Mediaset Group Mediaset Group (Net of the Epsilon Group)

MEDIASET GROUP

Annual Report 2000

MEDIASET S.p.A. - via Paleocapa, 3 - 20121 Milan Share capital ITL 1,181,227,564,000 wholly paid-in. Taxpayer’s code, VAT number and registration number in the register of companies in Milan: 09032310154

MEDIASET GROUP

2001 Ordinary and Extraordinary General Meeting Report, Consolidated Financial Statements and Annual Financial Statements for the year ended December 31, 2000

BOARD MEMBERS

Board of Directors

Chairman Fedele Confalonieri Deputy Chairman Pier Silvio Berlusconi Managing Director Giuliano Adreani Directors Franco Amigoni Tarak Ben Ammar Marina Berlusconi Pasquale Cannatelli Enzo Concina Maurizio Costa Mauro Crippa Gilberto Doni Bruno Ermolli Adriano Galliani Marco Giordani Alfredo Messina Jan Mojto Gina Nieri Roberto Ruozi Claudio Sposito

Board of Statutory Auditors

Chairman Achille Frattini Statutory auditors Francesco Antonio Giampaolo Riccardo Perotta

Alternate auditors Gianfranco Polerani Francesco Vittadini

IndependentIndependent AuditingAuditing FirmFirm Deloitte & Touche S.p.A.

NOTICE OF MEETING

The shareholders are called to attend the ordinary and extraordinary general meeting to be held in Via Cinelandia 5, Cologno Monzese (Milan), on April 9, 2001, at 10:00 a.m., for the first call and, should it be required, on April 17, 2001, at the same time and venue, for the second call, to decide upon the following

agenda:

1) appointment of Directors; 2) annual and consolidated financial statements as of December 31, 2000; Report on operations of the Board of Directors; Report of the Statutory Auditors; consequent resolutions; 3) authorization to the Board of Directors for the purchase and disposal of own shares, following revocation of the current authorization; consequent resolutions; 4) conversion of the share capital in Euro; consequent resolutions; 5) modification of art. 13 of the articles of association; consequent resolutions; 6) proposal of adoption of the regulation of the general meeting of Mediaset S.p.A. shareholders; consequent resolutions. The shareholders with the relevant certificate will have the right to take part in the meeting. Certificates must be requested at least five days before the date of the shareholders’ meeting from the authorized bodies, pursuant to CONSOB resolution no. 11768 dated December 23, 1998. The documents regarding the issues on the agenda will be available at the Registered office of the company and at Borsa Italiana S.p.A. within the terms envisaged by current regulations; shareholders may obtain a copy.

The Chairman Fedele Confalonieri

CONTENTS Mediaset Group: Consolidated Financial Statements as of December 31, 2000

Board of Directors’ Rreport on operating performance...... 1 The general economic situation ...... 5 Financial and economic results of the Mediaset Group ...... 7 Drafting criteria...... 7 Economic results...... 7 Balance sheet and financial position ...... 15 Results of the parent company - Mediaset S.p.A...... 17 Investments in subsidiary and affiliated companies ...... 18 Other operations ...... 20 Structure and operations of the Mediaset Group ...... 23 Commercial Television – Italy: advertising division ...... 23 Commercial Television – Italy: broadcasting and contents division...... 25 Commercial Television – International ...... 37 Multimedia and telecommunications division...... 41 Terrestrial digital television ...... 44 Personnel ...... 46 Legal developments in the television industry ...... 48 Relationships with companies in the Fininvest Group and the Mediolanum Group ...... 49 Significant events after December 31, 2000...... 50 Foreseeable developments ...... 51 Balance sheet and income statement as of December 31, 2000...... 53 Notes to the consolidated financial statements and Attachments 61 Structure and contents...... 63 Main changes in the consolidation area and investments in subsidiary and affiliated companies made in 2000 ...... 63 Group operations and regulatory framework ...... 64 Consolidation method...... 65 Valuation criteria and accounting principles ...... 66 Conversion of financial statements in extra-EMU currency ...... 69 Additional information...... 69 Comments on the main items Assets ...... 71 Shareholders’ equity and liabilities ...... 82 Memorandum Accounts ...... 90 Income statement ...... 93 Attachments...... 103 IndipendentIndipendent Auditors’Auditors’ ReportReport...... 1 17

CONTENTS Mediaset S.p.A.: Financial Statements as of December 31, 2000

Board of Directors’ Report on operating performance...... 121 Corporate Governance...... 125 The general economic situation ...... 128 Financial results...... 129 Economic results...... 129 Balance sheet and financial position ...... 131 Key events during the year ...... 132 Company activities...... 132 Employee Stock Plans...... 133 New organisation chart ...... 134 Euro project...... 134 Structure and operations of the Mediaset Group ...... 136 Commercial Television – Italy: advertising division ...... 136 Commercial Television – Italy: broadcasting and contents division...... 137 Commercial Television – International ...... 142 Multimedia and telecommunications operations...... 144 Terrestrial digital television ...... 146 Personnel ...... 148 Legal developments in the television industry ...... 148 Additional information pursuant to article 2428 of the Civil Code...... 149 Research & Development Operations ...... 149 Own shares ...... 149 Relationships with subsidiaries, affiliates, the parent company and related companies ...... 150 Significant events after December 31, 2000...... 151 Foreseeable developments ...... 152 Proposals of the Board of Directors to the General Meeting ...... 152 Balance Sheet and Income Statement ...... 157 Notes to the Financial Statements and Attachments ...... 165 Structure and content...... 167 Group operations and legislative framework ...... 167 Valuation criteria and accounting principles ...... 168 Additional information...... 171 Analysis on the main items Assets ...... 175 Shareholders’ equity and liabilities ...... 185 Memorandum accounts...... 192 Income statement ...... 194

Attachments...... 200 List of significant equity investments according to article 120, Law Decree no. 58/1998213 Reports of the Statutory Auditors’ and External Auditors...... 215 Summary of the resolutions taken by the general meeting...... 223

MEDIASET GROUP

Consolidated financial statements as of December 31, 2000 Board of Directors’ Report on operating performance

MEDIASET GROUP Consolidated financial statements as of December 31, 2000 Board of Directors’ Report on operating performance

Dear Shareholders, In 2000, the Group heading your company achieved a further and marked economic growth. Consolidated net revenues amounted to ITL 4,576.5 billion, growing 15.4% over 1999, the operating result amounted to ITL 1,338.9 billion (compared to 1,084.7 in 1999) with a 23.4% increase net of amortisation, depreciation and write-downs amounting to ITL 1,289.0 billion. Operating profitability therefore grew from 27.3% to 29.3% . Profit before taxation amounted to ITL 1,254.6 billion over ITL 1,134.9 billion achieved in 1999, with a 10.5% increase. The net profit pertaining to Group activities amounted to ITL 819.9 billion which, compared to ITL 656.7 billion as of December 31, 1999, shows an increase of 24.8%. Results in 2000 include the effects arising from the proportional consolidation of the Epsilon Group, the Joint-venture between the Mediaset Group and Kirch Media established at the end of 1999; the impact on the margins of the Mediaset Group in the year under examination was limited and mainly attributable to goodwill amortisation quotas calculated on some of the activities included in the new Group. The parent company, Mediaset S.p.A., achieved a gross profit of ITL 618.8 billion, after amortisation, depreciation and write-downs amounting to ITL 599.0 billion. The considerable increase in the operating profit, from 27.3% to 30.1% , net of the above mentioned impact regarding the Epsilon Group, represents the main feature of the economic results achieved by the Mediaset Group in 2000, where the extraordinary increase in advertising revenues was accompanied by a constant growth in the audience, with a simultaneous effective control action on operating costs.

Based on the further strengthening of the competitive position in its core business, Mediaset is now requested, with a view to the transition to the terrestrial digital television broadcasting system envisaged for 2006, to plan the necessary infrastructure investments for this process and to develop and adapt business models in line with the expected evolution of the domestic audio-visual industry. Mediaset intends to address and manage this process as an evolution, protecting and capitalising on its competitive edge and the economic returns guaranteed by the current model of general broadcaster, and mainly focusing on content production and distribution. The beginning of the integration between Television and New media and the presence in the potentially synergic field of telecommunications shall also allow Mediaset to grasp the new opportunities connected to the future progressive convergence between television and other Internet protocol-based platforms (interactive Tv, Enhanced Tv, T- commerce), which imply a greater control of end customer access technologies.

3 With respect to these evolutionary models, the current situation however remains characterized by the unchallenged primacy of advertising-based television which, in spite of the unquestionable increase in Internet and pay-Tv penetration, confirms to be the the medium with which most time is passed in our country. Auditel data even show a further increase in 2000 (amounting to 2.7% over the average detected in 1999) of television viewing, which reached 230 minutes every day, and an increase in overall television viewing, which grew in both Day Time and Prime Time, also due to the three events which marked the television year: European Football championships, Olympics and Big Brother. The data on the advertising market confirm the irreplaceable role played by classic media and television in particular in communication and marketing strategies for both emerging and consolidated (i.e. connected to mass consumption goods) industries. In 2000 the advertising market on classic media recorded, according to Nielsen data, an unprecedented growth of 14.5% (under the same terms for the same media and broadcasters analysed in 1999) , an extraordinary result, only partly marred in the last months of the year by the slowing down in investments showed by industries like telecoms, Internet companies, penalised by the U-turn in stock exchange performance and the delay in the market launch of the latest communication technologies (new Gprs terminals). In the framework of an extraordinarily expanding market, Publitalia ‘80 obtained a remarkable increase in television advertising on our networks. Based on the estimates made by Nielsen, this increase, amounting to 12.6%, is higher than that of the television advertising market which was equal, under equal conditions, to 12.4% over 1999. As to audience shares, 2000 represented for Mediaset the best out of the last six television years. In the day time average, Mediaset networks reached a 43.4% share, and improved the 1999 average data by almost one percentage point. In a situation marked by an increase in the overall television viewing, this result was accompanied by a 4.5% increase in contacts in Mediaset networks average minute. This result is extremely positive, since it was reached in the year when our main competitor had the exclusive rights tothe European football championships and the Olympic Games, broadcasting them live. In particular, in the last quarter of the year, Mediaset networks maintained an average share which was constantly above 45%, and in the same time, advertising audience increased by 11.5%. The leadership we acquired with respect to the state competitor in the last part of the year, which was confirmed in the first two months of 2001, represents for Mediaset the best guarantee of keeping the commercial value attributed to its publishing product, with a view to achieving the 2001 economic objectives, a year when the growth rate of the advertising market is expected to be lower than that exceptionally recorded in 2000. The audience shares obtained in 2000 mirror the ever greater effectiveness and co- ordination network publishing strategies, aimed at creating strong, innovative and profiled schedules, functional to the achievement of adequate cost sizing and investments optimisation objectives.

4 In 2000, network scheduling was characterized by the establishment of new production formats, especially in the fields of game shows, entertainment and investigations into matters connected to information and the news. Significant audience successes were also recorded in domestic self-produced drama, thus rewarding the large investments devoted to series, miniseries and soaps. Content acquisition and creation is more and more connected to the growing ability of the Group to maximize their commercial value, by joining publishing objectives and economic efficiency. In 2000, this strategy was implemented by reselling parts of some products to alternative distribution platforms (as was the case of Champions League and Big Brother) and in the start of brand extension projects connected to the development of proven and established television products in terms of their multimedia exploitation, as is the case of the scientific programme La macchina del tempo which linked publishing projects and a satellite theme channel to its well established television success. From this viewpoint, Big Brother, the programme broadcast by Canale 5, turned immediately to be the event of the autumn season, and represents the most astonishing, and under certain aspects, exceptional case of a product having a large television impact, which can be simultaneously experienced, with very good results in terms of users/subscribers, by means of multiple distribution channels (Internet, Pay tv, Wap). The strategy of a progressive integration between television and the Internet represents the basis of the project that is being developed by Mediadigit, a company established in late 1999 to comprise the Group’s multimedia operations (teletext, theme channels, the Internet), by means of the Mediaset Online vertical portal and the sites of the three networks. Through these operations, a consistent and extensive web content offer model will be progressively developed, with respect to those promoted by television, thus fostering the convergence and cross promotion between productions, characters and television personalities and the Internet and the achievement of advertising investors, which are often different from those who are usually present in advertising-based television. The instant success of the on line versions of Passaparola and TG5 is the first tangible and encouraging sign along the road of the research into and development of a strategy that will make it possible to benefit from the strong complementary character of these two media, especially in news and entertainment. The completion of the strategy will require the analysis of integration processes with companies able to provide technological know-how and end customer access management, operations that may be capitalised on a large scale also in the framework of new business models that can be implemented with the start of terrestrial digital television. Internationally, Mediaset’s strategy reflects its will to share synergic projects with European partners who have a similar competitive positioning and at the same time show significant opportunities for value creation. The two main existing international partnerships are to be seen in this light. Our established presence in the Telecinco Group, which recorded excellent performance in terms of revenues in 2000 as well, was accompanied by the strategic alliance with the Kirch Media Group, already our partner in Telecinco and Mediaset shareholder, with which the Joint-venture Epsilon

5 had been established at the end of 1999. The revision of equity investment and industrial agreements based on that Joint-venture, formally established in a preliminary agreement between the two Groups, envisages in 2001 the conversion of Mediaset’s investment in Epsilon into a 2.34% shareholding in Kirch Media KgaA capital, to date the most significant commercial television company in Germany. According to the agreement, the two Groups will also develop, by means of the jointly- owned companies Epsilon Tv Production and Epsilon Motion Pictures, a cinema and television content production and co-production activity aimed at international distribution.

THE GENERAL ECONOMIC SITUATIONSITUATION

The world economy, which in 2000 recorded one of the highest GDP increases of the last few years, showed at the end of the year significant signs of slowing down caused by both the increase in oil price and the decrease of the U.S. economy. These events mark the beginning of an extremely uncertain period, characterised by a swift reorientation of microeconomic forecasts and strategies which mainly affect those industries which are closely connected to the so called net economy, whose expected growth has been markedly reduced. The change in the expectations of the financial markets and economic players is currently affected by the anti-inflation attitude of the main Central Banks, which will only lead to loosening of the monetary policy if strong and sustainable economic growth is achieved in the long term. In the United States, GDP, which however grew by 5.1% over 1999, had a sharp slowdown in the last quarter of the year (+0.3%). After five years of economic expansion, we are now witnessing a reduction in residential investments and industrial production, with a high consumption of foreign products caused by the enduring strength of the dollar. The immediate actions on the interest rates decided by the Federal Reserve should however alleviate the effects of this slowdown, and create a renewed feeling of trust among households and companies, in view of a recovery expected already in the second half of 2001, whose size will also depend on the decisions that the new administration will take in terms of tax cuts. In 2000, the lingering weakness of the Japanese economy was confirmed, facing a more and more unsustainable increase in public debt, now amounting 130% of GDP; the general situation of Japanese economy, with a worrisome consumption stagnation, seems destined to further deteriorate, since the only stimuli to aggregated demand appear to be of tax nature. The repercussions of the Argentine debt crisis spread over Latin America, and threatened to enter also Brazil. The high variable rate element in the indebtedness of these countries may however trigger, with a reduction in U.S. rates, a recovery of the economic cycle, which might fully develop only following U.S. recovery, the main partner in terms of imports from Central and South America. Euro countries showed in 2000 an overall growth of 3.5% (2.9% in 1999), corresponding to higher growth rates of the single member states than the objectives included in the relevant Stability and Growth Agreements. The effect of the oil shock and the U.S. economy slowdown however contributed to a progressive reduction in

6 GDP growth rate, which fell from 3.7% in the second quarter to 3% in the last quarter of 2000. The improvement of labour market conditions and a basically expansion- oriented tax policy should however support domestic demand in 2001, and strengthen the positive trend in consumption, which grew by 2.8% in 2000. 2001 GDP growth forecasts for EMU countries, made by the European Central Bank, are around 3%, even ruling out for the moment a reduction in interest rates, with respect to the persisting risk of an even moderate return of the inflation, due to the enduring effects of energy prices increases of late 2000. In Italy, 2000 ended with a GDP growth amounting to 2.9%, double as much as that of 1999, though lower than the rate of the main countries in the Euro area (Germany: 3%, France: 3.3%; Spain: 4.1%). Inflation, conversely, amounted in 2000 to the almost physiological rate of 2.5%. In 2000, Italy confirmed to be one of the EMU countries with the greater propensity to consumption, and benefited from an increase in income available to households and a reduction (from 11.4% in 1999 to 10.7% in 2000) of the unemployment rate. The sustainability of these favourable situations will have to be assessed over the next few months, since the stimulating function carried out by the tax reduction in the last couple of years took place in the presence of a level of public debt which in 2000 was still higher than European average. The Italian economy, as was recently pointed out by the EU Commission, remains vulnerable, until the structural reforms regarding public and social security and pension expenditure are completed, and the rigid structure of the labour market is overcome. Such reforms must be accompanied by far-reaching measures fostering technological innovation and market liberalization, without which the competitiveness of Italian companies may be further reduced. The commercial surplus of our country shrunk in the last two years; the Euro's depreciation, which fostered exports to non-EMU countries, simultaneously reduced those directed within the EMU.

