00 GE Fabbri Editions Ltd. Sofia Publishing Bgl 5,000 51.09 Ge Fabbri Ltd. 100.00 GE Fabbri Phoenix Sp. Z .o.o. Ltd Wroclaw Publishing PLN 30,000 34.23 Ge Fabbri Ltd. 100.00 La Coccinella S.r.l. Varese Publishing Euro 250,000 59.99 RCS Libri S.p.a. 60.00 La Hune S.a.s. Paris Publishing Euro 172,800 99.99 Flammarion S.a 100.00 Editions Flammarion S.a. Geneva Publishing CHF 425,000 99.99 Flammarion S.a 100.00 Librerie Rizzoli S.r.l. Milan Publishing Euro 500,000 99.99 RCS Libri S.p.a. 100.00 Marsilio Editori S.p.a. Venice Publishing Euro 1,300,000 50.99 RCS Libri S.p.a. 51.00 Prima Ukraina Ltd (in liquidation) Kiev Publishing Uah 2,526,189 69.99 RCS International Books B.v. 70.00 RCS Livres S.a.s. Paris Publishing Euro 72,500,000 99.99 RCS Libri S.p.a. 100.00 RCS International Books Bv Amsterdam Publishing Euro 500,000 99.99 RCS Libri S.p.a. 100.00 Rizzoli International Publications Inc. New York Publishing USD 26,900,000 99.99 RCS International Books B.v. 100.00 Rizzoli Bookstores Inc. New York Publishing USD 5,200,000 99.99 Rizzoli International Publications I 100.00 S.c.i. Chevilly IV S.c.i. Paris Publishing Euro 2,772,000 99.99 Flammarion S.a 99.96 Ud-Union Distribution S.a. 0.04 S.c.i. La Libertè S.c.i. Paris Publishing Euro 120,000 100.00 Flammarion S.a 100.00 Skirà Editore S.p.A. Milan Publishing Euro 3,000,000.12 48.00 Edition d'Art Albert Skirà S.a. 100.00 Ud-Union Distribution S.a.s. Chevilly Publishing Euro 500,000 99.99 Flammarion S.a 100.00

Companies in the RCS PERIODICI group RCS Direct S.r.l. Milan Services Euro 200,000 100.00 Sfera Service S.r.l. 100.00 Sfera Direct S.l. Barcelona Publishing Euro 3,006 100.00 Sfera Editores Espana S.l. 100.00 Editrice Abitare Segesta S.p.A. Milan Publishing Euro 500,000 100.00 RCS Periodici S.p.a. 100.00 Feria Bebe S.l. Barcelona Publishing Euro 10,000 60.00 Sfera Editores Espana S.l. 60.00 Pubblibaby S.p.a. Cusago Publishing Euro 120,000 100.00 Sfera Editore Spa 100.00 Rizzoli Publishing Italia S.r.l. Milan Publishing Euro 500,000 100.00 RCS Periodici S.p.a. 100.00 Sfera Service S.r.l. Milan Publishing Euro 52,000 100.00 Sfera Editore Spa 100.00 Sfera Editore S.p.a. Milan Publishing Euro 2,000,000 100.00 RCS Periodici S.p.a. 100.00 Sfera Editores Espana S.l. Barcelona Publishing Euro 174,000 100.00 Sfera Editore Spa 100.00 Sfera Editores Mexico S.a. Granada Publishing MXN 14,883,000 100.00 Sfera Editore Spa 99.00 Sfera Service S.r.l. 1.00 Trend Service S.a. Granada Publishing MXN 250,000 99.00 Sfera Editores Mexico Sa 100.00

(3) Percentage refers to total share capital. Share of ordinary capital held: 99.37%