7 FINANCIAL AND ECONOMIC RESULTS OF THE MEDIASETMEDIASET GROUPGROUP

Drafting criteria The following economic and equity information refer to the years 2000 and 1999. We would like to point out that in 2000 the Epsilon Group (i.e. the group of companies in Joint-venture with the Kirch Group, established at the end of 1999, headed by Euroset S.a.r.l.) was consolidated by means of proportional integration. Mediaset Group’s consolidated results as of December 31, 2000 include the tax effects deriving from the revaluation of the Mediaset network brands, carried out by R.T.I. S.p.A. taking advantage of the faculty envisaged by Law November 21, 2000 no. 342 (the so called annex to the Budget 2000). For an overall description of the mode of application of the Law and its impact on the Mediaset Group’s Consolidated Financial Statements as of December 31, 2000, please see the relevant section in this Report.

Economic Results A summary of the Mediaset Group income statement is set out below:

Mediaset Group

2000 1999 2000 1999

(ITL billions) (EUR millions)

Revenues from sales and services 4,514.7 3,889.6 2,331.65 2,008.81 Other revenues and income 61.8 77.3 31.92 39.92

Total net consolidated revenues 4,576.5 3,966.9 2,363.57 2,048.73

Personnel expenses 562.1 560.1 290.30 289.27

Purchases, services and other costs 1,386.5 1,135.4 716.10 586.39

Operating costs 1,948.6 1,695.5 1,006.40 875.66

Gross operating margin 2,627.9 2,271.4 1,357.17 1,173.07

Depreciation, amortisation and write-downs 1,289.0 1,186.7 665.74 612.88

Operating result 1,338.9 1,084.7 691.43 560.19

Financial income (charges) (101.5) 36.0 (52.41) 18.59

Income (charges) from investments 19.4 4.7 10.02 2.43

Profit (loss) before extraordinary items 1,256.8 1,125.4 649.04 581.21

Sundry and extraordinary income (charges) (2.2) 9.5 (1.14) 4.91 Profit (loss) before taxation 1,254.6 1,134.9 647.90 586.12

Income taxes (434.5) (478.0) (224.40) (246.87) Profit (loss) for the year 820.1 656.9 423.50 339.25

Profit (loss) attributable to minority interests (0.2) (0.2) (0.10) (0.10)

Profit (loss) of the Mediaset Group 819.9 656.7 423.40 339.15

8 In order to have a better comparability of the results, the effects on the income statement arising from the 50% consolidation of the Epsilon Group are shown below:

Mediaset Group - effects arising from the consolidation of the Epsilon Group

2000 1999 2000 1999

(ITL billions) (EUR millions)

Revenues from sales and services 153.7 - 79.38 - Other revenues and income (0.5) - (0.26) - Total net consolidated revenues 153.2 - 79.12 -

Personnel expenses 4.2 - 2.17 - Purchases, services and other costs 126.4 - 65.28 - Operating costs 130.6 - 67.45 -

Gross operating margin 22.6 - 11.67 -

Amortisation, depreciation and write-downs 15.9 - 8.21 - Operating profit (loss) 6.7 - 3.46 -

Financial income /(charges) (4.7) - (2.43) - Income /(charges) from investments (10.2) - (5.27) -

Profit (loss) before extraordinary items (8.2) - (4.24) -

Sundry and extraordinary income (charges) - - - - Profit (loss) before taxation (8.2) - (4.24) -

Income taxes (9.5) - (4.91) - Profit (loss) for the year (17.7) - (9.15) -

Profit (loss) attributable to minority interests - - - -

Profit (loss) of the Mediaset Group (17.7) - (9.15) -

The negative effect on Mediaset Group margins, arising from the 50% consolidation of the Epsilon Group, is mainly attributable to goodwill amortisation; without those items, the economic impact deriving from the specific management of the Epsilon Group would prove positive. For an analysis of the economic results of the Epsilon Group, see the relevant section in the Report, devoted to the analysis of the Group’s main international operations.

9 Here follows a summary of the Mediaset Group income statement net of the effects arising from the 50% proportional consolidation of the Epsilon Group:

Mediaset Group net of the effects arising from the consolidation of the Epsilon Group

2000 1999 2000 1999

(ITL billions) (EUR millions)

Revenues from sales and services 4,361.0 3,889.6 2,252.27 2,008.81 Other revenues and income 62.3 77.3 32.18 39.92 Total net consolidated revenues 4,423.3 3,966.9 2,284.45 2,048.73

Personnel expenses 557.9 560.1 288.13 289.27 Purchases, services and other costs 1,260.1 1,135.4 650.82 586.39 Operating costs 1,818.0 1,695.5 938.95 875.66

Gross operating margin 2,605.3 2,271.4 1,345.50 1,173.07

Amortisation, depreciation and write-downs 1,273.1 1,186.7 657.53 612.88 Operating profit (loss) 1,332.2 1,084.7 687.97 560.19

Financial income (charges) (96.8) 36.0 (49.98) 18.59 Income (charges) from investments 29.6 4.7 15.29 2.43

Profit (loss) before extraordinary items 1,265.0 1,125.4 653.28 581.21

Suncry and extraordinary income (charges) (2.2) 9.5 (1.14) 4.91 Profit (loss) before taxation 1,262.8 1,134.9 652.14 586.12

Income taxes (425.0) (478.0) (219.49) (246.87) Profit (loss) for the year 837.8 656.9 432.65 339.25

Income (loss) attributable to minority interests (0.2) (0.2) (0.10) (0.10)

Profit (loss) of the Mediaset group 837.6 656.7 432.55 339.15

The percentage impact on net revenues of some of the significant element of the income statement is as follows:

Mediaset Group Mediaset Group (net of the Epsilon Group)

2000 1999 2000 1999

Net consolidated revenues 100.0% 100.0% 100.0% 100.0%

Operating costs 42.6% 42.7% 41.1% 42.7%

Gross operating profit 57.4% 57.3% 58.9% 57.3%

Amortisation, depreciation and write-downs 28.2% 29.9% 28.8% 29.9%

Operating profit 29.3% 27.3% 30.1% 27.3%

Profit (loss) before extraordinary items 27.5% 28.4% 28.6% 28.4%

Profit (loss) before taxation 27.4% 28.6% 28.5% 28.6%

Net profit (loss) 17.9% 16.6% 18.9% 16.6%

Tax rate (% on the proft (loss) before taxation) -34.6% -42.1% -33.7% -42.1%

It should be pointed out that, net of the tax effects connected to the revaluation of network brands, the Group tax rate as of December 31, 2000, would amount to 40.5%.

10 Here follows an analysis of the single Mediaset Group income statement elements, including in 2000 the share of results of the Epsilon Group.

Net Revenues

2000 4,576.5 Mediaset Group net consolidated revenues increased in 2000 over 1999 by ITL 609.6 billion. Net of the effect 1999 3,966.9 arising from the 50% consolidation of the Epsilon Group % change 15.4% (equal to ITL 153.2 billion), growth in comparable terms amounted to 11.5%.

The following table contains details of revenues:

(ITL billions)

2000 1999

Revenues from the sale of commercials 4,004.3 3,567.7 Revenues from television sales, promotions, sponsorships 686.2 624.3 Advertising revenues from third parties 4,690.5 4,192.0

Promoservice revenues 41.0 49.0 Other revenues from television operations 215.5 177.9 Agency discounts (686.8) (615.2)

Total net revenues from television operations 4,260.2 3,803.7

Revenues from multimedia operations 56.2 20.5

Total net revenues from non-television operations 106.9 142.7

Total net consolidated revenues Italy 4,423.3 3,966.9

Revenues 50% Epsilon Group 172.2 - Write-offs (19.0) -

Total net consolidated revenues 4,576.5 3,966.9

The significant increase in Group net revenues is mainly attributable to the growth in televisiotelevision revenues (+12.0%). In particular: n advertising revenues from thirdthird partiesparties reached ITL 4,690.5 billion, with an ITL 498.5 billion increase compared to 1999, equal to 11.9%. Revenues from the sale of commercials showed a very fast pace (+12.2%), while revenues from television sales, promotions and sponsorships increased less (+9.9%); n other revenues from television operations increased significantly because of the higher advertising revenues of Publitalia ‘80 on Mediaset networks with respect to companies belonging to the Fininvest Group and the revenues generated from the sale of the rights of some Champions League matches and the pay rights of the Big Brother production to digital platforms. In 2000, a significant increase was also shown by the revenues from multimedia operations,, attributable to: – growth in sales from operations begun in previous years (Happy Channel and Mediavideo);

11 – revenues paid by Stream for the distribution, as of the month of April, of two new theme channels (Duel and Comedy Life); – start of the publishing activity regarding the distribution of the new monthly magazine La macchina del tempo; – a strong increase in advertising connected to the Internet, regarding operations owned by the Group (Mediaset Online and network sites) and because of the activity of advertising concession carried out for third party portals (Jumpy and Excite Italia). The decrease in revenues from non-televisiontelevision operationsoperations, despite the increase (equal to ITL 8.2 billion) of Publitalia ‘80 S.p.A. revenues for fixed advertising (also due to the acquisition of new concessions in Italian stadiums and the selling of sponsors of Italian football national teams), results from the following factors: n absence in 2000 of record industry revenues, following the sale of the group’s record company RTI Music S.r.l. and of the investment in P.D.U. S.A., which took place in October 1999; in the previous year, revenues generated from these activities amounted to ITL 24.2 billion; n a decrease in revenues for the marketing of TV broadcasting equipment, following the sale to a third party of the equipment design and assembly branch of the subsidiary company Elettronica Industriale S.p.A., which took place in January 2000; last year, revenues generated from these activities amounted to ITL 21,8 billion. The share belonging to the Mediaset Group (50%) regarding the revenues of the Epsilon Group can be analysed as follows: n revenues deriving from the international sale of television rights generated by Betafilm GmbH, amounting to ITL 125.8 billion; n revenues from the sale of advertising spaces on media managed under licence or sub-licence, partly generated by Publieurope International Ltd. and revenues generated by the start of operations of Publieuros Ltd., amounting to a total of ITL 46.4 billion.

Write-offs regard services rendered and invoiced between companies belonging to the Mediaset Group and companies belonging to the Epsilon Group.

Operating costs

2000 1,948.6 The operating costs of the Mediaset Group have shown an increase of ITL 253.1 billion in 2000, compared to 1999 1,695.5 December 31, 1999; ITL 130.6 billion of which is due to % change 14.9% the effects arising from the proportional consolidation of the Epsilon Group. Net of this element, the percentage increase amounts to 7.2%. The main items in the operating costs are personnel expenses and purchases, services and other costs, which are analysed below.

Personnel expenses

12 2000 562.1 Personnel expenses of the companies belonging to the Mediaset Group, net of the share of the companies 1999 560.1 belonging to the Epsilon Group (ITL 4.2 billion) show an % change 0.4% ITL 2.2 billion decrease, due to the costs which came to an

end in 2000 regarding sold companies (record company and Elettronica Industriale S.p.A.); in comparable terms, there is a 1.5% increase in personnel expenses.

13 Purchases, services and other costs

2000 1,386.5 Purchases, services and other costs showed an increase of ITL 251.1 billion in 2000, 126.4 of which is attributable to 1999 1,135.4 the effect arising from the 50% consolidation of the % change 22.1% Epsilon Group; net of this element, the percentage

increase turns to be equal to 11.0%. This growth is mainly caused by the trend of television costs, as is shown in the following breakdown: (ITL billions)

2000 1999

Selling costs 170.3 158.7 Television scheduling costs 743.3 650.8 Broadcasting costs 68.2 55.7 Other costs 165.9 140.0 Total television costs 1,147.7 1,005.2

Multimedia costs 36.1 13.3 Other non-television costs 76.3 116.9

Purchases, services and other costs 1,260.1 1,135.4

50% Epsilon Group costs 145.4 - Write-offs (19.0) -

Total purchases, services and other costs 1,386.5 1,135.4

The increase in televisiontelevision costscosts can be mainly attributed to the increase in scheduling costs; the growth has been mainly generated by the contributions paid to SIAE (which vary according to advertising revenues) and cost elements that were not present in 1999, such as the new television licence fee (since 2000 related to the previous year’s sales of R.T.I. S.p.A.) and the production costs of domestic soap operas that in 1999 were included in depreciation, since they were purchased in the form of rights. Net of these elements, scheduling operating costs show an increase of around 5%. The increase in the costs relating to multimedia is mainly due to the start of Internet related activities (costs varying in line with advertising activities for third party portals and costs for the making of the Mediaset Online portal) and the costs for the creation of the two new theme channels distributed since April 2000.

The decrease in other non- televisiontelevision costs,costs, though in the presence of a growth in the variable costs connected to the sale of fixed advertising, was mainly generated by the sale of the record company and the Elettronica Industriale S.p.A. branch.

The share (50%) of the Epsilon Group costs pertaining to the Mediaset Group can be analysed as follows: n costs connected to the international distribution of rights paid by Betafilm GmbH, amounting to ITL 98.6 billion; this figure shows the owner’s share of the right distributed by Betafilm GmbH;

14 n advertising licence costs borne by Publieurope International Ltd. amounting to ITL 36.8 billion; n other operating costs for the companies belonging to the Epsilon Group, amounting to ITL 9.9 billion.

15 Gross Operating Margin

2000 2,627.9 The gross operating margin shows an ITL 356.5 billion increase over the previous year. Net of the effect arising 1999 2,271.4 from the 50% consolidation of the Epsilon Group, the % change 15.7% variation would amount to ITL 333.9 billion and its

percentage rate on consolidated net revenues would amount to 58.9% .

Operating Result

2000 1,338.9 The operating result of 2000 shows an increase of ITL 254.1 billion compared to 1999. 1999 1,084.7 This growth is lower in absolute terms than that of the % change 23.4% gross operating profit, mainly because of higher

amortisation rates for television rights, with respect to the higher costs borne at the beginning of the 1999/2000 season for the new Champions League. We would like to point out, however, that part of these higher amortisation rates were recovered by selling pay rights to Stream. Net of the effect arising from the 50% consolidation of the Epsilon Group, the Mediaset Group’s operating result shows an increase of ITL 247.4 billion, with a 22.8% increase; its percentage on the net revenues grows significantly, reaching the exceptional level of 30.1% (27.3% as of December 31, 1999).

Financial income/(charges)

2000 (101.5) The change to a minus sign of the balance of this item must be mainly attributed to losses connected to the 1999 36.0 value, at the year end exchange rate of currency positions billions change *** (137.5) which are mainly object of multi-annual coverage operations, to other charges from the revaluation of financial operations on securities and to the write-down of own shares held in order to have a book value in line with the market valuation.

Income/(charges)Income/(charges) fromfrom investmentsinvestments

2000 19.4 This item includes the result of equity investments and shows the economic effect of the equity valuation of 1999 4.7 Albacom S.p.A. (19.5% shareholding), of the companies billions change 14.7 operating in the Spanish television market that belong to the Telecinco Group (40% shareholding) and, since 2000, of the Mediaset Group’s share (50%) of the result of the shareholding held by the Epsilon Group in PKS (49%), a

16 holding company which indirectly holds a 16.53% share of ProSiebenSAT1MediaAG. The ITL 19.4 billion balance can be analysed as follows: n ITL 80.8 billion net income from the valuation of Telecinco (ITL 119.8 billion, which is the share of the result, and ITL 39.0 billion regarding the goodwill amortisation quota);

17 n a net ITL 49.9 billion billion for the goodwill amortisation quota); change regarding n loss cover in Blu S.p.A. as of December 31, 1999 for Albacom S.p.A. (ITL an amount of ITL 1.2 billion; 45.8 billion, which is n ITL 10.2 billion change for the equity valuation of the the share of the PKS Group, mainly due to the goodwill amortisation result, and ITL 4.2 quota.

Profit before taxation

2000 1,254.6 The growth of profit before taxation amounts to ITL 119.6 billion. 1999 1,134.9 Net of the effect arising from the 50% consolidation of the % change 10.5% Epsilon Group, the variation of 2000 compared to the

previous year amounts to ITL 127.8 billion, with an 11.3% increase, and a percentage on net revenues amounting to 28.6% .

Net profit

2000 819.9 The growth of Mediaset Group net profit amounts to ITL 163.1 billion; its percentage on net revenues rose from 1999 656.7 16.6% in 1999 to 17.9% in 2000. % change 24.9% Net of the effect arising from the 50% consolidation of the Epsilon Group, the variation of 2000 compared to the previous year amounts to ITL 180.8 billion, with a 27.5% increase. The higher percentage increase of net profit compared to profit before taxation is due to the significant reduction in the tax-rate, which fell from 42.1% to 34.6%. It is worth pointing out that the tax burden for the Mediaset Group as of December 31, 2000, benefits from a positive amount of ITL 74.1 billion attributable to the aforementioned revaluation. For a more detailed analysis of the determinants of this effect, see the following section of the Report and the Notes.

18 Balance sheet and financial position Here follows the balance sheet summary of the Mediaset Group:

Mediaset Group

Balance sheet summary 31/12/2000 31/12/1999 31/12/2000 31/12/1999

(ITL billions) (EUR millions)

Television rights 3,415.5 3,341.8 1,763.94 1,725.90

Other intangible and tangible fixed assets 871.3 770.8 449.99 398.08

Investments and other financial fixed assets 1,133.8 1,055.9 585.53 545.33

Net working capital and other current assets /liabilities (872.6) (1,131.9) (450.67) (584.58)

Provision for employee termination indemnity (164.7) (156.4) (85.06) (80.77)

Net invested capital 4,383.3 3,880.2 2,263.73 2,003.96

Net financial position 242.7 339.9 125.32 175.54

Net Group shareholders' equity and attributable to minority interests 4,626.0 4,220.1 2,389.15 2,179.50

The effects arising from the proportional consolidation (50%) of the Epsilon Group are highlighted below:

Mediaset Group - effects arising from the consolidation of the Epsilon Group

31/12/2000 31/12/1999 31/12/2000 31/12/1999

(ITL billions) (EUR millions)

Television rights 27.0 - 13.94 - Other intangible and tangible fixed assets 110.3 - 56.97 -

Investments and other financial fixed assets (121.5) - (62.75) - Net working capital and other current assets/liabilities (42.0) - (21.69) - Provision for employee termination indemnity - - - -

Net invested capital (26.2) - (13.53) -

Net financial position 8.4 - 4.34 - Net Group shareholders' equity and attributable to minority interests (17.8) - (9.19) -

19 For a comparable analysis of the year 2000 with 1999, the balance sheet and the cash flow of the Mediaset Group net of the effects arising from the 50% consolidation of the Epsilon Group are given below:

Mediaset Group net of the effects arising from the consolidation of the Epsilon Group

Balance sheet summary 31/12/2000 31/12/1999 31/12/2000 31/12/1999

(ITL billions) (EUR millions)

Television rights 3,388.5 3,341.8 1,749.99 1,725.90 Other intangible and tangible fixed assets 761.0 770.8 393.03 398.08 Investments and other financial fixed assets 1,255.3 1,055.9 648.28 545.33 Net working capital and other current assets /liabilities (830.6) (1,131.9) (428.97) (584.58) Provision for employee termination indemnity (164.7) (156.4) (85.06) (80.77)

Net invested capital 4,409.5 3,880.2 2,277.27 2,003.96

Net financial position 234.3 339.9 120.98 175.54

4,643.8 4,220.1 2,398.33 2,179.50 Net Group shareholders' equity and attributable to minority interests

Sources and applications 31/12/2000 31/12/1999 31/12/2000 31/12/1999

(ITL billions) (EUR millions)

Cash flow from operations 2,211.9 1,840.3 1,142.35 950.44

Total investments incl.: (1,547.7) (2,681.6) (799.32) (1,384.92) television rights (1,171.8) (1,806.2) (605.18) (932.82) equity investments (225.9) (763.4) (116.67) (394.26) intangible fixed assets (28.0) (31.8) (14.46) (16.42) tangible fixed assets (122.0) (80.2) (63.01) (41.42)

Share capital increases 5.2 3.8 2.69 1.96

Dividends paid (418.6) (323.5) (216.19) (167.07)

Other changes affecting cash flow (356.4) 817.4 (184.09) 422.15

Net cash flow (105.6) (343.6) (54.56) (177.44)

Below are comments to the main items and the variations to December 31, 1999. The analysis refers to Mediaset Group including, in 2000, the share of results pertaining to Epsilon Group.

Net invested capital

31/12/2000 4,383.3 The most significant element of the invested capital of the Mediaset Group is televisiontelevision rightsrights, which shows an 31/12/1999 3,880.2 increase of ITL 73.7 billion over December 31, 1999. billions change 503.1 The increase of other tangible and intangible fixed assets amounts to ITL 100.5 billion and mainly refers to the net consolidation differences generated following the consolidation of the Epsilon Group. InvestmentsInvestments anand other financial fixed assets rise by ITL 77.9 billion over December 31, 1999 due to the following main variations:

20 n ITL 32.9 billion net decrease due to the equity valuations of Telecinco, Albacom and Pks;

21 n equity investments n ITL 380 billion decrease due to the proportional amounting to ITL consolidation of the shareholding in Euroset S.a.r.l., 225.9 billion mainly consolidated at cost at December 31, 1999 (the regarding the capital shareholding value was replaced by the single balance increases in Blu S.p.A. sheet items of the subsidiary companies); (ITL 108 billion) and n ITL 268.6 billion increase due to the proportional Albacom S.p.A. (ITL consolidation of the shareholdings of the Epsilon 99.6 billion) and the Group valued at equity (PKS) and at cost (New subscribing of the Regency). 11.8% stake in The reduction in working capital and other current assets Euromedia and liabilities regards the decrease in commercial debts Luxembourg Two with respect to the for the payment of S.p.A. (ITL 10.5 Champions League the year 2000 tranche, with the multiannual debt billion); accounting which took place in 1999, and the reduction of n sale of Fivefactor net tax payables. S.p.A. (ITL 2.1 billion);

Group’s Shareholders’ and third Shareholders’ equity

31/12/2000 4,626.0 The Group’s shareholders’ equity, net of the effect deriving from the 50% consolidation of the Epsilon Group 31/12/1999 4,220.1 amounts to ITL 4,643.8 billion. The increase over billions change 405.9 December 31, 1999 can be attributed to the gross profit for 2000 net of dividends paid.

Net financial position

31/12/2000 242.7 The level of liquid funds net of the effect arising from the 50% consolidation of the Epsilon Group, amounts to ITL 31/12/1999 339.9 234.3 billion; the decrease over the previous year (equal billions change (97.2) to ITL 105.5 billion), though with a considerable cash flow generated by current operations, mainly relates to expenses borne for equity investments, amounting to around ITL 200 billion.

RESULTS OF THE PARENT COMPANY MEDIASET S .P.A..P.A.

Mediaset S.p.A. earned a net profit of ITL 618.8 billion in 2000, after amortisation, depreciation and write-downs of ITL 599.2 billion and a tax provision of ITL 302.6 billion. Operating revenues decreased by ITL 168.2 billion, mainly due to the reduction in the marketing of television rights which, starting with 1999, has become the province of Mediatrade S.p.A. and has determined a constant reduction in the qualitative and quantitative composition of the company’s library. Operating costs also decreased, falling from ITL 902,1 billion in 1999 to ITL 691.5 billion in 2000; this reduction is mainly connected to the notable reduction in the value of amortisation, depreciation and write-downs (- ITL 185.4 billion), and the reduction

22 in goods and services purchased (- ITL 8.7 billion), personnel expenses (- ITL 6.5 billion) and other operating costs (- ITL 9.2 billion) mainly due to the progressive transfer of operations to subsidiary companies in the Commercial Television division, following the reorganisation of the Group. The greater reduction in operating costs compared to that of operating revenues generated a significant positive variation in the operating profit which rose from ITL 85.3 billion in 1999 to ITL 127.7 billion in 2000, and showed an ITL 42.4 billion increase. However, the increase in financialfinancial incomeincome has mostly affected the increase in net profit for the year. It rose from ITL 267.4 billion in 1999 to ITL 794.3 billion in 2000, benefited during the year from the large dividends paid by subsidiary and affiliated companies (ITL 625.9 billion in 2000, compared to ITL 173.1 billion in 1999), opposed to an increase in other financial charges equal to ITL 77.4 billion, due to the write- down of own shares held and of other charges in the valuation of existing financial operations on securities at the end of the year. The result of the extraordinary management showed a decrease and fell from ITL 24.2 billion in 1999 to negative ITL 0.6 billion in 2000; in 1999 the economic benefit connected to deferred tax assets regarding previous years until 1998 had been included in the statements, which had been calculated according to accounting standard no. 25. The significant growth in investment income and the simultaneous reduction in operating costs determined a growth of profit before taxation amounting to ITL 544.5 billion.

The taxtax raterate is equal to 32.8%, basically unchanged with respect to that of the previous year.

In terms of the balance sheet, the net invested capital amounted to ITL 3,350.6 billion as of December 31, 2000, versus ITL 3,798.3 billion as of December 31, 1999; the most significant share of net invested capital is represented by equity investments and financial fixed assets, which amounted to ITL 1,942.2 billion; the item television rights decreased sharply (- ITL 467.4 billion) due to the above mentioned reduction in the management of television rights. Net shareholders’ equity rose from ITL 3,333.2 billion to ITL 3,538.7 billion; the ITL 205.5 billion increase is mainly attributable to the positive balance between the net profit for the year of ITL 618.8 billion and dividends paid for ITL 418.6 billion.

The net financial position, negative for ITL 465.1 billion as of December 31, 1999, showed a positive balance of ITL 188.1 billion as of December 31, 2000; the significant increase (+653,2 ) is to be mainly correlated to the dividends paid by subsidiary and affiliated companies.

INVESTMENTSINVESTMENTS ININ SUBSISUBSIDIARY AND AFFILIATED COMPANIESCOMPANIES n Within the process of rationalisation of core business activities, we point out the following:

23 – on January 25, 2000 the General meeting of Picienne Italia S.p.A. approved the final financial statements for the company liquidation; the paid-up capital was given back to the shareholders, according to the relevant shares; – on February 18, 2000 the company Elettronica Industriale S.p.A., 100% subsidiary of R.T.I. S.p.A., acquired, for ITL 300 million, a 30% stake in the company Digital Multimedia Technologies – DMT S.r.l. (now S.p.A.), the company to which on January 1, 2000 it had sold the company branch, including 113 employees, regarding the design and assembly of television broadcasting equipment. Elettronica Industriale S.p.A. retains the design and maintenance activities of the signal broadcasting network as well as the acquisition activity, on behalf of R.T.I. S.p.A., of the systems necessary to guarantee the development of the network. Within this operation, DMT’s majority shareholder had been given a right of option for the repurchase of the stake above, to be exercised upon the full payment of the purchase price of the branch. On November 8, 2000, DMT’s majority shareholder made the payment of this amount (ITL 14.2 billion) to Elettronica Industriale S.p.A., and simultaneously exercised the right of option above for an amount equal to that originally paid by Elettronica Industriale S.p.A.; – on March 8, 2000 the parent company Mediaset Group S.p.A. sold to a third party its 10% stake in the company Fivefactor S.p.A.; – on April 28, 2000 the company Mediaset Investment S.a.r.l. took part in the establishment of the company TV Breizh S.A. by subscribing a 13% stake of the share capital for ITL 3.8 billion. The company, whose main shareholders are the TF1, Artemis and News International Groups, will set up a Breton regional television channel to be distributed on the main satellite and cable French platforms; – on June 30, 2000 the subsidiary company Mediaset Investment S.a.r.l. cancelled its stake in RTI Music Espana S.A., following the liquidation of the company; – on July 25, 2000 the subsidiary company Mediaset Investment S.a.r.l. joined the EuroMedia Venture Fund by subscribing a 11.8% stake in EuroMedia Luxembourg Two S.A. capital, for an overall amount of USD. 5,000,000; – on November 3, 2000 Mediaset S.p.A. subscribed a 24% share, for EUR 1.2 million (ITL 2.3 billion), of Veleno S.p.A., a company owned by Medusa S.p.A. (24%), Arnoldo Mondadori S.p.A. (24%), Newmedia Investment S.A. (24%) and the company management (4%). The company has an initial share capital of EUR 4.9 million, and it will develop and manage new formats and copyrights in order to foster the implementation of publishing projects to be distributed on different media, with the contribution of the main creative talents belonging to the shareholders; – on December 20, 2000 Mediaset Investment S.a.r.l. set up the company Epsilon Tv Production S.r.l., with head office in Milan and wholly paid-up share capital of EUR 10,000. This company, which Kirch Media is expected to join with a 50%

24 stake, will develop the production and co-production of television contents on an international basis. n The following operations concern the area of activities connected to telecommunicationstelecommunications: – on April 7, 2000 the shareholders of Blu S.p.A. deliberated upon and subscribed a capital increase from ITL 300 to 1,500 billion. As of December 31, 2000, 5 tenths of this increase had been paid; ITL 54 billion was paid of the quota pertaining to Mediaset Investment S.a.r.l., equal to ITL 108 billion; – on July 26, 2000 and December 21, 2000, the Extraordinary Meeting of Albacom S.p.A. Shareholders, deliberated under article 2446 of the Italian Civil Code, the total coverage of the losses accrued by the Parent Company as at March 31, 2000 (ITL 280.5 billion) and as at October 31, 2000 (ITL 230.1 billion) by means of a reduction – by an equal amount – of the share capital (net of the use of the legal reserve for ITL 174 million) and the subsequent replacement of the share capital for the same amount. These capital increases were subscribed and paid by Mediaset S.p.A. in proportion to its share, for an overall amount of ITL 99.6 billion. n As to multimedia activities, the following company operations regarded Mediadigit S.r.l.: – on January 14, 2000 the parent company Mediaset Investment S.a.r.l. subscribed a capital increase from ITL 20 million to ITL 20 billion (ITL 11 billion have been paid) mainly aimed at the purchase, by Mediadigit S.r.l. from R.T.I. S.p.A., of the branch involved in the activities of the theme channel Happy Channel and the Mediaset Online Internet site; – on January 25, 2000 Mediadigit S.r.l. subscribed a 10% shareholding in the company Class Financial Network S.p.A., for ITL 600 million. Class Financial Network S.p.A., which includes Class Editori S.p.A., produces CFN, a theme channel devoted to economic and financial newsn distributed by Stream since April 2000. Following the subsequent participation of new shareholders, at December 31, 2000 CFN shareholders are the following: Class Editori S.p.A. 52.8%, Mediadigit S.r.l. 9.9%, Newmedia Investment S.A. 9.0%, Mediolanum Comunicazione S.r.l. 2.5%, other shareholders represented by significant banks and financial institutions 25.8%.

OTHER OPERATIONS

Employee Stock Plan

25 1,181,227,564,000, was carried out by means of a capital increase amounting to ITL 151.7 million, by means of the issue of 151,700 ordinary shares with a par value of ITL 1,000 each at a price of ITL 34,431, and a bonus issue of ITL 754.9 million, by means of the issue of 754,900 ordinary shares through the use of the profit for the year 1999. With the latter operation, the Employee Stock Plan established by the General Meeting of April 30, 1998 for a duration of three years, came to a conclusion.

2000/2002 Stock Optionion PlanPlan The General Meeting held on April 20, 2000, after noting the value in providing the company with an instrument that stimulates and brings about the loyalty of employees, with the aim of focusing their commitment towards the achievement of strategic objectives, like the previous 1997/1999 Employee Stock Plan, decided to promote the implementation of a Stock Option Plan in order to encourage the loyalty of participants to the Plan and have them share the responsibility of the Group management and improvement. The Meeting above approved the establishment of a Stock Option Plan on the company own shares, for employees of the company, of subsidiary companies and of the parent company selected by the Stock Option Plan Committee from among managers, journalists and department managers (or other company positions) who carry out functions of importance for achieving the Group’s strategic results, for the duration of three years, and also, if considered appropriate by the Board of Directors, to start similar projects on shares of subsidiary companies or companies where the company directly or indirectly holds stakes. In 2000, the Stock Option Plan Committee selected140 participants for the Plan and assigned rights of option to them for the purchase of company ordinary shares totalling 585,000 shares. The exercise of the options assigned is subject to the achievement of the performance indicators established by the committee and is exclusively allowed in one single time between January 1 of the third year and June 30 of the fourth year of calendar following the year of the assignation date.

New Organisation chart On May 4, 2000 the Board of Directors of Mediaset S.p.A., appointed by the General Meeting on April 20, 2000, approved the appointments, positions and power delegations. The new organisation at the top of the Mediaset Group envisages, under Chairman Fedele Confalonieri, who holds all the ordinary and extraordinary administration powers, the establishment of the position of Deputy Chairman, assigned to Pier Silvio Berlusconi. The Board appointed Mr. Giuliano Adreani as Managing Director, and he is also in change of the coordination of Management -Italy, in order to ensure the necessary synergies and integrations between the companies R.T.I. S.p.A. and Publitalia ‘80 S.p.A.