234

Companies consolidated line-by-line

% CONSOLI DATED % BY GROUP SHARE held COMPANY NAME HEAD OFFICE BUSINESS CURRENCY CAPITAL HELD BY directly Companies in the RCS QUOTIDIANI group Arlanza Ediciones S.a. Madrid Publishing Euro 375,000.00 72.23 Unidad Editorial Revistas S.L.U. 75.00 Canal Mundo Ficcion S.l. Madrid Television Euro 3,060.00 72.23 Canal Mundo Producciones Audiovisuales S.a. 100.00 Canal Mundo Producciones Audiovisuales S.a. Madrid Television Euro 80,270.68 72.23 Unidad Editorial S.a. 75.00 Canal Mundo Radio Cataluna S.L. Madrid Radio Euro 3,010.00 96.30 Unidad Editorial S.a. 99.99 Canal Mundo Radio Extremadura S.l. Madrid Radio Euro 3,913.00 96.30 Unidad Editorial S.a. 99.99 City Italia S.p.a. Milan Publishing Euro 3,100,230.00 100.00 RCS Quotidiani SpA. 100.00 City Milano S.p.a. Milan Publishing Euro 100,000.00 90.00 City Italia Spa 90.00 Consorzio Milano Marathon s.c.a.r.l. Milan Services Euro 20,000.00 60.00 RCS Sport S.p.a. 60.00 Ediservicios Madrid 2000 S.L.U. Madrid Publishing Euro 601,000.00 96.31 Unidad Editorial Revistas S.L.U. 100.00 Editora De Medios De Castilla Y Leon S.a. Valladolid Publishing Euro 1,668,300.00 86.45 Unidad Editorial S.a. 89.76 Editora De Medios De Valencia, Alicante Y Castellon S.a. Valencia Publishing Euro 1,322,200.00 58.69 Unidad Editorial S.a. 59.64 Fabripress S.a. 1.30 Automobili.com S.r.l. Milan Multimedia Euro 118,000.00 70.00 RCS Digital Spa 70.00 Editorial Del Pueblo Vasco S.a. Bilbao Publishing Euro 2,193,900.00 96.31 Unidad Editorial S.a. 100.00 Editoriale Corriere di Bologna S.r.l. Bologna Publishing Euro 1,002,000.00 50.05 RCS Quotidiani SpA. 50.05 Editoriale Fiorentina S.r.l. Milan Publishing Euro 10,000.00 100.00 RCS Quotidiani SpA. 100.00 Editoriale Veneto S.r.l. Padua Publishing Euro 1,840,000.00 51.00 RCS Quotidiani SpA. 51.00 La Esfera dos Livros S.L.U. Lisbon Publishing Euro 5,000.00 72.23 La Esfera de los Libros SL 100.00 Fabripress S.A.U. Madrid Publishing Euro 961,600.00 96.31 Unidad Editorial S.a. 100.00 Impresiones De Catalunya S.a. Barcelona Publishing Euro 3,000,000.00 96.26 Unidad Editorial S.a. 90.30 Fabripress S.a.u. 9.65 La Esfera de los Libros S.l. Madrid Publishing Euro 48,000.00 72.23 Unidad Editorial S.a. 75.00 Logintegral 2000 S.A.U. Madrid Publishing Euro 500,000.00 96.31 Unidad Editorial S.a. 100.00 Mundinteractivos S.A.U. Madrid Multimedia Euro 3,600,000.00 96.31 Unidad Editorial S.a. 100.00 Rey Sol S.a. Palma de Mallorca Publishing Euro 1,330,172.00 64.21 Unidad Editorial S.a. 66.67 RCS DBGames Spa Milan Multimedia Euro 1,500,000.00 51.00 RCS Digital Spa 51.00 RCS Digital Spa Milan Publishing Euro 500,000.00 100.00 RCS Quotidiani SpA. 100.00 RCS International Newspapers B.v. Amsterdam Publishing Euro 6,250,000.00 100.00 RCS Quotidiani SpA. 100.00 RCS Sport S.p.a. Milan Services Euro 100,000.00 100.00 RCS Quotidiani SpA. 100.00 Unedisa Producciones Baleares S.L.U. Palma de Mallorca Television Euro 3,060.00 72,23 Canal Mundo Producciones Audiovisuales S.a. 100.00 Unedisa Comunicaciones S.L.U. Madrid Multimedia Euro 2,410,000.00 96.31 Unidad Editorial S.a. 100.00 Unedisa Telecomunicaciones S.L.U. Madrid Multimedia Euro 1,100,000.00 96.31 Unidad Editorial S.a. 100.00 Unedisa Telecomunicaciones de Levante S.L. Valencia Multimedia Euro 3,010.00 49.27 Unedisa Telecomunicaciones S.L.U. 51.16 Unidad Editorial S.a. Madrid Publishing Euro 53,813,940.60 96.31 RCS International Newspapers B.v. 70.85 RCS Investimenti S.p.A. 25.58 Unidad Liberal Radio S.L. Madrid Multimedia Euro 10,000.00 52.97 Unidad Editorial S.a. 55.00 Unedisa Telecomunicaciones Baleares S.A. Madrid Multimedia Euro 1,200,000.00 96.31 Unedisa Telecomunicaciones S.L.U. 100.00 Veo Television S.a. Madrid Television Euro 27,328,752.00 53.31 Unidad Editorial S.a. 55.35 Red De Distribuciones Editoriales S.l. Madrid Publishing Euro 176,829.78 96.31 Unidad Editorial S.a. 100.00 Unidad Liberal Radio Madrid S.L. Madrid Multimedia Euro 10,000.00 45.24 Unidad Editorial S.a. 45.00 Libertad Digital S.A. 55.00 Recoprint Pinto S.L.U. Madrid Publishing Euro 3,652,240.00 96.31 Unidad Editorial S.a. 100.00 Recoprint Dos Hermanas S.L.U. Madrid Publishing Euro 2,052,330.00 96.31 Unidad Editorial S.a. 100.00 Recoprint Sagunto S.L.U. Madrid Publishing Euro 2,281,920.00 96.31 Unidad Editorial S.a. 100.00 Recoprint Rábade S.L.U. Madrid Publishing Euro 1,550,010.00 96.31 Unidad Editorial S.a. 100.00 Recoprint Güimar S.L.U. Madrid Publishing Euro 1,365,140.00 96.31 Unidad Editorial S.a. 100.00 Recoletos Cartera Internacional S.A. Madrid Multimedia Euro 2,281,432.06 96.31 Unidad Editorial S.a. 99.99 Recoletos Medios Digitales S.L.U. 0.01 Económica, Sociedade Gestora de Participações Sociais SA Lisbon Investment holding Euro 400,000.00 96.31 Recoletos Cartera Internacional S.A. 50.00 Recoletos Medios Digitales S.L.U. 50.00 ST&SF Sociedade de Publicações LDA Lisbon Publishing Euro 285,312.00 96.31 Económica Sociedade Gestora de Participações Sociais SA 100.00 Económica Digital - Informação Financeira LDA Lisbon Publishing Euro 5,000.00 96.31 Económica Sociedade Gestora de Participações Sociais SA 100.00 Correio Médico – Edição de Publicações Médicas LDA Lisbon Publishing Euro 5,000.00 96.31 Económica Sociedade Gestora de Participações Sociais SA 100.00 Fortuna Comunicação Social SA Lisbon Publishing Euro 300,000.00 96.31 Económica Sociedade Gestora de Participações Sociais SA 100.00 Recoletos Medios Digitales S.L.U. Madrid Publishing Euro 4,766,549.07 96.31 Unidad Editorial S.a. 100.00 Last Lap S.L. Madrid Publishing Euro 6,010.00 49.12 Recoletos Medios Digitales S.L.U. 51.00 Last Lap Organiçao de eventos S.L. Lisbon Publishing Euro 30,000.00 49.27 Last Lap S.L. 99.67 Económica Sociedade Gestora de Participações Sociais SA 0.33 Corporación Radiofónica Informacion y Deporte S.L.U. Madrid Multimedia Euro 900,120.00 96.31 Recoletos Medios Digitales S.L.U. 100.00 Recoletos Television S.A. Madrid Multimedia Euro 6,010,200.00 96.31 Recoletos Medios Digitales S.L.U. 100.00 Baobad - Comunicações e Publicações SA Lisbon Multimedia Euro 60,200.00 96.31 Unidad Editorial S.a. 99.94 Recoletos Medios Digitales S.L.U. 0.02 Recoletos Cartera Internacional S.A. 0.02 Recoletos Información S.L. 0.02 Recoletos Información S.L.U. Madrid Multimedia Euro 10,520,716.89 96.31 Unidad Editorial S.a. 100.00 Recoprint Impresiòn S.L.U. Madrid Publishing Euro 3,005.06 96.31 Unidad Editorial S.a. 100.00 Información Estadio Deportivo S.A. Seville Multimedia Euro 154,339.91 81.83 Recoletos Información S.L. 84.97 Ediciones Cónica S.A. Madrid Publishing Euro 432,720.00 95.73 Unidad Editorial S.a. 99.40 Unidad Editorial Informaciòn Deportiva S.L.U. Madrid Publishing Euro 102,000.00 96.31 Unidad Editorial S.a. 100.00 Unidad Editorial Informaciòn Economica S.L.U. Madrid Publishing Euro 102,000.00 96.31 Unidad Editorial S.a. 100.00 Unidad Editorial Informaciòn General S.L.U. Madrid Publishing Euro 102,000.00 96.31 Unidad Editorial S.a. 100.00 Unidad Editorial Revistas S.L.U. Madrid Publishing Euro 1,195,800.00 96.31 Unidad Editorial S.a. 100.00

235

Companies consolidated using the equity method

SHARE % held COMPANY NAME HEAD OFFICE BUSINESS CURRENCY CAPITAL HELD BY directly

Eurogravure S.p.a. Bergamo Publishing Euro 24,492,374.92 RCS MediaGroup SpA 30.00 Inimm Due S.à.r.l. Luxembourg Real estate Euro 240,950 RCS MediaGroup SpA 20.00 M-Dis Distribuzione Media SpA Milan Distribution Euro 6,392,727 RCS MediaGroup SpA 45.00 Gruppo Finelco S.p.A. Milan Radio Euro 418.736 RCS MediaGroup SpA 34.60