Euro Project In the Mediaset Group the Euro Project was started in 1998, by means of the establishment of the Group Euro Committee, which had approved a preliminary planning of short-term solutions (contingency plan).

26 In 1999, an explanatory book titled “Pensare“Pensare inin Euro”Euro” (Thinking in Euro) was prepared and distributed to all employees, and the master plan was completed and approved, with the objective to adopt the Euro as unit of account starting from 2001. In the year 2000, the Euro Committee approved and distributed a document called: “Progetto“Progetto EuroEuro didi GruppoGruppo - lineelinee guidaguida perper lala transizionetransizione all’Euro”all’Euro” (Group Euro Project – guidelines for the transition to the Euro) including reference criteria and principles for the implementation of the Euro Project. In all Group sections, operating projects have been started for the transition to the Euro, with the following objectives: n adoption of Euro in corporate accounting and in the sub-systems, in line with legal limits and taking advantage of business opportunities; n adjustment of IT systems and promotion of appropriate measures for the change of company procedures; n training of in-house personnel. The structure of the Euro Project envisages the adjustment of the SAP accounting system and other holding systems and processes at Group level, as well as the adjustment of vertical systems and processes of the advertising, broadcasting and contents areas. The working plans include the following main intermediate objectives: since January 2001, active invoicing systems in the advertising area have been converted into Euro; the conversion into Euro of the Group’s accounting system is expected to take place in May 2001; the main sub-systems of the broadcasting and contents areas will be converted into Euro in the last four months of 2001. The costs of extraordinary maintenance for the adjustment of IT systems have been estimated on the whole in ITL 7.1 billion.

Write- up of corporate assets In late 2000, Parliament approved Act 342 dated November 21, 2000 (the so called tax annex to the 2000 Budget) which envisages, among other things, that joint-stock companies have the faculty to write-up their assets (tangible, intangible and investments in subsidiary or affiliated companies) for an amount not exceeding their “current value”; the write-up means a charge, since a 19% substitute tax for assets subject to amortisation or depreciation has to be paid on its amount. Mediaset Group exercised this faculty solely for intangible assets represented by Canale 5, Italia 1 and Retequattro brands belonging to the company R.T.I. S.p.A. The write-up was carried out for an overall amount of ITL 355 billion, determined on the base of an appropriate certified assessment. In 2000, a substitute tax must be paid on this amount for ITL 67.4 billion. In consideration of the fact that within the Mediaset Group the exercise of this faculty is a one-off event, the Consolidated Financial Statements as of December 31, 2000 do not record its effects in terms of a higher value of fixed assets and the relevant

27 amortisation quota. This way, a comparable application of accounting standards is maintained, and statements can be compared over time. The effect on the Consolidated Financial Statements of the Mediaset Group is therefore given only by the whole amount of tax savings, net of the substitute tax to be paid in 2000, enjoyed by the company R.T.I. S.p.A. for the residual amortisation period of the asset subject to write-up, calculated on an accruals basis for the year when the write- up has been made. The Consolidated Financial Statements therefore include in the income statement the substitute tax accounted for in R.T.I. S.p.A. financial statements as a reduction of the revaluation reserve, thus acknowledging by means of an economic amount, a deferred tax asset equal to the benefit related to the higher amortisation quotas to be deducted. The overall amount of this benefit on the consolidated profit for the year amounts to ITL 74 billion.

28 STRUCTURE AND OPERATIONSIONS OFOF THETHE MEDIASETMEDIASET GROUPGROUP

The Mediaset Group’s operations are organised as follows:

MEDIASET GROUP

COMMERCIAL TELEVISION MULTIMEDIA/TLC

Italy International

Advertising Broadcasting and contents Epsilon Group Multimedia

- Publitalia '80 S.p.A. - R.T.I. S.p.A. - Publieuros Ltd. - Mediadigit S.r.l. - Promoservice Italia S.r.l. - Mediatrade S.p.A. - Publieurope International Ltd. - Videotime S.p.A. - E.T.N. S.a.r.l. Telecommunications - Elettronica Industriale S.p.A. - Betafilm GmbH - Albacom S.p.A. - RTI Music S.r.l. - Blu S.p.A. Telecinco Group

- Telecinco S.A. - Publiespana S.A.

Commercial Television – Italy:Italy: adveradvertising division A substantial portion of the Mediaset Group’s revenues are generated from the sale of television advertising on Mediaset networks, over which Publitalia ‘80 S.p.A. has exclusive rights. The following is a breakdown of Publitalia ’80 S.p.A.’s revenues:

(ITL billions)

2000 1999

Advertising sales 4,690.5 4,192.0

Advertising sales to Fininvest Group and Mediolanum Group 76.6 53.9 Advertising sales to Promoservice 9.1 10.6

Advertising sales to other Group companies - 1.5

Advertising sales Publitalia '80 S.p.A. 4,776.2 4,258.0

Again in 2000 Publitalia ‘80 S.p.A. confirmed itself as market leader with television advertising revenues of ITL 4,776.2 billion which, compared to ITL 4,258.0 billion of 1999, represent an increase of ITL 518.2 billion (+12.2%); this result was mainly obtained by means of a careful pricing policy and an increasingly effective placement of advertisements.

29 The following table summarises advertising revenues in the so called traditional area for 2000, compared to 1999:

(source: Nielsen Adex – net figures)

Media 2000 1999 Change

ITL billions % ITL billions % %

Newspapers 3,289 22.4% 2,783 22.1% 18.2%

Magazines 2,314 15.7% 2,038 16.1% 13.5%

Television (*) 7,928 53.8% 6,969 55.2% 13.8%

Radio 700 4.7% 528 4.2% 32.6%

Posters and billboards 387 2.6% 304 2.4% 27.3%

Cinema 123 0.8% - 0.0% 0.0% Total market 14,741 100.0% 12,622 100.0% 16.8%

(*) Television at '99 homogeneous values 7,830 6,969 12.4%

The advertising market grew again considerably in 2000; based on the estimates provided by Nielsen, overall advertising revenues amounted to ITL 14,741 billion with a 16.8% increase over the previous year; with equal analysed media, the increase amounted to 14.5%.

All traditional area media show considerable increases.

As to television, with ITL 7,928 billion revenues, it is worth pointing out that MTV advertising revenues are taken into consideration for the first time in 2000; net of these, comparable growth over the same period in 1999 amounts to 12.4% . The increase by Publitalia ’80, estimated by Nielsen at 12.6%, is higher than that of Rai (+0.6%), though the latter benefited from the broadcasting of two extraordinary events such as the European Football Championships in June 2000 and the Olympics in September 2000.

The high percentage growth of the radio (+32.6%) was fostered by the large increase achieved in commercial radios; this situation is not only the result of the actual recovery of this medium, but also of the inclusion of new networks in the sample (Rai Radio 3, Radio Capital, One-o-One Network and Radio 24).

The good result of the press (+16.2%), achieved thanks to a large increase in spaces, was affected by both the growth of newspapers (+18.2%) and of magazines (+13.5%).

Among advertising investors, the highest growth is to be found in the aggregate telecommunications and IT; the aggregate finance and insurance is also growing. Traditional industries (mass consumption and auto) remain however two irreplaceable pillars in Italian advertising. Publitalia ‘80 also has exclusive rights for the selling of advertising regarding the Mediaset Group Internet activities (Mediaset Online and third party sites) and since the beginning of 2000 of Jumpy, the horizontal portal of the Fininvest Group. This activity generated overall revenues of about ITL 23 billion in 2000.

30 InternationalInternational AdvertisingAdvertising The Mediaset Group’s international advertising activities have been carried out since 2000 by the European Joint-venture Epsilon, the companies Publieuros Ltd. and Publieurope International Ltd. Publieuros Ltd., established in 1999, started in early 2000 promotion and marketing activities with a view to keeping a check on the advertising investment strategies of the leading European multinationals. Publieurope International Ltd. plays the role of advertising sub-agent and sells space on behalf of national agencies. The results generated by these operations in the year 2000 are shown in summary form in the section devoted to the Epsilon Group.

Commercial Television – Italy:Italy: broadcastingbroadcasting andand contentscontents divisiondivision The Broadcasting and contents division belongs to R.T.I. S.p.A. which, directly or by means of subsidiary companies, controls the following areas ofas at activity: n management of television networks and programme scheduling n production of television programmes n technology for the production of television programmes n acquisition and management of television rights n management of the signal broadcasting network n record publishing.

31 Management of television networks and programme scheduling In 2000, each network broadcast 8,784 hours of programmes each for a total amount of 26,352 hours, including 11,880 hours of original programmes produced in-house. The following table provides a breakdown of the programmes broadcast during the year by network and programme type, and divided between original productions and television rights purchased:

Type Canale 5 Italia 1 Retequattro Mediaset total

Film 585 6.7% 1,057 12.0% 2,945 33.5% 4,587 17.4%

Tv Movie 675 7.7% 267 3.0% 174 2.0% 1,116 4.2%

Mini-series 99 1.1% 24 0.3% 68 0.8% 191 0.7%

TV series 1,296 14.8% 2,429 27.7% 506 5.8% 4,231 16.1%

Sit-com 291 3.3% 754 8.6% - 0.0% 1,045 4.0%

Soap 133 1.5% - 0.0% 440 5.0% 573 2.2%

Telenovelas 2 0.0% - 0.0% 1,115 12.7% 1,117 4.2%

Cartoons 78 0.9% 1,534 17.5% - 0.0% 1,612 6.1%

Total rights 3,159 36.0% 6,065 69.0% 5,248 59.7% 14,472 54.9%

News 2,422 27.6% 476 5.4% 1,021 11.6% 3,919 14.9%

Sport 46 0.5% 547 6.2% 61 0.7% 654 2.5%

Entertainment: 2,748 31.3% 1,640 18.7% 1,850 21.1% 6,238 23.7%

light entertainment 979 11.1% 545 6.2% 244 2.8% 1,768 6.7%

talk show 915 10.4% 30 0.3% 2 0.0% 947 3.6%

music 52 0.6% 266 3.0% 156 1.8% 474 1.8%

quiz-game-show 345 3.9% 496 5.6% 382 4.3% 1,223 4.6%

reality 182 2.1% 135 1.5% 22 0.3% 339 1.3%

soft news 275 3.1% 168 1.9% 1,044 11.9% 1,487 5.6%

Culture: 155 1.8% 16 0.2% 307 3.5% 478 1.8%

cultural programmes 151 1.7% 1 0.0% 273 3.1% 425 1.6%

documentaries 1 0.0% 15 0.2% 34 0.4% 50 0.2%

theatre 3 0.0% - 0.0% - 0.0% 3 0.0%

Soap 132 1.5% 0.0% 0.0% 132 0.5%

Teleselling 122 1.4% 40 0.5% 297 3.4% 459 1.7%

Total productions 5,625 64.0% 2,719 31.0% 3,536 40.3% 11,880 45.1%

Total 8,784 100.0% 8,784 100.0% 8,784 100.0% 26,352 100.0%

In 2000, Mediaset achieved an average audience share of 43.4%, which represents the highest level since 1995. This result combines the very fine performances of both Day Time (+0.9 share points), and Prime Time (+0.5). Though this year’s results were affected by extremely significant sports events like the European Football Championships and the Olympics (both broadcast by Rai), Mediaset recorded one percentage point up on 1999, gaining audience from Rai, and minor channels.

32 Results obtained in the last months of the year are even better: in October, Mediaset networks achieved an overall 45.3%, only 0.4 share points below Rai; in both November and December, Mediaset networks outperformed their direct competitor, and maintained an audience share over 45%.

Change Full Day 2000 1999 over 1999

43.4% 42.6% 0.8% Mediaset Networks

RAI Networks 47.3% 47.6% -0.3%

Other 9.3% 9.8% -0.5%

Total 100.0% 100.0%

The viewing figures of each of the Mediaset networks are analysed below. Prime Time audience data refer to the 20:30-22:30 time bracket.

Canale 5 2000 was an exceptional year for Canale 5 which, over the 24 hours, gained no less than 1.3 points over 1999, and obtained an average share of 22.5%, the highest in the last 14 years. The network’s success was evenly distributed throughout the year: n in January, a growth of 1.5 share points over 1999 was recorded, and the distance from Rai 1 was reduced to a few share decimal points; n in Spring, Canale 5 managed to catch up with the main state network (22.4% vs. 22.6%), thanks to an astonishing 2 point increase over the previous year; n Canale 5 performed well during the European Football Championships (in spite of the fact that the Italian national team reached the final), keeping a level of 19.3% (vs. 19.9% during the 1996 championships, when however our national team had been eliminated in the quarter finals); n in Autumn, then, it clearly became the main Italian network: in October, it was the leading network with a 24.4% share (vs. 23.2% of Rai 1) and further strengthened its position in the two following months achieving, on a 24 hour basis, 25.7%.

Change Canale 5 - Total share 2000 1999 over 1999

22.5% 21.2% 1.3% Full day

22.5% 21.2% 1.3% Day Time

Prime Time 22.5% 21.3% 1.2%

As the table shows, the share increase is evenly distributed throughout the day, and Canale 5 has become the favourite network for the 15 - 64 years age target. Here follow the detailed results of the various times:

33 n in Day Time, Canale 5 achieved record audiences and obtained (with 22.5%) its highest result since 1987. The network’s results were achieved thanks to a large number of its programmes, showing a strong schedule both during the week and at week-ends. In Autumn, Canale 5 represented the main audience choice thanks to the day section of Grande Fratello (Big Brother), and managed to conquer a significant space in this difficult time: the reality show obtained 19.2%, which was the highest level achieved by a production in the last four years. In early afternoon, the Beautiful/Vivere double bill ensures maximum visibility to the network: the American soap recorded 34.0% (equal to 5.9 million viewers); in its wake, Vivere is winning new hearts at a level of 31.2% (vs. 25.5% in 1999). In early evening the network’s programmes were so successful that it was possible to halve last-year’s distance from Rai 1. At 18:30, the daily programme with Grande Fratello became the hinge for the whole scheduling: this production achieved excellent audience shares (above 30% share on average), and attracted to Canale 5 nearly 50% of viewers aged 15 to 34. It was followed by the game of the year Chi vuol essere miliardario, which proved to be unbeatable: it clearly won the duel with In bocca al lupo! (34.6% vs. 22.6%) and kept ranking first also against its “copy” Quiz show (29.3% vs. 26.6%). Also well established productions did very well: the audience of Verissimo was excellent (25.5%), like that of Passaparola, which rose from 23.4% in the first six months to 26.0% in the last months of the year. Canale 5 has become the main reference point for the viewer also during Sunday afternoons thanks to Buona domenica, which reached its top success in Autumn: it defeated Domenica in (29.6% vs. 23.3%), and its first part achieved 29.8% and outperformed for the first time and for seven Sundays, Quelli che il calcio…; the second part reached an extraordinary 29.0%. Grande Fratello was the leader between the two parts (29,6%).

Late in the evening, Maurizio Costanzo show with 23.4% gained 1.5 points over the same period of the previous year. n In Prime Time, Canale 5 reached 22.5% (the best result in the last 13 years), and became the network of choice for children and viewers aged 15 to 64. There are positive results for all product types. Among productions, the new programme Grande Fratello achieved an outstanding 34.2%, showing a sharply growing trend (from 21.4% at the beginning to 50.3% for the last show). In general terms, Prime Time programmes performed very well, and often turned out to be the winners of the night: from the seventh series of Paperissima (30.8%), continually beating Commissario Rex in Autumn, to Ciao Darwin 3 (26.8%), which notably bridged the gap with Carramba, to C’è posta per te that did very well in all its different positions (from 22.7% on Wednesdays, to 25.6% on Fridays, up to 25.8% on Sundays).

34 Good results were also achieved by the new series of Il grande bluff , Bufffoni and Chi ha incastrato Peter pan, all with shares between 24.5% and 26.0%. Last but not least, Striscia la notizia with 30.5% share confirmed to be a top product, which always leads a high number of viewers into the rest of the evening. As to films shown, among all the ones that we have broadcast, a special mention goes to Tre uomini e una gamba (36.7%), the most watched film of 2000. A few first showings however recorded very good results: Scambio di identità (28.8%), L’eliminatore (27.9%), Sliding Doors (27.0%), The Jackal (26.7%), Vulcano (26.4%) and The Peacemaker (26.0%). Italian dramas provided a good contribution, with a large number of genres. Among them, the television event Padre Pio with 36.9% (the second part obtained 39.7% and almost 11.2 million viewers); very good levels were also reached by Le ali della vita with Sabrina Ferilli (27.7%), the police shows Operazione Odissea (26.3%) and Distretto di Polizia (23.0%, with a growing trend up to 26.5% of the last show) and Valeria Medico Legale (23.7%). It is also worth mentioning sports, with the first showing of the Italian Under 21 National Team on the Mediaset networks: the two matches of the finals of the European Championship in this category, broadcast by Canale 5 recorded an average share of 28.1%, with the final at 34.3%.