Companies equity accounted by the RCS QUOTIDIANI group Calprint S.l. Valladolid Publishing Euro 1,856,880 Unidad Editorial S.a. 39.58 Comercial de Prensa Siglo XXI S.a. Madrid Publishing Euro 601,000 Unidad Editorial S.a. 20.00 Difernet S.l. (in liquidazione) Madrid Multimedia Euro 4,320 Munditeractivos S.a. 33.00 Promociones Periodisticas Leonesas (Propelesa) S.a. Leon Publishing Euro 691,150 Unidad Editorial S.a. 10.00 Editoriale Del Mezzogiorno S.r.l. Naples Publishing Euro 866,360 RCS Quotidiani SpA. 48.92 Edi.T.A.A. S.r.l. Trento Publishing Euro 600,000 RCS Quotidiani SpA. 50.00 Omniprint S.A. Santa Maria del Cami Publishing Euro 2,790,000 Rey Sol S.a. 45.00 Val Disme S.L. Valencia Publishing Euro 144,242.91 Red De Distribuciones Editoriales S.L. 23.75 Diserpe S.L.U. Valencia Publishing Euro 3,006 Val Disme S.L. 100.00 Cirpress S.L. Carreño(Asturias) Publishing Euro 14,000 Red De Distribuciones Editoriales S.L. 24.70 Distribuciones Papiro S.L. Salamanca Publishing Euro 37,274.02 Red De Distribuciones Editoriales S.L. 26.35 Distribuidora de Publicaciones Boreal S.L. Madrid Distribution Euro 113,300 Red De Distribuciones Editoriales S.L. 29.00 Souto S.L. Lugo Distribution Euro 33,656 Distribuidora de Publicaciones Boreal S.L. 100.00 Distrigalicia S.L. La Coruña Distribution Euro 37,262 Distribuidora de Publicaciones Boreal S.L. 100.00 Berálán S.L. Guipuzcoa Distribution Euro 217,742.30 Red De Distribuciones Editoriales S.L. 22.25 Banatú S.L. Guipuzcoa Transport Euro 4791,36 Berálán S.L. 100.00 Gestion de Logistica Editorial S.L. Madrid Publishing Euro 310,000 Unidad Editorial S.a. 35.00 Distritoledo S.L. Toledo Publishing Euro 12,020.24 Gestion de Logistica Editorial S.L. 60.00 Distrimedios S.L. Jerez de la frontera (Cädiz) Distribution Euro 100,000 Red De Distribuciones Editoriales S.L. 38.00 Distribuidora Almeriense de Publicaciones S.L. Almería Distribution Euro 264,480 Distrimedios S.L. 26.60 Distribuidora Jienense de Publicaciones S.L. Jaén Publishing Euro 219,600 Distrimedios S.L. 100.00 Distribuidora Cordobesa de Medios Editoriales S.L Córdoba Distribution Euro 31,000 Distrimedios S.L. 70.00 Distribuidora Extremena de Pubblicaciones S.L. Badajoz Distribution Euro 10,000 Distrimedios S.L. 70.00 Radio Salud S.A. Barcelona Publishing Euro 200,782.08 Recoletos Medios Digitales S.L.U. 30.00 Subscripciones de Medios Editoriales S.L. Jerez de la frontera (Cädiz) Distribution Euro 110,000 Distrimedios S.L. 100.00 Distrimorris Pubblicaciones S.L. Algeciras (Cadiz) Publishing Euro 6,000 Distrimedios S.L. 60.00 Logistica Ciudad Real S.L. Ciudad Real Distribution Euro 6,010.12 Distrimedios S.L. 70.00 Distribuciones Ricardo Rodriguez SL Granada Distribution Euro 6,240.00 Distrimedios S.L. 70.00 Madrid Deportes y Espectáculos S.A. Madrid Multimedia Euro 600,000.00 Recoletos Medios Digitales S.L.U. 30.00 Prensa Serviodiel S.L. Huelva Distribution Euro 7,152.65 Distrimedios S.L. 70.00 Cronodis Logística Integral S.L Guadalajara Publishing Euro 500,000 Gestion Logistica Editorial S.l. 95.00 Logintegral 2000 S.a. 5.00 Gestora de Derechos de Prensa S.A. Madrid Publishing Euro 126,000 Unidad Editorial S.a. 35.56 Escuela de Cocina Telva S.L. Madrid Publishing Euro 61,000.00 Ediciones Cónica S.A. 50.00 Sector MD SL Vizcaya Advertising Euro 3,305.57 Berálán S.L. 76.18 Trecedis SL Madrid Distribution Euro 860,730.00 Berálán S.L. 7.69 Cirpress S.L. 7.69 Distribuciones Papiro S.L. 7.69 Marina Press Distribuciones S.L. 7.69 Distribuidora de Publicaciones Boreal S.L. 7.69 Distrimedios S.L. 7.69 Distribuidora Terraconense de Publicacione 7.69 Val Disme S.L. 7.69 Grup Logistic Vilarroya S.L. 7.69 Distribuidora de Aragòn S.L. 7.69 Gestion de Logistica Editorial S.L. 7.69 Segre Distribucions de Prensa S.L. 7.69

Companies equity accounted by the RCS LIBRI group Actes Sud Participation S.a. Arles Publishing Euro 3,408,134.00 Flammarion S.a 35.40 Editions J'ai lu S.a. 11.60 Call Centre Factory Sarl Jullian Telemarketing Euro 10,000 Ge Fabbri Ltd. 20.00 Data Base Factory Sarl Paris Publishing Euro 90,354 Ge Fabbri Ltd. 20.00 Data Base Factory Ltd London Publishing GBP 1,000 Ge Fabbri Ltd. 20.00 Mail order Factory France Paris Publishing Euro 10,000 Ge Fabbri Ltd. 20.00 Fédération Diffusion S.a.r.l. Paris Publishing Euro 7,623 Ud-Union Distribution S.a.s. 20.00 Livres Diffusion Sas Ivry Sur Seine Publishing Euro 39,000 Ud-Union Distribution S.a.s. 33.33 White Bird Production Courbevoire Publishing Euro 276,000 Editions Casterman S.a. 44.40 Mach 2 Libri S.p.a. Peschiera B. Publishing Euro 646,250 RCS Libri S.p.a. 29.10 R.L. Libri S.r.l. Milan Publishing Euro 250,000 RCS Libri S.p.a. 50.00 Rba Fabbri France S.a.r.l. Paris Publishing Euro 50,000 Editions Fabbri S.a.r.l. 50.00 Socadis Ltée St Laurent Publishing CAD 40,000 Editions Flammarion Ltée 50.00 Ge Eaglemoss London Publishing GBP 1,000 Ge Fabbri Ltd. 50.00 Ge Eaglemoss ( China) Bejing Publishing RMB 4,047,000 Ge Eaglemoss 100.00

Companies equity accounted by the RCS PUBBLICITA' group ADR Advertising SpA Fiumicino Advertising Euro 1,000,000 IGP-Decaux S.p.a. (4) 74,50 IGP-Decaux S.p.a. Milan Advertising Euro 11.085.783 RCS International Advertising B.v. 67.65 Pubblisuccesso Lombardia S.r.l. (in liquidazione) Milan Advertising Euro 312,000 IGP-Decaux S.p.a. 100.00 Publitransport GTT S.r.l. Turin Advertising Euro 100,000 IGP-Decaux S.p.a. 49.00