Change Italia 1 - Total share 2000 1999 over 1999

Full day 11.3% 11.5% -0.2%

Day Time 11.2% 11.3% -0.1%

Prime Time 11.7% 12.0% -0.3%

The very good health of this network is proved by the full day data regarding its target audience: n with a 26.5% share (almost 3 points more than in 1999) it strengthened its leadership on children aged 4 to 14, effectively countering Rai 2 programmes in Autumn; n with a 15.0% share it ranked third again with respect to young-adult audience aged 15 to 44, without being affected by Canale 5’s growth on the same target (in 2000 the two Mediaset networks together reached an excellent 42.0% share on this target). More in detail:

35 n in Day Time Italia 1 remained at the same values of last year, enjoying the good results guaranteed by library rights broadcasting.

In the morning, thanks to a careful use of the library (with titles such as A team, Chips, Supercar and Mac Gyver) Italia 1 reached 12.4% between 9:00 and 12:00, improving previous year’s data (+0.4). In the afternoon, the network’s strength is based on cartoons: I Simpson close at 16.4%, Dragon Ball reaches a significant 15.7% (a good 4 share points more than 1999), while the new Futurama rapidly won the hearts of the audience (15.4%). However, the real event of the year is Pokemon (17.1%), able to attract the public’s attention thanks to an astonishing growth which went from 12.6% in January to an extraordinary 27.4% in the first week of June. In Autumn, they absolutely won the battle against the “clone” Digimon broadcast by Rai 2 (15.7% vs. 11.4%). Pokemon guarantees visibility also to the other programmes shown in Bim Bum Bam (16.2%), making it possible for this programme to gain more ground: in the first part of the year it smashed its historical competitor Solletico (16.1% vs. 10.4%); in July and August, when it was the only children’s programme, it reached 20.0%; in Autumn it clearly won the battle with the new Rai 2 programme WWW rai2 boys and girls (15.3% vs. 10.7%). The afternoon series performed well, too: in early 2000, Xena closed at 16.0%; in the summer months, Baywatch received its legacy and obtained 15.1%. Pacific Blue did 12.5%, standing the battle with extremely strong Chi vuol essere miliardario. As to productions, there was a satisfactory result with Bigodini, the new lunch-time game: in spite of the difficult competitive situation (dominated by the news and Beautiful) the new production managed to gain ground and closed at 8.8%. A special mention is to be given to Sarabanda: constantly growing in the first months of the year (from 11.9% in January to 17.1% in May), with an average 13.6% it gained three points over 1999 and provided a final contribution to the Prime Time result of the network. Late at night, Italia 1 successfully relied on the humour and irreverent spirit of well established productions: Mai dire gol (14.0%), Le Iene (16.4%) and Zelig (14.7%). In Autumn, the desecrating satire of Gialappa’s with Mai dire Grande Fratello obtained exceptional results, achieving the same audience as Le iene (over 2 million viewers) in a usually depressed slot: the programme reached 28.3%, with over 50% of share among people between 15 and 34 years of age. We would also like to mention a few film series that were successfully broadcast late at night in Summer: specifically Notte Horror on Tuesdays (15.9% on average with peaks at 20.0%), Vacanze e risate on Fridays (12.2%) and Cult on Saturdays (12.0%). n In Prime Time, films shown improved last year’s data and achieved an average share of 11.9%. Audience peaks were reached by Space Jam (20.3%), Grease (19.0%), Arma Letale3, Anaconda and Nome in codice: Broken Arrow (all above 17.0%).

36 As to productions, very good results were achieved in Spring by Angeli (13.8%) and Tempi moderni (12.7%), in Autumn by Il brutto anatroccolo (12.1%). Among new programmes, there are Candid angels on Wednesdays (12.3%) and Strano ma vero on Thursdays (11.8%). The strength of the historical music event Festivalbar was confirmed. It was the only summer production and closed at 15.7% (touching on many occasions 18.0%). Specials performed very well, too: Galà della pubblicità at 19.5% and Sarabanda il match at 20.4%. In 2000, the network was strongly based on series (114 nights compared to 74 in the previous year, +52%) carefully balancing historic titles and new series.

On Saturdays, in a difficult competitive situation, Walker Texas Ranger achieved 10.3% thus confirming last year’s data; on Sundays, X Files was first broadcast alone (with a very good 10.2% against Un medico in famiglia) and then together with the new series Buffy (and the two series achieved 11.0%). Among new series, Dawson’s Creek did very well (10.6%): after a slow start, it progressively gained ground among young viewers (35.5% share of young women aged between 15 and 24).

In Summer, on Fridays, a significant 12.2% marked the debut of Gli specialisti. In Autumn, the network’s schedule became richer with the drama Tequila e Bonetti (11.5%). Football performed excellently, in particular Champions League matches: the number of broadcast games has doubled (11 compared to 6 in the previous year) and their average share was 17.7%.

Retequattro

Change Retequattro - Total share 2000 1999 over 1999

9.6% 9.9% -0.3% Full day

10.1% 10.4% -0.3% Day Time

Prime Time 7.9% 8.3% -0.4%

Over the full day, the network has been affected on the one hand by a not very good performance at year’s beginning, and on the other hand by Rai 3 programmes, which had exclusive rights over the Olympics. In the last quarter, however, Retequattro gained ground in all the times, showing new vitality. However, our network stays clearly ahead of Rai 3 and remained highly attractive for adult viewers, always ranking fourth for people over 45 years of age. In particular: n in Day Time Retequattro was also this year above a viewing level of 10.0%. All the main productions performed in a satisfactory way.

37 At lunch, Forum did not show any sign of weakness: it closed at 18.7%, a very good level bearing in mind that since September this programme had to face not only Rai 1 and Rai 2 programmes, but also the very strong offer of Canale 5 (with the couple Ultime dal cielo and Grande Fratello). Early in the afternoon, La ruota della fortuna with 10.9% gained viewers in spite of Vivere’s growth on Canale 5, while at 18:00 O.K. il prezzo è giusto (9.0%) remained at last year’s levels, thanks to a renewed attention shown by adult viewers over 35 years of age. Saturday productions were all well above the network’s average: in the first months of the year Chi c’è c’è achieved 14.5%, Sabato Vip conquered 14.1% and Il trucco c’è 13.7% (vs. 9.8% of its first showing in Autumn 1999). These two shows were particularly appreciated by adult women, and in Autumn were both over 21.5% of the share on women aged over 45. The new Storie di medici e di pazienti reached 9.4% peaking above 11.0%. Starting from Autumn, Retequattro renewed its late evening with the double bill Sipario del Tg4/Terra nostra. This proved to be a winning choice: the network’s data improved greatly, and in particular, there was high consensus among viewers from the South of Italy (between 19:35 and 20:40 from Monday to Saturday, it reached a 12.5% share on this target, vs. 4.7% in Spring).

In particular, Sipario del tg4 reached 6.1%, showing a positive trend over the year: from 5.1% of the first showing to 7.0% in December. An astounding result was recorded by Terra Nostra (9.3% on average), the Brazilian drama/soap opera which had an overwhelming growth: from 4.7% at the beginning to 11.3% of the last week of the year (equal to over 2.8 million viewers). n In Prime Time, films continue to be precious for this network, which devoted as much as 208 nights to cinema. Alongside the performance of single titles (Nostra Signora di Fatima at 13.6%, Potere assoluto at 12.6%, L’aquila d’acciaio, Sol Levante, Chi trova un amico trova un tesoro, Marcellino Pane e vino and Fuga da Alcatraz all above 11.0%), it is worth mentioning the results of a number of series that accompanied our audience in Spring with Don Camillo e Peppone (9.1%), in Summer with Charles Bronson (12.2%) and the eternal Totò (9.2%). Sunday data were positive in Autumn (8.9%) when the network managed to take advantage of the space not occupied by other networks with respect to male audience and obtained good results with titles such as Apollo 13 (11.2%) and Caccia a Ottobre rosso (10.3%). Also drama data were good, in particular, Questa casa non è un albergo, against the drama series featuring Cochi and Renato on Rai1, obtained a good 7.9% and the miniseries Uno sparo nel buio reached a 9.9% share between May and June. As to productions, we mention, in the first part of the year, Nel mondo dei dinosauri (9.0% on average) and the excellent 11.3% reached by Viva Napoli. In Summer results above the network average for Ballo, amore e… (10.3%) and for Festival di Napoli (9.4%). In Autumn, a positive confirmation for Bravo bravissimo (10.3%), while the new programme Miracoli (10.1%) managed to conquer a large

38 share of adult viewers and obtained a brilliant result if we consider its difficult competitive situation, monopolized by Grande Fratello. Football programmes: the two nights devoted to the European Under 21 Championships obtained an average of 19.9%, while Champions League, practically debuting on this network with regular programmes devoted to matches of foreign teams, reached 9.5% with peaks of over 13.0%.

Production of television programmes In 2000, R.T.I. S.p.A. produced 45.1% (including repeats) of the television programmes broadcast by the Mediaset networks. The following table shows the number of productions completed in 2000 by type of programme and separated into television programmes and sales programmes:

Description Number of productions

2000 1999 % change Prime Day Prime Day Prime Total Total Day Time Total Time Time Time Time Time

TV programmes Entertainment and talk shows 64 96 160 64 81 145 0.0% 18.5% 10.3% Other news 10 44 54 8 61 69 25.0% -27.9% -21.7% News - 4 4 - 4 4 0.0% 0.0% 0.0% Sport 3 21 24 5 22 27 -40.0% -4.5% -11.1% Quiz/Game shows 4 13 17 1 10 11 300.0% 30.0% 54.5% Music 6 20 26 8 13 21 -25.0% 53.8% 23.8% Soap - 1 1 - - - 0.0% 0.0% 0.0% Total TV programmes 87 199 286 86 191 277 1.2% 4.2% 3.2%

Commercial programmes Teleselling 1 34 35 1 40 41 0.0% -15.0% -14.6% Total commercial programmes 1 34 35 1 40 41 0.0% -15.0% -14.6%

Total 88 233 321 87 231 318 1.1% 0.9% 0.9%

The number of original productions remained practically unchanged in the two years 1999/2000. The following new programmes made in 2000 are worthy of mention: n for Canale 5: in Day Time, A tu per Tu, Celebrità, Link and Chi vuol esser miliardario (also in Prime Time); in Prime Time, Provini, Ragazzi irresistibili, La vita è meravigliosa, Premiata Teleditta; C’è posta per te and Grande Fratello (also in Day Time); n for ItaliaItalia 11: Telenauta, Guerre di Robot, Mai dire Grande fratello, Mai dire Maik, Rewind, Wozzap, Speed in Day Time; Strano ma Vero, Candid Angels, Macchemù in Prime Time; n for RetequattroRetequattro: Medici in Day Time; Circo and Miracoli in Prime Time. A total of 7,016 hours of programmes were produced in 2000 compared to 7,060 in 1999, with a 0.6% decrease. A significant shift can be detected from the News area (-29.2%) to the Entertainment (+7.1%) and Games and quiz shows (+20.3%) areas. The following productions did not go ahead: Moby Dick, Vive Bene, Linee d’ombra, Giallo 4, Moby’s, Sali e Tabacchi, among new productions, Grande Fratello, Chi vuole essere miliardario, Mai dire Maik.

39 Description Hours of finished product

2000 % 1999 % % change

Entertainment and talk shows 2,563 36.6% 2,394 34.0% 7.1%

Other news 816 11.6% 1,153 16.3% -29.2%

News 1,699 24.2% 1,747 24.7% -2.7%

Sport 569 8.1% 602 8.5% -5.5%

Game and quiz shows 854 12.2% 710 10.1% 20.3%

Teleselling 292 4.2% 333 4.7% -12.3%

Music 129 1.8% 121 1.7% 6.6%

Soap 94 1.3% - 0.0% 0.0%

Total 7,016 100.0% 7,060 100.0% -0.6%

Technology for the production of television programmes The technology for the production of programmes (in-house production), is owned only to a minimum extent by R.T.I., and is mainly concentrated in the subsidiary company Videotime S.p.A., which guarantees the maintenance and technological development of productive systems (studios, post-production and graphic rooms and mobile direction units). In the last few years, the emergence of digital technology has mainly affected the first stages in the television production process: production (in studio) and post-production (in the editing room). The plan for the transformation into digital of all shooting and editing equipment is under way, which started in the second half of 1990s and will be concluded in the next five years. In 2000, the high pervasive character of digital technology began to change the stage after the production process, i.e. storage, which, in turn, comes before the emission, distribution and broadcasting of the signal. The possibility to turn (video) images and (audio) sounds in numeric (digital) format makes it possible to create digital archives. The creation of digital archives will eliminate the manual handling of magnetic supports, which instead will be stored away by robots with the subsequent computer cataloguing of the physical content of the archive, and will be remotely examined by many users through an audio/video network infrastructure. The productive area involved in the project implemented last year is that of information programmes (news), where archive images represent a key element in the process. The project of the news digital archive is strictly connected to the project of a new digital editorial office made up of work stations connected to this archive and to each other as a network, from which it will be possible to consult and compose archive images with those from the satellite or external shooting and make the various news programmes. This new digital production and filing system for information programmes, implemented in 2000, will gradually replace current news production systems starting from the first months of next year.

40 Acquisition and management of television rights Mediaset S.p.A. and its subsidiaries have the most important library of television rights in Italy and one of the largest in Europe. The following table contains details of the rights library by category as of December 31, 2000:

Description No. of titles No. of shows

Films 5,203 5,203

TV series 660 16,108

Telenovelas 14 1,710

Cartoons 758 21,569

Mini series 206 711

Soap operas 17 3,076

Tv movies 1,909 1,959

211 673 Various (Musicals, Entertainment, Theatre, etc..)

Total 8,978 51,009

Soap Opera e Cartoons Mini series Telenovelas 8.4% 2.3% 0.3%

TV series 7.4%

Tv movies 21.3% Films 57.9%

Vari Musicals,Varietà, Prosa, ecc..2,4%

All activities regarding the purchase and production of rights for the Italian television market have been brought under Mediatrade S.p.A., which has the objective to manage the rights library of the group. New rights are bought up on a continuous basis from: n US Majors:

the Mediaset Group has signed long-term agreements to buy rights from the leading US producers and distributors; these agreements typically involve purchases for an average of 5 years, with the possibility of 4 or 5 television screenings. Agreements are currently in place with MCA-Universal, Twentieth Century Fox, Sony Columbia, Warner Bros. International, Dreamworks.