Companies equity accounted by the RCS DIFFUSIONE group A.S.E. Agenzia Servizi Editoriali S.r.L. Milan Distribution Euro 30,600 M-Dis Distribuzione Media SpA 30.00 Consorzio C.S.I.E.D. Milan Distribution Euro 103,291 M-Dis Distribuzione Media SpA 10.00 Milano Press S.r.l. 10.00 Milano Press S.r.l. Milan Distribution Euro 50,000 M-Dis Distribuzione Media SpA 100.00 GE-dis S.r.l. Genoa Distribution Euro 350,000 M-Dis Distribuzione Media SpA 80.00 Pieroni Distribuzione S.r.l. Milan Distribution Euro 750,000 M-Dis Distribuzione Media SpA 30.00 TO-dis Srl Turin Distribution Euro 510,000 M-Dis Distribuzione Media SpA 55.00 Trento Press Service S.r.l. Trento Distribution Euro 260,000 M-Dis Distribuzione Media SpA 30.40

Companies equity accounted by the BV group Hachette Rizzoli International Communications B.v. Amsterdam Publishing Euro 9,075,604.32 RCS International Magazines B.v. 50.00 Hachette Rizzoli Magazines Sa Athens Publishing Euro 3,540,000 Hachette Rizzoli International Communicati 50.00

Companies equity accounted by the DADA group E-Box Srl Milan Multimedia Euro 10,000 Dada.net S.p.A. 30.00 DADA Entertainment LLC New York Multimedia USD 200 Dada USA Inc 50.00

Companies equity accounted by the Finelco group Sing Sing Srl Milan Radio Euro 10,000 Gruppo Finelco S.p.A. 100.00 Radio Studio 105 srl Milan Radio Euro 780,000 Gruppo Finelco S.p.A. 100.00 RMC Italia Srl Milan Radio Euro 312,000 Gruppo Finelco S.p.A. 97.08 Radio Engineering CO Srl Milan Services Euro 52,000 Gruppo Finelco S.p.A. 100.00 Radio News Network Srl Milan Publishing Euro 10,400 Gruppo Finelco S.p.A. 100.00 Edizioni Donegani Srl Milan Publishing Euro 10,000 Gruppo Finelco S.p.A. 100.00 Radio 105 USA Corp New York Radio USD 100,000 Radio Studio 105 srl 100.00 Virgin Radio Italy Spa Milan Radio Euro 15,526,224 Gruppo Finelco S.p.A. 98.99 Pubbliarea Srl Milan Advertising Euro 10,000 Gruppo Finelco S.p.A. 75.00 Night Express Srl (in liq.) Milan Publishing Euro 15,600 Gruppo Finelco S.p.A. 100.00 United Music Srl Milan Publishing Euro 10,000 Gruppo Finelco S.p.A. 100.00 Music First Ntw AG Zurich Radio CHF 100,000 Gruppo Finelco S.p.A. 30.00 Pubblisa Srl Rome Advertising Euro 10,200 Gruppo Finelco S.p.A. 30.00 NCP Ricerche Srl Milan Research Euro 10,000 Gruppo Finelco S.p.A. 95.00

236

Available for sale

SHARE % held COMPANY NAME HEAD OFFICE BUSINESS CURRENCY CAPITAL HELD BY directly Alice Lab Netherlands N.v. Amsterdam Investment holding Euro 128,850.95 RCS MediaGroup SpA 10.65 Emittenti Titoli SpA Milan Investment holding Euro 4,264,000 RCS MediaGroup SpA 1.46 Immobiliare Editori Giornali S.r.l. Rome Publishing Euro 830,462 RCS MediaGroup SpA 7.49 Istituto Europeo di Oncologia Srl Milan Scientific research Euro 79,071,770 RCS MediaGroup SpA 5.18 Mode et Finance Paris Apparel Euro 6,428,540 RCS MediaGroup SpA 9.49 Poligrafici Editoriale SpA Bologna Publishing Euro 34,320,000 RCS MediaGroup SpA 9.99 Raisat S.p.a. Rome Television Euro 2,585,000 RCS MediaGroup SpA 5.00 Audiradio Srl Milan Services Euro 258,000 RCS MediaGroup SpA 7.55

Investments held by the RCS QUOTIDIANI group Ansa S.r.l Rome Publishing Euro 11,424,000 RCS Quotidiani SpA. 3.13 Consuledit S.c.a.r.l. Milan Publishing Euro 20,000 RCS Quotidiani SpA. 11.19 Entregas Comunicacion y Subscripciones S.L. Asturias Publishing Euro 12,000 Cirpress S.L. 80.00 Libertad Digital S.A. Madrid Multimedia Euro 920,950 Unidad Editorial S.a. 3.26 Medios de Azahar S.A. Castellon Services Euro 392,500 Editora De Medios De Valencia, Alicante 8.02 Suscribe S.l. Palma de Mallorca Publishing Euro 300,000 Logintegral 2000 S.a.u. 15.00 Teledifusion Madrid S.a. Madrid Multimedia Euro 1,000,000 Unedisa Telecomunicaciones S.l. 10.00 Segre Distribucions de Prensa S.L. Lerida Distribution Euro 180,303.63 Red De Distribuciones Editoriales S.L. 10.00 Distribuidora de Aragòn S.L. Zaragoza Distribution Euro 300,000 Red De Distribuciones Editoriales S.L. 16.00 Marina Press Distribuciones S.L. Barcelona Distribution Euro 300,000 Red De Distribuciones Editoriales S.L. 15.00 Grup Logistic Vilarroya S.L. Girona Distribution Euro 600,000 Red De Distribuciones Editoriales S.L. 5.00 Distribuidora Tarraconense de Publicaciones S.L. Tarragona Distribution Euro 150,000 Red De Distribuciones Editoriales S.L. 14.00 Valdebro Publicaciones S.A. Zaragoza Publishing Euro 100,701 Distribuidora de Aragon S.A. 40.00 Distrisoria Publicaciones Y Distribuciòn S.L. Soria Distribution Euro 30,050 Distribuidora de Aragon S.A. 60.00 Palacio del Hielo S.A. Madrid Multimedia Euro 1,617,837.91 Unidad Editorial S.a. 8.53

Investments held by the RCS LIBRI group Meta Concept S.a. Paris Publishing Euro 741,817 Flammarion S.a. 19.23 Presses Universitaires De France S.a. Paris Publishing Euro 2,241,017 Flammarion S.a 15.10 Dilicom S.a.S Paris Publishing Euro 128,768 Ud-Union Distribution S.a.S. 7.46 Investments held by the RCS PERIODICI group Consuledit S.c.a.r.l. Milan Publishing Euro 20,000 RCS Periodici S.p.a. 5.25 Rizzoli Publishing Italia S.r.l. 1.83 Sfera Editore S.p.a. 0.95 Editrice Abitare Segesta S.p.A. 0.29

Investments held by the RCS PUBBLICITA' group Consorzio Arredo Urbano Spa Cadorago (Co) Advertising Euro 190,000 IGPDecaux S.p.a. 10.00 I - Mago S.p.a. Florence Advertising Euro 510,000 IGPDecaux S.p.a. 14.00 Audiposter S.r.l. Milan Advertising Euro 15,756 IGPDecaux S.p.a. 5.20

Investments held by the BV group MB Venture capital fund I partecipating company E N.V. Amsterdam Investment holding Euro 50,000 RCS International Magazines B.v. 9.90

Investments held by the Finelco group Audiradio Srl Milan Services Euro 258,000 Gruppo Finelco 2.33 RMC 2 Srl Milan Radio Euro 10,200 Gruppo Finelco 19.00

Investments held by the GFT NET group Consorzio T.A. 2000 per l'ind. Moda (in liquidation) Milan Apparel Euro 18,076 GFT NET S.p.A. 14.30

237

EXCHANGE RATES AGAINST THE EURO

238

The main exchange rates used to convert Financial statements drawn up in currencies other than the euro are as follows:

Rate Average Rate Average at rate at rate 31.12.2007 Anno 2007 31.12.2006 Anno 2006

Canadian dollar CAD 1.44490 1.46785 1.52810 1.42369 Us dollar USD 1.47210 1.37048 1.31700 1.25560 Hungarian forint HUF 253.73000 251.35200 251.77000 264.26300 Swiss franc CHF 1.65470 1.64272 1.60690 1.57288 Bulgarian lev BGL 1.95580 1.95580 1.95580 1.95580 British pound GBP 0.73335 0.684337 0.67150 0.68173 Polish Zloty PLN 3.59350 3.78370 27.48500 28.34170 Mexican peso MXN 16.05470 14.97480 14.29370 13.69430 Czech Koruna CZK 26.62800 27.76560 27.48500 28.34170 Russian Rouble RUB 35.98600 35.01830 34.68000 34.11170 Ukraine hryvnia UAH 7.43411 6.90334 6.64623 6.32819 Brazilian real BRL 2.61078 2.66379 2.81333 2.73313 Australian dollar AUD 1.67570 1.63484 1.66910 1.66681 Chinese renminbi CNY 10.75240 10.41780

239

QUARTERLY CONSOLIDATED INCOME STATEMENTS

240

Quarterly income statement

(€/millions) 1st quarter 2nd quarter 3rd quarter 4th quarter Full year 2007 2006 (1) 2007 2006 (1) 2007 2006 (1) 2007 2006 (1) 2007 2006 (1) Net revenues 581.3 532.0 733.3 604.8 659.7 573.4 763.6 670.5 2,737.9 2,380.7 Distribution revenues 340.3 320.6 343.1 314.4 398.4 378.4 378.6 370.5 1,460.5 1,383.9 Advertising revenues 185.0 170.8 301.0 235.1 185.5 147.8 297.4 241.1 969.0 794.8 Other publishing revenues 56.0 40.6 89.2 55.4 75.8 47.2 87.6 58.9 308.5 201.9 Operating costs (438.5) (390.6) (472.5) (403.7) (459.8) (427.2) (486.8) (434.1) (1,857.5) (1,655.6) Payroll costs (111.7) (104.6) (134.2) (104.1) (125.6) (103.5) (132.5) (106.4) (504.0) (418.6) Impairment of receivables (0.1) (2.7) (6.7) (5.8) (3.3) (2.7) (0.2) (1.0) (10.2) (12.2) Increases in provisions for risks (0.6) (1.1) (2.3) (1.2) (0.8) 0.3 (2.1) (5.6) (5.9) (7.6) EBITDA 30.4 33.1 117.7 89.9 70.2 40.4 141.9 123.3 360.3 286.7 Amortization of intangible assets (6.8) (3.2) (13.7) (4.1) (13.0) (4.2) (15.4) (8.8) (48.8) (20.2) Depreciation of property, plant and equipment (10.0) (7.9) (11.4) (8.3) (11.4) (7.8) (14.3) (9.7) (47.1) (33.6) Impairment of fixed assets 0.0 (0.2) (0.6) 0.2 0.0 0.0 (4.3) (5.3) (4.9) (5.3) EBIT 13.6 21.9 92.0 77.7 45.8 28.4 108.0 99.6 259.4 227.6 Net financial income (charges) (0.1) 3.7 (7.2) 3.9 (15.2) (2.0) (13.2) (3.7) (35.7) 2.0 Income (charges) from financial assets/liabilities 0.0 (0.0) 63.3 6.9 (2.9) 34.9 (5.2) 28.7 55.1 70.5 Share of income (losses) from investments valued using equity method (0.5) 1.9 4.6 0.9 (2.4) (4.9) 7.5 5.3 9.3 3.2 Earnings before tax 13.0 27.4 152.7 89.5 25.3 56.5 97.2 130.0 288.2 303.3 Income taxes 5.7 11.1 (10.9) (26.7) (14.9) (17.4) (41.4) (25.6) (61.5) (58.6) Net income (loss) from continuing operations 18.7 38.5 141.8 62.8 10.4 39.0 55.8 104.4 226.7 244.8 Net income (loss) from discontinuing and discontinued operations (2.5) (2.0) (3.8) (2.0) 12.8 (2.9) 0.4 (3.2) 7.0 (10.1) Net income (loss) before minority interests 16.2 36.5 138.0 60.7 23.3 36.2 56.2 101.2 233.7 234.6 Net (income) loss pertaining to minority interests 0.7 (2.8) (10.6) (5.0) (3.0) (0.9) (1.1) (6.4) (14.0) (15.1) Net income (loss) pertaining to the group 17.0 33.7 127.4 55.7 20.2 35.3 55.1 94.8 219.7 219.5

(*) The comparative figures have been restated to take account of the amounts relating to the Play Radio and CNR businesses, reclassified to "Net income (loss) from discontinuing and discontinued operations".

241

TABLES ATTACHED TO THE FINANCIAL STATEMENTS OF RCS MEDIAGROUP S.P.A.

242

LIST OF EQUITY INVESTMENTS PURSUANT TO ITALIAN CIVIL CODE ART. 2427.5 PLUS ADDITIONAL INFORMATION RECOMMENDED BY CONSOB IN COMMUNICATION 94001437 OF FEBRUARY 23, 1994 ET SEQ.

Net income Name and head office Share (loss) for % Number of Book (€/millions) capital latest year Equity held shares value SUBSIDIARY COMPANIES

RCS Libri S.p.A. - Milan At Dec-31-2006 42.4 19.6 110.6 99.99 706,681,994 155.7 - purchase of preference shares 15,000 - - stock options 0.1 At Dec-31-2007 42.4 22.8 133.4 99.99 (a) 706,696,994 155.8

RCS Broadcast S.p.A. - Milan At Dec-31-2006 24.3 (8.7) 15.7 98.99 88,980,554 57.0 - capital reduction to cover losses (32,058,834) 0.0 - capital increase 11.6 - stock options (0.2) - disposals (56,921,720) (68.4) At Dec-31-2007 0.0 0.0 0.0 0.00 (a) 00.0

RCS Pubblicità S.p.A. - Milan At Dec-31-2006 40.0 0.2 50.3 100.00 40,000,000 40.4 At Dec-31-2007 40.0 (4.1) 46.2 100.00 (a) 40,000,000 40.4

RCS Quotidiani S.p.A. - Milan At Dec-31-2006 40.0 52.9 139.8 100.00 40,000,000 41.7 - stock options (0.1) At Dec-31-2007 40.0 42.2 132.0 100.00 (a) 40,000,000 41.6