41 n InternationalInternational televisionstelevisions producers:producers: the Group has important, well-established rights purchase relations with US and European producers who supply very popular television products (TV movies, soap operas, mini-series and TV series). The serial nature of these programmes, produced on a seasonal basis, makes for a lasting producer / user relationship. n ItalianItalian filmfilm producersproducers // distributors:distributors:

From Italian companies, the Group buys packages including both the television rights to films produced by them (which, together with the purchase of European films, are important in complying with the broadcasting quotas imposed by television broadcasting regulations) and the rights to international films. The rights agreement in place with the associated company Medusa Film S.p.A., one of the leading distributors in Italy, plays a fundamental role in this context. n InIn- house drama production: the Mediaset Group has the know how and organisation to select projects and produce highly popular TV movies, mini-series and TV series. These programmes are produced in-house or together with leading international partners. In some cases, production costs are partially covered by exporting the programmes produced. 2000, in line with the strategy devised in 1999 for the strengthening of contents, saw a major drive towards increasing the level of dramas produced. In particular, production focussed towards: – long-running drama series; – increase in the number of hours produced; – bringing down average production costs. During 2000, the Mediaset Group also made steps towards further improving its rights library. Of the many agreements reached, the following are worthy of note: n the acquisition, by virtue of the long-term agreements in place with US Majors, of the following blockbusters: Titanic, Man in Black, Ipotesi di Complotto, Space Jam, Ransom-il Riscatto, L’ombra del Diavolo, Contact, Bugiardo Bugiardo, Speed 2: Senza Limiti, Peacemaker, Batman e Robin, Innamorati Cronici, Mars Attacks, The Jackal and Il matrimonio del mio migliore amico; n the renewal of the rights to a number of the most successful television series such as: Beautiful, Beverly Hills, Sentieri, Febbre d’Amore, Baywatch, X Files, I Simpson, Ally Mc Beal, Buffy, Dawson’s Creek, Cosby, Siska, Mr Bean and Walker: Ranger del Texas; n the acquisition of the Brazilian soap opera Terra Nostra based on the history of Italian migrants in the late XIXth century, which won a place in the heart of Mediaset networks audience; n the acquisition, for the current television season, of TV movies such as Giuseppe di Nazareth e Maria Maddalena and high quality Mini-series, such as La Guerra del

42 Golfo, Mama Flora, Virtual Obsession, under a long-term agreement with Hallmark, Giovanna D’arco and Mr. Murder, acquired by Endemol; n the signing of an exclusive three-year (2000-2002) agreement for the supply of Free TV rights to children programmes (specifically, cartoons) with the Saban Group, one of the world leading producers and distributors of television programmes for children; n the acquisition for the current television season of successful films like: Così è la vita, L’uomo della Pioggia, Simpatici e Antipatici, Kundun, Deep Rising, Il Signor 15 palle and Sliding Doors with respect to the three-year (1995-1998) agreement with the subsidiary company Medusa Film S.p.A.; n Mediatrade S.p.A. and Medusa Film S.p.A. defined, under the 1999-2002 long- term agreement signed in 1999, a package of films, chosen among those distributed by Medusa in the 2000-2001 season, available for television screening as ofas at 2002. In particular: Chiedimi se sono felice, Autumn in New York, Duets, Human Traffic, Non ho sonno, L’ultimo bacio, The Million Dollar Hotel, Malena, Mothman Prophecies, Magnolia and Under suspicion. An agreement was also signed for the purchase by Mediatrade of a package of films among which: Entrapment, Fight Club, Sogno di una notte di mezza estate, Gun Shy and Maybe Baby; n Mediatrade S.p.A. signed preliminary agreements with Italian distributors that will lead to the acquisition of high-class and successful films in the next few years, such as: Le regole della casa del sidro (winner of a few Oscar awards in 1999) and Dancer in the dark (winner of the Palme d’or at the 2000 Cannes Festival); n the production of several mini-series and television series with very prestigious casts and scriptwriters, such as: Sei forte maestro, Distretto di polizia, Il Bello delle donne, Tequila e Bonetti, Piccolo mondo antico, L’Impero, La Uno bianca and Cuore; n the stipulation of long-term supply agreements with the company Epsilon Motion Pictures, being established with the Kirch Group. These agreements envisage the acquisition of the rights in Italy to films that Epsilon Motion Pictures will co- produce and co-finance with major independent Producers (Spyglass Entertainment, Hydepark, Wildwood and New Regency). In some cases, Mediatrade will have all sorts of rights (theatrical, home video, pay TV, free TV) and will independently manage them by means of distribution agreements. During 2000, in line with the stipulated agreements, the rights to the following films were acquired: Insider-Dietro la verità , Shanghai Noon (Pallottole cinesi), Mission to Mars, Keeping the faith (Tentazioni d’amore), The sixth sense, Instinct, Antitrust, Bandits, Original Sin-Dancing in the dark and The legend of Bagger Vance.

43 The network carries the signals of R.T.I. S.p.A.’s three commercial television networks (Canale 5, Italia 1 and Retequattro) to over 99% of the country's population. This infrastructure is not only used to broadcast the signal of television programmes from the Segrate centre (distribution system), but also to carry semi-finished signals from any point on the network to the television production centres where the television programme is made (contribution system). The digital transformation process of the signal carrying network by means of radio repeaters, completed in the second half of 1990s, will enable R.T.I. to fully express a highly precious potential: there is redundant broadcasting capacity that may be used for the most varied purposes. Within the contribution system, in 2000 a fibre optic cable loop owned by R.T.I. was completed between production and broadcasting centres in the Milan area. This loop will allow for a highly reliable system of links enabling a much faster service and allowing the transport of much more data than using current technology (radio repeaters). With the introduction of the optic fibre, a new era for signal broadcasting has begun for R.T.I.. So far, the only alternative to our radio-repeaters network was to use long term leased satellite transponders. Starting with this year, however, R.T.I. has a “third way” to carry the signal on optic fibres on some stretches of its network. To date, besides the Milan loop, also the Milan – Rome stretch and the main production centres in the Rome area have an optic fibre connection. These connections are guaranteed by leased capacity in the long term from major carrier providers. In 2000, significant projects were carried out in the broadcasting area, which represents the origin of the distribution process of the television signal in Italy. The new automatic assembly and broadcasting system for theme channels published by the subsidiary company Mediadigit has been working since April. This system, thanks to digital technology, makes it possible to manage the broadcasting of the current 4 theme channels (Happy Channel for Telepiù, Duel, Comedy Life and MT Channel for Stream) and can manage another channel from a single system, and this way broadcast a high number of channels, as is the case of theme networks, with minimum staff. Downstream of this project for theme channels, the automation system of the assembly and broadcasting activity for the three R.T.I. commercial networks (Canale 5, Italia 1 and Retequattro) began its implementation stage, in order to exploit the benefits provided by technology to the core business network broadcasting. This project will enable us early next year to improve the quality of the current process, reducing the risk of error connected to several manual operations (e.g. handling of the magnetic support, sequence of events, etc.).

Music publishing RTI Music S.r.l. is active in the field of music publishing connected to Mediaset Group television activities. This business includes the production, acquisition, management and protection of copyright to musical works / soundtracks to audio-visual works.

44 RTI Music S.r.l. made in 2000 the soundtracks to all films and television series produced by Mediatrade S.p.A. (including Tequila e Bonetti, Padre Pio, IV Comandamento, Piccolo Mondo Antico), by Medusa S.p.A. (including Malena, Concorrenza sleale) and by external executive producers (including Alen Luz de Luna, Il commissario Montalbano second series). RTI Music S.r.l. also performed audio work, on behalf of R.T.I. S.p.A., on many television productions (including La sai l’ultima, Ciao Darwin, Buona Domenica, Momenti di gloria, Bigodini, etc.). RTI Music S.r.l. also supplies an important music archive service with its “Music Bank”; it currently owns around 3,000 hours of music with own original recordings of works and around 5,000 hours of original recordings of works owned by third parties and other music leading to a total music coverage of around 20,000 hours. This business generated revenues of ITL 8.4 billion mainly as a result of broadcasting rights for the use of music used in programmes scheduled on Mediaset networks.

Commercial Television - InternationalInternational

Epsilon Group 2000 is the first year of operation for the Epsilon Group, the equal Joint-venture between Mediaset and Kirch Media established in October 1999. The economic and financial situation of the Epsilon Group as of December 31, 2000 results from the full consolidation of the holding Euroset S.a.r.l. and the subholding companies where it has a 100% shareholding: Publieuros Ltd., Betafilm GmbH and Euroset Television S.a.r.l. (“E.T.N.”), which assesses in turn by means of the net asset method its 49% shareholding in PKS GmbH. This company held at the time of the establishment of the Joint-venture a 59% stake in SAT 1 GmbH and Media 1 GmbH capital; in the second half of 2000, within the reorganisation process of the broadcasting business area of the Kirch Media Group, the two companies sold their television and advertising operations to a new holding company, called ProsiebenSAT1MediaAG, which also acquired the business of the Pro7 Group, whose ordinary capital is 100% held by Kirch Media. The expert assessment carried out to calculate the share swap values for the shareholders in the merger of these companies showed the following value relationships: Sat1/Media 1 Group: 28% of the new entity ProsiebenSAT1MediaAG; Pro7 Group: 72% of the new entity ProsiebenSAT1MediaAG. Following this operations, completed in October 2000, whose accounting effects are calculated starting from January 1, 2000, the indirect stake held by PKS in ProsiebenSAT1Media AG amounts to 16.53%. Here is the summary of the Group’s income statement as of December 31, 2000:

(ITL billions)

45 Epsilon Group 31/12/2000 31/12/1999

Revenues from sales and services 344.4 - Other revenues and income - - Total consolidated net income 344.4 -

Staff costs 8.6 - Purchases, services, other costs 290.8 - Operating costs 299.4 -

Gross operating margin 45.0 -

Amortisation, depreciation and write-downs 46.2 - Operating result (1.2) -

Financial income / (charges) (11.8) - Income/(charges) from investments (20.4) - Profit (loss) before extraordinary items (33.4) -

Sundry and extraordinary income /(charges) - -

Profit (loss) before taxation (33.4) -

Income taxes (19.0) -

Profit/(loss) for the year (52.4) -

These results are significantly marred by the goodwill amortisation quotas, arising from the consolidation of the activities included during the setting up of the Group, though with positive results generated by the specific operation. The consolidated net revenues of the Epsilon Group, amounting to ITL 344.4 billion, show the two main kinds of operations: n selling of television rights carried out by Betafilm GmbH for ITL 251.5 billion. This business concerns internationally distributing (with the exclusion of the Italian and German markets, directly served by Mediaset and Kirch Media) television and cinema rights; n advertising revenues equal to ITL 92.9 billion, regarding the sale of advertising spaces in European television networks and newspapers (carried out by Publieurope International Ltd. for international customers residing outside the country of the licenced medium) as well as the payments received from marketing work carried out by Publieuros Ltd. on large European multinational investors. The grossgross operatingoperating profitprofit amounts to ITL 45.0 billion, equal to 13.1% of net revenues. The main cost component is variable according to revenues and is borne by both Betafilm (as commissions paid to the rights owners on whose behalf it makes international sales) and Publieurope (as commissions paid to publishers or concessionaries from which it acquires the sub-concession to sell advertising spaces abroad). Personnel expenses amount to ITL 8.6 billion, with an average number of 63 employees in the companies belonging to the subholding companies Betafilm and Publieuros. The operatingoperating lossloss amounts to ITL 1.2 billion, due to goodwill amortisation quotas (36.8 billion) mainly arising from consolidating Betafilm into Euroset and those from ETN setting up costs. The investmentinvestment chargecharge of ITL 20.4 billion, corresponds to the equity valuation of the 49% shareholding in the PKS Group, including the share of the profit for the year, equal

46 to 14.8 billion and the yearly goodwill amortisation quota included in the value of ETN shareholding in PKS, equal to 35.2 billion. The lossloss beforebefore taxationtaxation is ITL 33.4 billion, also due to the negative balance of the financial operations, mainly due to losses on exchange rate operations deriving largely from the foreign currency debt appreciation of Betafilm and a few of its subsidiary companies. The netnet resultresult shows a loss of ITL 52.4 billion net of taxes amounting to ITL 19.0 billion. Here is the balance sheet summary of the Group as of December 31, 2000:

(ITL billions)

Epsilon Group 31/12/2000 31/12/1999

Television rights 54.0 - Other intangible/tangible fixed assets 350.2 - Investments and other financial fixed assets 517.2 - Net working capital and other assets/liabilities (87.0) - Provision for employee termination indemnity - -

Net invested capital 834.4 -

Net financial posizion 16.8 -

Group shareholders' equity and attributable to minority interests 851.2 -

Equity investments and other financial fixed assets, whose balance is equal to ITL 517.2 billion, mainly include the 49% shareholding in PKS GmbH (equal to ITL 440 billion) and the 3.95% shareholding in Monarchy Holding BV, a company that controls 100% of New Regency (equal to ITL 76,6 billion).

Other net fixed assets, equal to ITL 350.2 billion, mainly include net consolidation differences, depreciated in 10 years, arising from shareholdings of Betafilm GmbH and Publieurope International Ltd. The value of the net equity of the Epsilon Group, equal to ITL 851.2 billion, shows the result for the year and the subsequent setting up and capital increase operations of Euroset S.a.r.l., carried out in 1999. * * * * * On September 11, 2000, the Board of Directors of the companies involved approved a preliminary agreement between the Mediaset Group and the Kirch Media Group, aimed at developing the Joint-venture agreements stipulated on October 19, 1999, and the conversion of the financial resources invested by Mediaset Investment S.a.r.l. in Epsilon corporate structure, for the acquisition of an equity stake in Kirch Media KgaA. Kirch Media, Mediaset’s partner in Epsilon through CON Medien GmbH, a company that controls 50% of Euroset S.a.r.l., can now be considered the “German Mediaset”, since it owns an established activity of international trading of rights, the three German general commercial networks SAT 1, Pro 7 and Kabel 1, and the sports channel DSF and the news network N24. This structure was completed in late 2000, following the transfer to Kirch Media of the 20.8% share of Pro 7 capital held by Rewe, which obtained in exchange a 6.0% stake in Kirch Media (this operation was carried out in September last year) and the merging in the new ProsiebenSAT1MediaAG holding

47 company of the television and advertising operations belonging to SAT 1 GmbH and Media 1 GmbH and those controlled by Pro 7. By March 31, 2001, the parties shall define detailed agreements including the following contents: n return to each shareholder of the operations transferred in the Epsilon corporate structure: – Mediaset Investment S.a.r.l. shall hold again 100% of Publieuros/Publieurope capital, which will remain however the European concessionary for Kirch Media and Telecinco; – the Kirch Media Group shall hold again 100% of Betafilm and PKS capital; Betafilm will remain however the international distributor of the Mediaset Group’s television rights; – in addition to the return of transferred operations, Mediaset Investment S.a.r.l. shall receive cash amounting to ITL 391.3 billion (the cash investment connected to the setting up of Epsilon corporate structure in 1999 amounted to ITL 361.6 billion); these financial resources will make it possible to finance the acquisition of the above mentioned shareholding in Kirch Media, without the need for further resources; n Mediaset Investment S.a.r.l. will acquire a 2.34% stake in Kirch Media KgaA capital (i.e. equal to 2.48% before the dilution effect generated by the already mentioned acquisition of Kirch Media capital by Rewe) for an amount of ITL 391,3 billion. The acquisition of the shareholding in Kirch Media will be supported by the acceptance of an agreement between shareholders, whose parties are some companies belonging to the Kirch Group, Fininvest S.p.A., the Group of Prince Alwaleed and the Lehman Brothers Group. The acceptance of the agreement mentioned above shall imply the acquisition of significant rights, among which that regarding representation in corporate bodies, once consensus from other shareholders is obtained; n setting up of Epsilon Tv Production and Epsilon Motion Pictures, in Milan and Munich, respectively; the latter will also have a branch in Zurich. Epsilon Tv Production, already established at December 31, 2000, by Mediaset Investment S.a.r.l, will be equally owned by Mediaset Investment S.a.r.l and Kirch Media KgaA; Epsilon Motion Pictures, already established at December 31 by Kirch Media, will be controlled by Mediaset Investment S.a.r.l. (20%), Medusa Film S.p.A. (30%) and Kirch Media KgaA (50%). The stipulation of these new agreements shall supersede the Joint-venture agreement signed on October 13/14/15, 1999.

48 The positive economic situation of Spain supported also in 2000 the good trend of advertising investments channelled into the Spanish television industry, which rose from around PTS 340 billion in 1999 to around PTS 370 billion in 2000 (over ITL 4,300 billion), with a 9.1% increase. In this situation, Publiespana S.A. television advertising sales showed an outstanding 15.6% growth, by far higher than the growth rate of the reference market, and went from PTS 92.8 billion in 1999 to PTS 107.3 billion in 2000 (around ITL 1,250 billion). An excellent performance was achieved during the year also with respect to the audience, both in overall terms and in connection with the commercial target. These amounted in the full day to 22.3% and 25% respectively (compared to 21% and 23.5% recorded in 1999, respectively). As to the commercial target, a most significant element for advertising investors, Telecinco performance was clearly higher than that of its two main competitors, Antena 3 and TVE-1, whose audience shares amounted to 23% and 19.7% respectively. As part of the plan to rationalise and develop the Group operations, it is worth mentioning the following: n PubliMedia S.A. and Advanced Media S.A. operations started. These two companies are 100% controlled by Publiespana S.A., and they deal with publishing activities (magazines and home video) and Internet based advertising sales; n Telecinco S.A. acquired a 29% shareholding in Gsmbox Spagna (this company belongs to a European portal dedicated to mobile communications, with the objective of developing e-commerce activities and of becoming European leader in the sale of products for last generation telcoms) and a 12.9% stake in Europortal Jumpy Espana S.A. The equity valuation of the investment, including goodwill amortisation quota of ITL 39 billion, yielded the Group a net income of ITL 80.8 billion.

Multimedia and telecommunications division

Multimedia operations The Mediaset Group’s New Media operations (theme channels, Internet and teletext) are concentrated in Mediadigit S.r.l., a company that has been active since 2000, with the objective to develop synergy and brand extension opportunities with respect to our traditional core business focused on television, by providing services and contents that can be distributed on different platforms (digital Pay Tv, Internet and Telecommunications). These operations are supported, as already shown, by Publitalia ‘80 as to Internet based advertising sales. In the last months of 2000, R.T.I. S.p.A. also started, within the brand extension strategy of the network’s television products, the new monthly magazine MT- La macchina del Tempo, available since November.