RCS Investimenti S.p.A. - Milan At Dec-31-2006 39.1 0.5 39.8 99.52 96,051,518 39.6 - acquisitions 11,350 - - payment for future capital increase - 900 - stock options 0 At Dec-31-2007 39.1 54.5 994.3 99.53 (a) 96,062,868 939.7

GFT NET S.p.A. - Turin At Dec-31-2006 0.9 6.1 7.3 100.00 900,000 0.0 At Dec-31-2007 0.9 13.4 14.8 100.00 (a) 900,000 0.0

RCS International Magazines BV - Amsterdam At Dec-31-2006 2.3 28.0 51.6 100.00 2,300 20.1 At Dec-31-2007 2.3 (0.2) 36.4 100.00 (c) 2,300 20.1

RCS Periodici S.p.A. - Milan At Dec-31-2006 5.0 8.8 29.7 100.00 5,000,000 115.8 - stock options (0.1) At Dec-31-2007 5.0 8.6 30.2 100.00 (a) 5,000,000 115.7

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Net income Name and head office Share (loss) for % Number of Book (€/millions) capital latest year Equity held shares value

RCS Factor S.p.A. - Milan At Dec-31-2006 2.0 0.3 4.4 90.00 1,800,000 1.9 At Dec-31-2007 2.0 0.6 5.6 90.00 (c) 1,800,000 1.9

RCS Produzioni S.p.A. (ex RCS Servizi e Partecipazioni S.p.A.) - Milan At Dec-31-2006 1.0 (0.4) 1.4 100.00 1,000,000 3.1 At Dec-31-2007 1.0 0.5 1.9 100.00 (a) 1,000,000 3.1

Dada S.p.A. - Florence At Dec-31-2006 2.7 7.3 53.5 44.24 7,063,568 80.3 - acquisitions 481,533 10.7 At Dec-31-2007 2.7 7.3 53.5 46.87 (c) 7,545,101.0 91.0

Adelphi Edizioni S.p.A. - Milan At Dec-31-2006 1.0 - 2.4 10.00 104,000 1.6 At Dec-31-2007 1.0 0.0 2.4 10.00 (c) 104,000 1.6

Digicast S.p.A. - Rome At Dec-31-2006 ------additions 10,200 17.1 At Dec-31-2007 0.1 2.5 3.0 51.00 (c) 10,200 17.1

AGR S.r.l. - Milan At Dec-31-2006 ------acquisitions 13.6 - impairment loss (3.6) At Dec-31-2007 0.5 (1.7) 1.9 100.00 (a) 1-

Net balance "subsidiary companies" at Dec-31-2007 1,428.0

Net income Name and head office Share (loss) for % Number of Book (€/millions) capital latest year Equity held shares value

ASSOCIATED COMPANIES AND JOINT VENTURES

Eurogravure S.p.A. - Bergamo At Dec-31-2006 24.5 2.7 15.2 30.00 14,130,216 3.7 At Dec-31-2007 24.5 (1.5) 14.1 30.00 (a) 14,130,216 3.7 m-dis S.p.A. (ex RCS Diffussione S.p.A.) - Milan At Dec-31-2006 6.4 6.1 20.9 45.00 2,876,727 8.1 At Dec-31-2007 6.4 4.1 18.8 45.00 (a) 2,876,727 8.1

Inimm Due S.à.r.l. - Luxembourg At Dec-31-2006 0.2 0.0 4.5 20.00 1,928 0.5 - distribution of reserves (0.3) At Dec-31-2007 0.2 10.6 1.0 20.00 (a) 1,928 0.2

Gruppo Finelco - Milan At Dec-31-2006 ------acquisitions 193,422 74.5 - capitalization acquisition costs 0.4 At Dec-31-2007 0.6 (2.6) 65.3 34.64 (a) 193,422 74.9

Net balance "associated companies" at Dec-31-2007 86.9

OTHER COMPANIES

Intesa Sanpaolo S.p.A. (ex Banca Intesa S.p.A.) - Milan At Dec-31-2006 3,613.0 2,240.9 15,323.2 0.28 (c) 19,571,685 113.2 - Sanpaolo Imi merger with share exchange at €3.115 9,871,435 57.1 - disposals (29,443,120.0) (170.3) At Dec-31-2007 ------

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Net income Name and head office Share (loss) for % Number of Book (€/millions) capital latest year Equity held shares value

Intesa Sanpaolo S.p.A. (ex Sanpaolo IMI S.p.A.) - Milan At Dec-31-2006 5,400.3 2,140.1 11,853.0 0.17 3,169,000 57.1 - merger into Intesa Sanpaolo (3,169,000.0) (57.1) At Dec-31-2007 ------

3 Italia S.p.A. - Trezzano sul Naviglio (Mi) At Dec-31-2006 6,512.7 (371.3) 5,731.8 0.50 (d) 6,594,480 15.0 - disposals (6,594,480) (15.0) At Dec-31-2007 ------

Poligrafici Editoriale S.p.A. - Bologna At Dec-31-2006 34.3 4.6 96.2 9.99 13,199,900 19.2 - impairment loss (4.5) At Dec-31-2007 34.3 4.6 96.2 9.99 (d) 13,199,900 14.7

Raisat S.p.A. - Rome At Dec-31-2006 2.6 2.8 7.3 5.00 25,000 2.5 At Dec-31-2007 2.6 2.8 7.3 5.00 (c) 25,000 2.5

Istituto Europeo di Oncologia S.r.l. - Milan At Dec-31-2006 79.1 4.9 89.9 5.18 1 4.1 At Dec-31-2007 79.1 5.9 95.8 5.18 (c) 14.1

Alice Lab Netherlands NV - Amsterdam At Dec-31-2006 0.1 0.4 10.5 10.65 27,370 0.9 - capital increase 0.5 At Dec-31-2007 0.1 (1.7) 8.1 10.65 (b) 27,370 1.4

Mode et Finance - Paris At Dec-31-2006 6.4 (0.1) 4.4 9.49 60,980 0.4 At Dec-31-2007 6.4 (0.4) 3.9 9.49 (a) 60,980 0.4

Emittenti Titoli S.p.A. - Milan At Dec-31-2006 4.3 1.2 6.2 1.47 120,000 0.1 At Dec-31-2007 4.3 1.8 6.9 1.47 (a) 120,000 0.1

Immobiliare Editori Giornali S.r.l. - Rome At Dec-31-2006 0.8 - 0.7 7.49 1 0.1 At Dec-31-2007 0.8 - 0.7 7.49 (c) 10.1

Audiradio S.r.l. - Milan At Dec-31-2006 ------acquisitions 10.1 At Dec-31-2007 0.3 - 1.0 7.56 (c) 10.1

Vital Stream Holding Inc - Irvine, CA, USA At Dec-31-2006 n.a. n.a. n.a. 0.03 8,998 - At Dec-31-2007 n.a. n.a. n.a. 0.03 8,998 -

Cardio Now - Encinitas, CA, USA At Dec-31-2006 n.a. n.a. n.a. n.a. 436 - - winding up (436) At Dec-31-2007 n.a. n.a. n.a. n.a. - -

Net balance "other companies" at Dec-31-2007 23.4 Net balance "total equity investments" at Dec-31-2007 1,538.3 (a) Figures refer to financial statements at Dec-31-2007. (b) Figures refer to financial statements at Jun-30-2007. (c) Figures refer to financial statements at Dec-31-2006. (d) Figures refer to financial statements at Dec-31-2005.