Theme Channels In 2000, in Italy satellite digital pay TV recorded a significant penetration increase. Based on Taylor Nelson-Sofres-Abacus data, satellite TV viewers in Italy amount to 6.5

49 million, around 66% of which watch satellite channels every day. By 2004, based on the estimates calculated by Italmedia Consulting, digital TV penetration in Italy will amount to around 30% of households with a television. Among the main market drivers are the reduction in access costs regarding set-top boxes and parabolic antennae, the imminent introduction of the single standard for decoders and especially the growing appeal of supply, both in terms of theme channels and premium contents, such as football, movies and sports events, accompanied by a large availability of non encrypted channels. Apart from technologic opportunities, the actual market success in future years will be definitely determined by the quality of supply devoted to a demanding and segmented user base. The offer of Mediaset Group’s theme channels is based on the experience accrued in general television in order to develop unique proposals with special attention to contents. In April 2000, Mediadigit flanked Happy Channel (devoted to smile and good humour and distributed since 1998 within Telepiù’s Basic package) with two new theme channels (Comedy Life, for female viewers and Duel TV, an action channel) distributed though Stream’s digital platform; these were joined on January 8, 2001 by Mt Channel, a channel devoted to science programmes. Since April 2000, Stream has also been distributing CFN channel, devoted to economic and financial news; this channel is made by Class Financial Network S.p.A. (whose main shareholder is the Class Editori Group) of which Mediadigit S.r.l. acquired in January 2000 a 10% stake of the share capital (9.9% as of December 31, 2000). Total revenues from the theme channel area amounted to ITL 22.8 billion in 2000.

Teletext The consolidation of teletext operations continues (Mediavideo and interactive service), and it made it possible to reach in 2000 10 million users per week, also thanks to the strong differentiation from our main competitor (Televideo RAI), such as greater ease of use and channel differentiation. To date, Mediavideo includes 800 pages and is totally innovative in terms of contents, graphics and operation modes, and exploits information contents made in collaboration with partners such as press agencies (ANSA), newspapers (Sole 24 ore), magazines. During the year, brand extension projects were started, with reference to television products (for example Speciale Grande Fratello offered highlights updated on a 24-hour basis) and interactive services for Publitalia ‘80 customers (Mediolanum, Banca Reale, IMI Web). The Group’s revenues from this area amounted to ITL 8.4 billion.

50 with other companies belonging to the Fininvest Group to achieve a consolidated leadership position in this market as well. In this context, Mediaset’s objective, through its own sites, is to be the market leader in the info-tainment area, and to create the most successful television vertical portal in Italy. According to Nielsen/Netratings data, in December 2000 the number of Italians who surfed the net for pure entertainment reasons increased by 40%, a growth due to the significant increase in the number of Italians who have home access (+22.5% from July to December 2000). In particular, already in 2000, the Mediaset Online site has become more and more the information site, as well as the “site of the sites” of the Group’s networks (Canale 5, Italia1 and Retequattro), where the Internet versions of the main Group’s television programmes were concentrated. Mediaset Online and the three official sites of Canale 5, Italia 1 and Retequattro networks, jointly reached and exceeded 500,000 page views per day in the year average. In 2000, Mediadigit took part in the establishment of the Polymedia digital platform, an integrated system for the management and publishing of Group’s news, with the digital transformation of all sources, archives included, in the making and broadcasting of services, with the objective to foster content packaging activities that will be provided to Mediaset networks’ sites. Total revenues in the Group’s Internet area amounted to ITL 4.3 billion, with the addition of ITL 18.8 billion from other portals, among which Jumpy and Excite Italia, for which Publitalia ‘80 S.p.A. acts as concessionary for the selling of advertising spaces.

Telecommunications At present, the Mediaset Group is active in the field of telecommunications through a 19.5% stake held by Mediaset S.p.A. in Albacom S.p.A., a company in the fixed telephone market, and through a 9% stake held by Mediaset Investment S.a.r.l. in Blu S.p.A., the fourth national mobile phone network in Italy.

Fixed telephone market In the field of fixed telephones, Albacom S.p.A. has now strengthened its position of second domestic company in the Business area, and is marked by the high level of specialization of the solutions offered to over 50,000 customers. The company is progressively redefining its product mix, which is still strongly focused on voice services, towards a greater development in value added services (data/Internet). In the first half of the year started on April 1, 2000, the top management structure was redefined and far-reaching measures were taken to provide the company with operating entities appropriate to face the growing complexity of this business and pursue objectives of higher management efficiency. The strengthening of own network infrastructures and end users access now represents one of the strategic priorities that the company is pursuing by means of industrial and partnership agreements with national and local companies with a view to the opportunities connected to the so called privatising of the 'last mile'.

51 In this view, in October 2000, Albacom won the competition for the acquisition of a 60% shareholding in Basictel S.p.A., a company that has been recently established by the Italian Railways with the objective to plan, implement and manage for telecommunication purposes a fibre optic infrastructure along the power lines placed beside a 4,000 km stretch of the railway lines owned by the Italian Railways. This operation will enable Albacom to widen and strengthen the transport capability of the existing network at generally more advantageous conditions than conventional implementation modes of network infrastructure. This way Albacom will have a highly sophisticated backbone available, for the supply of wide band services (voice, data, fast Internet, video streaming) which will also make it possible to increase the traffic share on its own network, thus significantly reducing interconnection costs. In the first nine months (April - December) of the current year, Albacom recorded a 40% increase in turnover over the same period of the previous year. The operating result of Albacom is still affected by the diseconomies of voice services due to the high influence of interconnection fees with Telecom Italia and mobile termination with current main domestic companies and of the simultaneous reduction in prices brought about by growing competitive pressures. At December 31, 2000, the equity valuation of the investment in Albacom S.p.A. resulted in a total charge of ITL 49.9 billion for the Mediaset Group, ITL 4.2 billion being amortisation of goodwill.

Mobile Telephony In the field of mobile telephony, Blu S.p.A. launched on May 15, 2000, its own commercial service and reached 800,000 customers at year’s end, equal to a 10% market share on net new users. These results are clearly above initial objectives and rewarded the effective and innovative differentiation strategy applied since its commercial launch. Blu managed to anticipate the evolution under way among industry companies, progressively shifting from the simple provision of voice services to the aggregation, customisation and supply of integrated contents and services for well identified business and consumer vertical markets, imposing its brand of dynamic company, extremely accessible for ease of use and capable of offering clear and competitive rating plans. The European market of mobile telephony recorded an all-time high growth in 2000, with around 90 million new users (+58% over 1999). Penetration in Europe exceeded 60% with 244 million users. In Italy, in 2000, 12 million new users were recorded and a 72% penetration rate on the population was reached (42 million SIM), now in line with Scandinavian countries. Expenditures in mobile telephony in Italy are constantly growing; the progressive convergence between the Internet and mobile terminals and the decreasing trend in prices should contribute to fuel further development up to over 50% of the overall expense in telecommunications. In the market of mobile telecommunications, the great opportunity for development is represented by the progressive convergence with the Internet that will make it possible to gradually launch services with a high content density (information, entertainment and transactional).

52 The allocation of UMTS licences was in Europe and Italy the most significant event of 2000 in the industry. Blu was admitted to take part in the national bid for the allocation of one of the five UMTS licences. After taking part in the first ten rounds, with a maximum offer of ITL 4,490 billion, on October 23, before the eleventh round, it formally announced its withdrawal from the running. On the very same date, the Committee of Ministers deliberated the exclusion of the company from the bid and the start of the procedures necessary to cash the ITL 4,000 billion bank guarantee in line with article 6.4 of the bid regulations. This guarantee requested by the bid regulations to the benefit of the Ministry of Communications for an amount equal to the basic auction price, equal to ITL 4,000 billion, had been released on October 9 by a pool of banks coordinated by the Banca Nazionale del Lavoro, including Montepaschi and Deutsche Bank and, on the same date, counter-guaranteed by Blu S.p.A. shareholders in proportion to their own stakes. On October 25 and 27 and November 2, Blu filed a request of stay of proceeding with the Lazio Regional Administrative Court, to obtain the cancellation of this decision. On November 3, the Committee of Ministers formally allocated the licences to the five companies still taking part in the bid: Tim, Omnitel, Blu, Andala, Ipse 2000. On November 9 the Lazio Regional Administrative Court ruled the temporary suspension of the payment of the above mentioned guarantee, whose annulment was decided in January 2001 within the relevant decision of the Court, as is shown in the section of the Report regarding Significant events after December 31, 2000. After the non allocation of the UMTS licence, Blu's positioning and strategic objectives do not change substantially: in December 2000 the company launched, the first in Italy, GPRS technology based services, capitalizing on the competitive edge that can be acquired as a first mover and is currently committed to exploring alternative strategic scenarios in order to have the UMTS technology in the future. As of December 31, 2000 the company has a workforce of 1,479 employees and invested over ITL 800 billion for the creation of network and information infrastructures, setting up six offices and a distribution network with 4,000 points of sale. The net loss as of December 31, 2000, the first year of operations of the company, amounted to ITL 649 billion; this result, together with the investments made and the financial needs guaranteed by the intervention of shareholders, are in line with the company plan prepared on the occasion of the release of the GSM licence. The investment valued at cost within the Mediaset Group was not depreciated therefore, since it was not considered permanent with respect to the current stage as a start-up and future company plans.

TERRESTRIAL DIGITAL TELEVISION

53 analogue general television, but now it is obliged to be present in all the new fields of digital convergence between telecommunications, television, the Internet and interactivity. The Mediaset Group is able to cover a large part of the spectrum of the multimedia value chain, especially as content producer and packager. However, with the introduction of digital television, investments will become necessary in both content production and diversification operations (theme channels, adaptations and new productions for the web) in order to maximize the profits generated by multiple means of use (PC, new generation mobile terminals) for both the completion of the digital transformation of processes regarding the production of contents (digital news) and the broadcasting network infrastructures. This strategy shall face, downstream of the value chain, new processes and players active as Internet service providers, in the field of enabling technologies (set top box) and telecommunications in order to implement a multimedia integrated technological platform capable of enabling, by means of a business model based on the integration between content provider and customer access technology, the exploitation of the opportunities connected to interactive digital services. To support these applications, broadcasters, also in the new framework connected to terrestrial digital television, shall implement a more articulated and integrated architecture (enhanced TV) with respect to the one characteristic of television linear offer, and will have the need for a return channel, a conditioned access system, a content selection and delivery interface (Electronic Program Guide). The Mediaset Group, by means of its shareholdings in Albacom (high broadcasting speed optic fibre infrastructure, voice, data services and services reserved to corporate users) and in Blu (fourth GSM mobile phone company) is present in industries that at the moment are only partly synergic with respect to this evolution, will therefore have to progressively assess the opportunity to channel investments and/or partnerships and/or commercial agreements towards a direction that will make it possible to acquire a competitive advantage with respect to the complex scenarios that will open up in the next few years. To be ready for the implementation of the most appropriate positioning strategies in the scenario of the future digital convergence and, in line with the need to remain flexible in defining the most suitable times and modes, Mediaset carried out, in the last months of 2000, financial operations on stocks connected to the convergence process. The valuation of these commitments as of December 31, 2000 implied a net charge of around ITL 50 billion, connected to the negative trend that characterized the market in these sectors. Besides, the adaptation process of Mediaset’s typical business model, arising from the introduction of digital broadcasting systems, already started with the primary objective to guarantee the progressive digital transformation of the whole television production process, implied overall investments amounting to around ITL 130 billion. In particular, around ITL 75 billion was used for the activities which are more directly related to television production (production, contribution, post- production, storage, assembly and broadcasting) and around ITL 55 billion for the creation of distribution infrastructures, completed in 1999.

54 PERSONNEL

Workforce The following table contains details of the Mediaset Group workforce as of December 31, 2000, with the exclusion of the Epsilon Group workforce that, at the same date, amounted to 64 employees.

Workforce including temporary staff. 31/12/2000 31/12/1999

Managers 270 267

Journalists 294 280

Middle managers 609 612

Office staff 3,141 3,304

Manual workers 70 99

Mediaset Group 4,384 4,562

The total number of employees – including both permanent staff and entertainment and non-entertainment temporary staff – decreased by 178 over December 31, 1999. This reduction is mainly due to two events: on the one hand the disposal of the design and assembly branch of television signal broadcasting equipment carried out by Elettronica Industriale S.p.A. to the company DMT - Digital Multimedia Technologies S.r.l., which involved the departure of 113 employees from the Group and on the other hand, the selling to the company Telespazio of the operations connected to satellite connections, as well as a negative balance between leavers and starters. It is also worth highlighting the fact that employees were transferred from R.T.I. S.p.A. to Mediadigit S.r.l., within the framework of the sale of the company branch regarding the activities of the theme channel Happy Channel and the Internet site Mediaset Online.

Geographical distribution The geographical distribution of the workforce in Italy as of December 31, 2000 is as follows: – Milan: 67% – Rome: 19% – other locations: 14% The bulk of those employed in the sale of advertising are located in the Milan headquarters at Milano 2 Segrate while the remainder are based in Rome and in the various regional offices of Publitalia ‘80 S.p.A. The majority of television production staff work in the Milan area, in Cologno Monzese and Milano 2 Segrate, or in Rome, where the dubbing unit for international programmes is located, as well as the unit for the production and co-production of TV drama.

55 Signal broadcasting staff work in Segrate (Milan) only, while those in charge of television signal management and those belonging to the regional television troupes work in Lissone (Milan), in Rome and in other regional locations.

56 Personnel expenses In 2000, Personnel expenses increased as a result of the automatic contract dynamics, which implied the following: n the payment of the agreement quotas regarding the national contract of private televisions n the payment of the agreement quotas regarding the national contract for the service/commerce sectors n the payment of the agreement quotas regarding the national contract for managers in the industrial sector n the payment of the agreement quotas regarding the national contract for managers in the commercial sector n the payment of the result-related bonuses for supplementary agreements for office staff and journalists. This increase was however offset by the decrease in the number of employees in the companies belonging to the Mediaset Group, for the reasons mentioned above.

Training During 2000, the Mediaset Group considered the planning and implementation of training projects as a qualifying element aimed at ensuring the following for its own staff: – development of professional skills – update of managerial and technical know how – maintenance of high skill levels – an appropriate level of culture and awareness in terms of prevention and safety. Training activities specifically developed along a few main lines: n Management training Company orientations and organisational development strategies highlighted the need to develop cross-functional integration, human resource management, activities planning and scheduling capabilities in those who have co-ordination and management positions; in view of this, projects were carried out aiming at developing individual skills with respect to human resource management, at fostering mutual knowledge and cross-fertilization between people and their roles and more in general, at developing organisation skills on the whole, also by finding and sharing common reference models. n Specific training Specific training focused on the will to send strong signals in line with multimedia market changes, in the light of new digital technologies. Particular attention was devoted to training on broadcasting systems, new complex equipment/devices/systems, with the specific involvement of staff from the Operation and News areas.

57 n ITIT trainingtraining The update and evolution of IT supports has made this kind of training more and more important to optimise at best the use of hardware and software, which is the result of company investments; in 2000, the update process on computer literacy specifically regarded electronic mail and automatic work attendance projects. n Language training

This kind of training is aimed at constantly increasing the average knowledge level of foreign languages, in both qualitative and quantitative terms. n Training on safety (In application of Act 626/94) In previous year, many projects were carried out on this issue, for staff dealing with emergencies, but in 2000 activities were mainly devoted to staff in change of videoterminals and workers’ representatives on safety. Two significant Mediaset Group projects, which already took place in 1999 and were strengthened in 2000, are worthy of mention: n the Writers’ School whose aim is to train new generations of young writers and raise awareness in executive producers to the field of creative writing, in keeping with the organisational model of general TV; n the Drama School which intends to invest in young professionals in three specific roles: scriptwriters, directors and producers regarding television serials, to make up what is clearly lacking in terms of training and method in the Italian market. Finally, Mediaset, in order to promote professional qualification of young people and to facilitate their entry in the labour market, offered work experience to 80 people who just received their degree or are writing their final dissertation, by means of a temporary activity in our offices. In total, training courses organised by the Group involved 2,900 people and implied an overall investment of around ITL 2.3 billion. It is also worth highlighting that, on July 14, 2000 a significant labour agreement was signed with the editorial committees of our news offices, supported by the National Press Federation and the Journalists’ Associations of Lombardy and Lazio, to start the introduction of digital technologies in our news programmes. Thanks to this agreement, a process was started that will bring digital technology to all our programmes by 2001, abandoning the traditional analogue method. This change, which places us clearly in the forefront in the industry, besides positively affecting product quality, sets the conditions for the use of our services on new media.