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LIST OF "OTHER EQUITY INVESTMENTS" AND "OTHER SECURITIES" REPORTED AS CURRENT ASSETS AND THEIR MOVEMENTS DURING THE YEAR

(€/thousands) Balance at Increase Balance at Dec-31-2006 (Decreases) Dec-31-2007 Revaluation Market Relative to Carrying Total value Carrying price in market price ISIN code Description Currency value €/000 €/000 value €/000 December in December 2007 2007

Other securities b) Other variable-yield securities: Listed: LU0134649283 DUEMME EUR SHORT T-I Euro 23,915 (23,915) - Total listed securities 23,915 (23,915) - Total b) "Other variable-yield securities" 23,915 (23,915) - Total "Other securities" 23,915 (23,915) -

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RECLASSIFIED INCOME STATEMENT FOR HOLDING COMPANIES PURSUANT TO DECREE 127/91 (CONSOB Communication 94001437 of Feb-23-1994) (€/millions) 2007 2006

FINANCIAL INCOME (CHARGES)

1) INCOME FROM EQUITY INVESTMENTS . subsidiary companies 64.3 82.3 . associated companies 5.3 3.7 . other companies 63.5 69.7

2) OTHER FINANCIAL INCOME a) from receivables held as fixed assets: . subsidiary companies - - . associated companies - - . other companies - - b) from securities held as fixed assets not representing equity investments - - c) from securities held as current assets not representing equity investments 1.2 6.6 d) income other than above: . subsidiary companies 21.9 9.5 . associated companies 0.1 0.1 . other companies 3.4 5.1

3) INTEREST AND OTHER FINANCIAL CHARGES . subsidiary companies ( 2.9) ( 2.0) . associated companies ( 1.8) ( 1.2) . other companies ( 42.3) ( 2.9) . exchange gains and (losses) - -

TOTAL FINANCIAL INCOME (CHARGES) 112.7 170.9

ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS 4) REVALUATIONS a) equity investments - - c) securities held as current assets not 0.4 representing equity investments - - 5) WRITEDOWNS a) equity investments ( 8.1) ( 7.5) c) securities held as current assets not representing equity investments

TOTAL ADJUSTMENTS ( 8.1) ( 7.1)

6) OTHER OPERATING INCOME 29.9 22.1

OTHER OPERATING COSTS: 6) RAW AND ANCILLARY MATERIALS, CONSUMABLES AND GOODS ( 0.7) ( 0.6) 7) NON-FINANCIAL SERVICES ( 23.4) ( 15.3) 8) RENTALS AND LEASING ( 5.0) ( 3.8) 9) PAYROLL COSTS ( 17.6) ( 21.9) 10) AMORTIZATION, DEPRECIATION AND WRITEDOWNS ( 2.2) ( 1.5) 12) PROVISIONS FOR RISKS ( 0.4) ( 0.1) 13) OTHER PROVISIONS - - 14) OTHER OPERATING EXPENSES ( 2.6) ( 1.5)

TOTAL OTHER OPERATING COSTS ( 51.9) ( 44.7)

INCOME (LOSS) FROM ORDINARY OPERATIONS 82.6 141.2

INCOME (LOSS) BEFORE TAXES 82.6 141.2 16) INCOME TAXES (CURRENT AND DEFERRED) 14.3 25.0

NET INCOME (LOSS) FOR THE YEAR 96.9 166.2

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INDIPENDENT AUDITORS’ REPORT

248

INDIPENDENT AUDITORS’ REPORT ON THE STATUTORY FINANCIAL STATEMENTS

250

REPORT BY THE BOARD OF STATUTORY AUDITORS

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RCS MediaGroup SpA Via San Marco, 21 – 20121 Milan Share capital €762,019,500 fully paid-in Company Register, Tax Code & VAT number 12086540155 Business Register number 1524326

Report by the Board of Statutory Auditors to the Shareholders’ Meeting pursuant to art. 153 of Decree 58 dated February 24, 1998

To the Shareholders of RCS MediaGroup SpA, t of equity investments pursuant to Italian Civil Code art. 2427.5 plus additional We confirm that during the year ended December 31, 2007 we conducted the supervisory activities required of us by law in compliance with the “Standards of conduct for the Board of Statutory Auditors” recommended by the Italian Accountancy Profession and with other instructions issued by CONSOB (Italy’s stockmarket regulator) in Bulletin 1025564 dated April 6, 2001 and subsequent amendments. The supervisory activities for which we are responsible were carried out as described below and we hereby inform you that we: – took part in meetings of the shareholders, the Board of Directors and the Executive Committee held during the year and that we received timely and complete information from the directors regarding the activities and major operations carried out by the Company and its subsidiaries as per the law and the Company’s by-laws; one or more of our members also attended all the meetings of the Internal Control Committee and almost all the meetings of the Group Compensation Committee, both of which are sub-committees of the Board of Directors; – obtained the information needed to verify compliance with the principles underlying correct administration as well as the adequacy of the Company’s internal controls, accounting systems, and organizational structure. We obtained such information by direct inspection and from the heads of the primary areas involved as well as from the independent auditors, Reconta Ernst & Young SpA; – verified the operation of the systems for controlling the Company’s subsidiaries and adequacy of the instructions given to them, also pursuant to art. 114.2 of Legislative Decree 58/98; – monitored actual implementation of the corporate governance rules outlined in the Corporate Governance Code promoted by the Italian Stock Exchange, as adopted by the Company; – verified compliance with all current laws and regulations regarding the preparation and drawing up of the parent company and consolidated financial statements as well as the accompanying documents. We also verified that the Company’s and the Group’s 2007 Directors’ Reports on Operations were prepared in accordance with the law and current regulations and in line with the resolutions adopted by the Board of

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Directors, and that their contents were consistent with those reported in the parent company and consolidated financial statements. The Board of Statutory Auditors had no observations to make regarding the half-year and quarterly reports and observed that they were published as per the law and current regulations. No significant facts that would require reporting to the supervisory authorities or mention in this report have emerged as a result of the monitoring activities described above.

* * *

The specific information that the aforementioned CONSOB Bulletin dated April 6, 2001 and its subsequent amendments requires to be provided in this report is listed below. 1. We received adequate information regarding those operations with a major impact on the Company’s balance sheet, income statement and financial position completed by RCS MediaGroup SpA and its subsidiaries. Based on the information obtained we ascertained that these operations were carried out in compliance with the law and the Company’s by-laws and did not appear to be imprudent or risky, against the Company’s interest, against resolutions adopted by the Shareholders’ Meeting or, at any rate, such as to compromise the integrity of the Company’s assets; 2. We received adequate information regarding transactions with other group companies or related parties. Based on the information provided, we ascertained that these transactions were in compliance with the law and the Company’s by-laws, were carried out in the best interest of the Company and no doubts emerged regarding the correctness and completeness of the related disclosure in the financial statements, potential conflicts of interest, the safeguarding of the Company’s assets and the protection of minority shareholders. Based on the information made available to us no abnormal or atypical transactions emerged. 3. In the Directors’ Reports on Operations and the Explanatory Notes to both the parent company and consolidated financial statements the directors have disclosed and explained the principal transactions with third parties, other group companies and related parties in adequate detail. The “Ownership Structure and Corporate Governance” section of the Directors’ Report on Group Operations by the RCS MediaGroup includes an outline of the procedures approved by the Board of Directors, subsequent to examination and approval by the Internal Control Committee, relating to transactions, including significant transactions, carried out by the Company or its subsidiaries with related parties and particularly those in which any director has an interest on his own account or that of third parties. 4. The reports issued today by Reconta Ernst & Young SpA, the independent auditors, on both the parent company and consolidated financial statements for the year ended December 31, 2007 do not contain any qualifications or specific disclosures. 5. In 2007 the Board of Statutory Auditors received no reports of reprehensible facts under art. 2408 of the Italian Civil Code. In February 2008, it did receive a letter from a company shareholder, qualified by the same as a report of reprehensible facts under art. 2408 of the Italian Civil Code, concerning the activities of RCS Periodici SpA, a wholly-owned subsidiary of RCS MediaGroup SpA. The necessary controls and

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gathering of information from interested parties, including through the Board of Statutory Auditors of RCS Periodici SpA, did not reveal any breaches of the law and/or company regulations or procedures. 6. In 2007 the Board of Statutory Auditors did not receive any statements or complaints. 7. In 2007 RCS MediaGroup SpA also granted the following assignments to Reconta Ernst & Young, on top of the financial audit of the parent company and consolidated financial statements under art. 159 of Legislative Decree 58/98, the other activities associated with financial audits under art. 155 of Legislative Decree 58/98 and the limited audit of the parent company and consolidated half-year reports, for which the following invoices have already been issued for the amounts indicated below: - €255,000 for auditing the pro-forma consolidated figures for the year ended December 31, 2006 included in the Information Circular prepared in accordance with art. 71 of the Issuer Regulations adopted by CONSOB in Resolution 11971 of May 14, 1999 and subsequent amendments and additions, published after the subsidiary Unidad Editorial SA acquired all the share capital in Recoletos Grupo de Comunicacion SA, a transaction qualifying as a significant acquisition; - €165,000 for performing specific audit procedures on the accounting treatment of the significant transaction involving the acquisition of Recoletos Grupo de Comunicacion SA, with particular reference to the provisions of IFRS 3 regarding Purchase Price Allocation, carried out as part of the audit of the consolidated financial statements of the subsidiary Unidad Editorial S.A. for the purposes of their inclusion in the consolidated financial statements of RCS Mediagroup SpA at December 31, 2007; - €190,000 for methodological support and assistance when testing controls for the purposes of issuing the certification required by art. 154-bis of Decree 58/1998 and art. 81 of the CONSOB Issuer Regulations; - €35,000 for advice on the application of accounting standards.

8. During 2007 a firm of tax consultants, belonging to the same network as the independent auditors, was engaged to provide tax advice for fees of €21,600. 9. In 2007 the Board of Statutory Auditors issued the following opinions as required by law: - favourable opinion on the resolutions adopted by the Board of Directors concerning the remuneration of the company’s Chief Executive Officer, based on the recommendations of the Group Compensation Committee (to whose preceding meetings the Board of Statutory Auditors had also been invited); - favourable opinion on the proposal to nominate Riccardo Stilli, the Company’s Chief Financial Officer, as the Head of Financial Reporting under art. 154-bis of Decree 58/1998. 10. In 2007 the Board of Directors met 9 times, the Executive Committee met 5 times, the Internal Control Committee met 5 times, the Group Compensation Committee met 5 times, while the Board of Statutory Auditors met 11 times. During one of these meetings we met with the Boards of Statutory Auditors of the companies controlled by RCS MediaGroup SpA which head each of its sectors, in order to exchange information on accounting and control systems and general business conduct pursuant to art. 151.2 of Legislative Decree 58/1998.

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11. We have no particular observations to make regarding compliance with the principles underlying correct business administration, which appear to have been observed in a consistent manner. 12. We have no particular observations to make regarding the adequacy of the organizational structure which we consider suitable for ensuring the proper conduct of business and operations. 13. The internal control system appeared adequate in light of both the Company’s needs and operations, as ascertained during the meetings of the Internal Control Committee which, based on the corporate governance rules adopted, were attended by the Chairman of the Board of Statutory Auditors (or another auditor appointed by him). As recommended by the Corporate Governance Code for Listed Companies, the Head of Internal Audit and the Internal Control Officer attended meetings of the Board of Statutory Auditors in order to facilitate the proper exchange and flow of information regarding the conduct of their duties as well as the results of any tests performed. 14. We have no particular observations to make regarding the adequacy of the accounting system and consider it suitable for correctly representing the results of operations. We note that for the first time, the Chief Executive Officer and Head of Financial Reporting have issued a certification of the parent company and consolidated financial statements at December 31, 2007, pursuant to art. 81-ter of CONSOB Regulation 11971 dated May 14, 1999 and subsequent amendments and additions. 15. We have no particular observations to make regarding the adequacy of the information provided by subsidiaries to the parent company designed to ensure timely compliance with the disclosure requirements established by law. 16. No facts or situations that need to be mentioned in this report emerged from the periodic exchange of information between the Board of Statutory Auditors and the independent auditors, also pursuant to art. 150.3 of Legislative Decree 58/1998. 17. The Board of Directors, and to the extent applicable, the Board of Statutory Auditors of RCS MediaGroup SpA have adopted almost all the corporate governance rules contained in the March 2006 edition of the Corporate Governance Code promoted by the Italian Stock Exchange. RCS MediaGroup SpA’s Corporate Governance Report, prepared in accordance with Section IA.2.6 of the Instructions to the Regulations of Markets Organized and Managed by the Italian Stock Exchange, describes in detail the principles and application guidelines adopted by the Company in order to clearly illustrate which recommendations of the above mentioned Corporate Governance Code have been applied and in what way in 2007. This report also lists the reasons why certain recommendations have either been adopted partially or not at all. To the extent of our responsibility we controlled the implementation of the corporate governance rules that the Company declared it had adopted and made sure that RCS MediaGroup SpA’s Corporate Governance Report contained the results of our periodic review of the continued independence of our members, determined using the same criteria as that applied to the directors. Having been already extensively updated early in 2006, the Organizational, Management and Control Model adopted under Legislative Decree 231/2001 was once more reviewed and updated in 2007, particularly in relation to laws which have extended the liability under Decree 231/2001 to new culpable and non-culpable

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offences relating to occupational safety (noting that some of the company’s direct subsidiaries, which manage production facilities, have already independently made such revisions), without prejudice to the related procedures already envisaged under applicable statutory provisions. 18. We performed our monitoring activities during the year in a normal way and no omissions, reprehensible facts or irregularities emerged that would require reporting. 19. We have no proposals to make pursuant to art. 153.2, of Legislative Decree 58/1998 relating to RCS MediaGroup SpA’s individual financial statements at December 31, 2007 or their approval, just as we have nothing to add regarding the allocation of net profit for the year.

Milan, April 11, 2008 The Board of Statutory Auditors

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