LEGAL D EVELOPMENTS IN THE T ELEVISION INDUSTRY

During the year, two significant investigations regarding our Group were carried out by the Authority for Guarantees in Communications: that on dominant positions according to article 2 clause 9 Act 249/97 and that on the development of satellite/cable users, that should lead to clarifications about the performances required by article 3 clause 7.

58 The former came to a positive conclusion, since the Authority determined that ours is a legitimate position according to Law. The second investigation has not come to an end yet. In January/February this year, following an investigation started in September 2000, the Authority refused twice to authorize the purchase of TMC and TMC2 by Telecom through SEAT, based on the prohibition included in article 4 clause 8 of Law 249/97. The case started by Telecom against this decision is still pending. Bill 1138, after over 4 years of discussions in Parliament, was not passed; its regulations shall be examined in the next legislature. As shown in the section devoted to Significant Events after December 31, 2000, on March 7, 2001 Decree no. 5, dated January 23, 2001 was turned into Law. It includes the awaited regulations for the start of broadcasting by means of digital technique (the only matter left from Bill 1138). The Law specifically considers the start of the experimentation stage of digital broadcasting, the possibility to acquire equipment/frequencies for the experimentation, the possibility for owners of more than one national television authorisation to use up to 60% of their broadcasting capacity for every digital frequency, the 2006 deadline, by which the whole television system should migrate to the sole digital broadcasting technique. The Authority is also approving the regulations regarding advertising and the creation of the Register of Communication Operators.

RELATIONSHIPS WITH C OMPANIES IN THE FININVEST GROUP AND THE MEDIOLANUM G ROUP

In 2000, the Mediaset Group had the following investment and economic relationships with the parent company Fininvest S.p.A. and its subsidiary and affiliated companies:

(ITL billions)

59 Financial Trade and Trade and Value of Cost of Financial Extraordinary receivables other other production production income and income and receivables payables (charges) (charges)

Fininvest S.p.A. - 11.6 0.6 16.2 12.4 - -

Alba Servizi Aerotrasporti S.p.A. - - 0.4 - 1.6 - - Arnoldo Mondadori Editore S.p.A. - 7.8 0.7 37.4 1.4 - - Mondadori Pubblicità S.p.A. - 1.2 0.4 1.2 0.5 - - Banca Mediolanum S.p.A. - 2.7 - 12.6 - - - Blockbuster Italia S.p.A. - - - 2.8 - - - Edilnord Gestioni S.p.A. - - - - 1.3 - - Euridea S.p.A. ------European Communications Ltd. - 0.2 0.1 0.2 - - - Fininvest Servizi S.p.A. - - - - 0.1 - - GSMBOX S.p.A. - 5.0 - 4.2 - - - Jumpy S.p.A. - 0.4 5.7 12.5 6.9 - - Mediolanum Vita S.p.A. 0.1 0.1 - - 1.1 - - Medusa Film S.p.A. - 9.5 38.3 22.0 4.0 - - Medusa Cinema S.p.A. - 0.1 - 0.3 - - - Medusa Video S.r.l. - 0.1 - 0.3 - - - Milan A.C. S.p.A. - 0.9 11.1 0.4 3.5 - -

Pagine Italia S.p.A. - 0.4 - 0.4 0.8 - - Reteitalia S.p.A. - 0.1 0.2 0.1 0.2 - - S.E.E. S.p.A. - 0.4 - - - - - S.F.I.I. S.A. - - - 3.2 - - - Trefinance S.A. - 0.2 - - - - - Yond S.p.A. - 0.1 1.9 - 3.2 - - Other - 5.7 2.7 7.9 1.9 - -

Total 0.1 46.4 62.1 121.7 39.0 - -

In accordance with CONSOB communications no. 97001574 of February 20, 1997 and 98015375 of February 27, 1998, we inform you that the commercial relationships with the Fininvest Group and Mediolanum Group as set out in the table above were subject to normal market conditions. We point out that, with the exception of revenues from Fininvest S.p.A. (regarding new charges carried out in the year with respect to liabilities covered by the guarantee released on June 6, 1996), revenues from other companies belonging to the Fininvest Group and the Mediolanum Group, regarded the sale of television advertising spaces. We also point out that in 2000, the Mediaset Group purchased television rights from companies belonging to the Fininvest Group or related to them, for an overall amount of ITL 157.9 billion. These purchases may be analysed as follows: – Medusa Film S.p.A. 144.5 billion; – Medusa Video S.p.A. 0.4 billion; – Milan A.C. S.p.A. 13.0 billion.

SIGNIFICANT EVENTS A FTER DECEMBER 31, 2000 n On January 8, 2001 Stream started broadcasting MT Channel, a science programmes channel made by Mediadigit S.r.l. within the framework of the brand extension policy of the television programme bearing the same name from which the monthly specialist magazine had already been conceived, whose first issue was distributed in November 2000. n On January 23, 2001 the signing of an agreement was announced, based on which KirchMedia Gmbh & Co. KgaA will acquire from News German Television Holding, a subsidiary company of News Corporation Limited, the activities of the German television network tm3. As an exchange to this contribution, News German

60 Television Holding will receive a stake in the share capital of KirchMedia Gmbh & Co. KgaA, equal to 2.48%, and a payment in cash. KirchMedia Gmbh & Co. KgaA’s shareholders, once this operation and the transaction regarding Mediaset’s entry are completed, will be the following: KirchHolding Gmbh & Co. KG 72.62%, Thomas Kirch 6.54%, Rewe 5.71%, Capital Research Management Funds 2.93%, Trefinance S.A. (Fininvest Group) 2.48%, Kingdom Holdings 8 B.V. 2.48%, Lehman Brothers Merchant Banking 2.48%, News German Television Holding 2.48%, Mediaset Investment S.a.r.l. 2.28%. n On January 24, 2001 the Regional Administrative Court of Lazio issued the memorandum decision which accepted the appeal of Blu S.p.A. and as a consequence annulled the decision taken by the Committee of Ministers on October 23, 2000, regarding the payment of the bank guarantee of ITL 4,000 billion, submitted by Blu to take part in the bid for UMTS licences. On February 19, 2001, the reasons for the decision of the Regional Administrative Court were made public, which ascertain the correct and legitimate behaviour of Blu during the bid and in its previous stages. The ruling of the Regional Administrative Court will become final either after the expiration of the terms for the appeal before the Council of State (this can be filed by the Attorney General and/or the Codacons Association by June 19, 2001 or within 30 days of the notice of the ruling by Blu) or, in the event of an appeal, following a favourable ruling by the Council of State. The procedure of the Authority for the Guarantee of Competition and Market, which so far has not communicated any breach to Blu, should come to an end by June 30, 2001. n On January 25, 2001, Blu S.p.A. shareholders made a payment of ITL 200 billion regarding the capital increase decided on April 7, 2000; Mediaset Investment S.a.r.l. paid ITL 18 billion, according to its shareholding. Following this payment, Blu's share capital (amounting to ITL 1,500 billion) is paid up for an amount of ITL 1,100 billion. n Negotiations for the acquisition by the Mediaset Group of a 5% stake in the share capital of Gestevision Telecinco S.A. and Publiespana S.A. from the Planeta Group, definitely stopped in January without carrying out this operation, because of new circumstances which did not depend on the behaviour of the Mediaset Group but which, however, notably prolonged these negotiations. n Since March 5, 2001, Tgcom is on the net, the site which represents the new version of web information of Mediaset Online with real time updates 24 hours a day, comments, video services, polls and forums that will create interactions with the users. Tgcom is made within the new department of the Mediaset Group, bearing the same name, set up with the objective of developing journalistic contents that can be broadcast by means of different platforms, among which the Internet, Mediavideo and mobile terminals. n On March 7, 2001, the Senate turned into Law Decree no. 5 dated January 23, 2001, which regulates the start of national television programmes by means of digital technique.

61 FORESEEABLE DEVELOPMENTS n The trend of television advertising revenues seen in the first two months of 2001, is in line with our 6% growth objective, higher than that of the reference market. n In the first two months of 2001, Mediaset networks has won an audience share of 44.7% in the full day, with an increase of 2.2 share points over the same period of the previous year.

for the Board of Directors the Chairman

MEDIASET GROUP

2000 Consolidated Financial Statements Balance sheet and Income statement

MEDIASET GROUP Consolidated balance sheet as of December 31, 2000 (ITL billions)

ASSETS 31/12/2000 31/12/1999

A) RECEIVABLES FROM SHAREHOLDERS - -

B) FIXED ASSETS

I Intangible fixed assets 1 start-up and expansion costs 8.7 24.7 2 research, development and advertising costs 6.4 4.1 3 industrial patents and intellectual property rights 15.7 16.2 4 concessions, licences, trademarks and similar rights a) television rights 3,415.5 3,341.8 b) trademarks 52.6 69.1 c) concessions 0.2 0.2 5 goodwill 24.1 32.2 6 intangible assets under formation and advances 195.5 195.6 7 other 20.2 12.6 8 differences arising from consolidation 139.2 45.8

Total 3,878.1 3,742.3

II Tangible fixed assets 1 land and buildings 111.5 110.9 2 plant and machinery 210.1 185.1 3 industrial and commercial equipment 34.0 35.0 4 other tangible fixed assets 29.8 36.2 5 fixed assets under construction and payments on account 23.5 3.1

Total 408.8 370.3

III Financial fixed assets 1 investments in: a) subsidiary companies 0.1 380.1 b) affiliated companies 788.2 538.2 c) other companies 332.4 122.9

Total 1,120.7 1,041.2

2 receivables: a) Fininvest Group and Mediolanum Group companies 0.1 0.1 b) other companies 13.0 14.5

Total 13.1 14.6

3 other securities - 0.1

Total 1,133.8 1,055.9

TOTAL FIXED ASSETS (B) 5,420.6 5,168.5

66 MEDIASET GROUP

Consolidated balance sheet as of December 31, 2000 (ITL billions)

ASSETS 31/12/2000 31/12/1999

C) CURRENT ASSETS

I Inventory 1 raw materials, consumables and supplies 3.8 6.2 2 work in progress and semi-finished products 6.2 8.5 3 contracts in progress 0.5 0.7 4 finished goods and products 25.0 23.1

Total 35.5 38.5

II Receivables 1 trade receivables 1,260.7 1,109.5 2 due from subsidiary companies 24.3 8.9 3 due from affiliated companies 6.1 14.2 4 due from parent company 11.6 11.9 5 due from Fininvest Group and Mediolanum Group companies 34.8 35.8 6 other receivables 188.0 236.7

Total 1,525.5 1,417.0

III Financial assets (which are not fixed assets) 5 own shares 69.6 - 6 other securities 372.4 323.0 7 receivables due from subsidiary and affiliated companies - -

Total 442.0 323.0

IV Liquid funds 1 bank and postal deposits 470.5 338.3 3 cash in hand and cash equivalents 0.2 0.2

Total 470.7 338.5

TOTAL CURRENT ASSETS ( C) 2,473.7 2,117.0

D) PREPAYMENTS AND ACCRUED INCOME 1 accrued income 13.6 7.0 2 prepayments 20.2 13.1

TOTAL PREPAYMENTS AND ACCRUED INCOME (D) 33.8 20.1

TOTAL ASSETS 7,928.1 7,305.6

67 MEDIASET GROUP

Consolidated balance sheet as of December 31, 2000 (ITL billions)

SHAREHOLDERS' EQUITY AND LIABILITIES 31/12/2000 31/12/1999

A) SHAREHOLDERS' EQUITY I Share capital 1,181.2 1,180.3 II Share premium reserve 1,432.3 1,427.3 III Revaluation reserve - - IV Legal reserve 87.5 74.9 V Reserve for own shares 69.6 - VI Statutory reserves - - VII Other reserves 165.6 413.5 VIII Retained earnings (losses) 866.7 463.8 IX Profit (loss) for the year 819.9 656.7

Total Group shareholders' equity 4,622.8 4,216.5

Shareholders' equity attributable to minority interests 3.2 3.6

TOTAL CONSOLIDATED GROUP SHAREHOLDERS' EQUITY

AND ATTRIBUTABLE TO MINORITY INTERESTS (A) 4,626.0 4,220.1

B) PROVISIONS FOR RISKS AND CHARGES 1 for pension benefits and similar obligations 5.6 4.7 2 tax reserves (18.4) 114.2 3 Other reserves 151.3 61.2

TOTAL PROVISIONS FOR RISKS AND CHARGES (B) 138.5 180.1

C) EMPLOYEE TERMINATION INDEMNITY 164.7 156.4

D) PAYABLES 3 due to banks 653.2 316.2 4 due to other financial institutions 16.8 5.4 5 advance payments received 6.5 7.1 6 trade accounts 1,829.5 1,878.3 8 due to subsidiary companies - 1.0 9 due to affiliated companies 2.1 1.0 10 due to the parent company 0.6 0.5 10bis due to Fininvest Group and Mediolanum Group companies 61.5 46.0 11 due to taxation authorities 126.6 315.5 12 due to social security institutions 21.0 21.2 13 other sums payable 212.9 118.9

TOTAL PAYABLES (D) 2,930.8 2,711.1

E) ACCRUALS AND DEFERRED INCOME 1 accruals 39.8 6.9 2 deferred income 28.2 31.1

TOTAL ACCRUALS AND DEFERRED INCOME (E) 68.0 38.0

TOTAL LIABILITIES 3,302.1 3,085.5

TOTAL NET SHAREHOLDERS' EQUITY AND LIABILITIES 7,928.1 7,305.6

68 MEDIASET GROUP

Off- balance sheet items as of December 31, 2000 (ITL billions)

31/12/2000 31/12/1999 personal sureties given 364.8 13.1 collateral security - - commitments 5,416.9 2,539.5 contingencies 9.4 15.6 potential liabilities counter-guaranteed by the parent company 25.9 22.6

TOTAL OFF-BALANCE SHEET ITEMS 5,817.0 2,590.8

69 MEDIASET GROUP Consolidated income statement as of December 31, 2000 (ITL billions)

31/12/2000 31/12/1999

A) VALUE OF PRODUCTION 1 revenues from sales and services 4,514.7 3,889.6 2 changes in inventories of work in progress, semi-finished and finished goods 5.5 (8.7) 3 changes in contracts in progress 0.2 (3.6) 4 own work capitalised 31.9 39.2 5 other revenues and income 61.8 77.3

TOTAL VALUE OF PRODUCTION (A) 4,614.1 3,993.8

B) COST OF PRODUCTION 6 raw materials, consumables and supplies 120.9 128.2 7 services 1,046.4 820.9 8 leasing and rental 150.9 147.0 9 personnel expenses: a) wages and salaries 395.6 384.1 b) social security contributions 117.4 114.3 c) employee termination indemnity 38.0 34.8 d) pension benefits and similar obligations 1.1 1.1 e) other expenses 10.0 25.8 Total personnel expenses 562.1 560.1 10 amortisation, depreciation and write-downs a) amortisation of intangible fixed assets 1,193.2 1,079.4 b) depreciation of tangible fixed assets 69.5 66.4 c) other write-downs of fixed assets 12.7 17.8 d) write-downs of receivables included in current assets and liquid funds 13.6 23.1 Total amortisation, depreciation and write-downs 1,289.0 1,186.7 11 changes in the inventories of raw materials, consumables and supplies (3.2) 16.8 12 provisions for risks - - 13 other provisions 17.2 3.5 14 sundry operating costs 91.7 45.9

TOTAL COST OF PRODUCTION (B) 3,275.2 2,909.1

DIFFERENCE BETWEEN VALUE AND COST OF PRODUCTION (A-B) 1,338.9 1,084.7

C) FINANCIAL INCOME AND (CHARGES) 15 income from investments a) Fininvest Group and Mediolanum Group companies - 0.2 b) other companies 0.4 - Total income from investments 0.4 0.2

70 MEDIASET GROUP

Consolidated income statement as of December 31, 2000 (ITL billions)

31/12/2000 31/12/1999

16 other financial income a) from receivables included in fixed assets 0.3 0.3 b) from securities included in fixed assets 0.1 - c) from securities included in current assets 24.8 19.0 d) other income 112.8 79.4 Total other financial income 138.0 98.7 Total financial income 138.4 98.9

17 interest and financial charges a) subsidiary companies - - b) parent company (0.2) - c) Fininvest Group and Mediolanum Group companies - (0.3) d) other (239.7) (62.6) Total interest and other financial charges (239.9) (62.9)

TOTAL FINANCIAL INCOME AND (CHARGES) (C) (101.5) 36.0

D) ADJUSTMENTS TO THE VALUE OF FINANCIAL INVESTMENTS 18 write-ups a) investments 80.8 42.3 19 write-downs a) investments (61.4) (37.6)

TOTAL ADJUSTMENTS TO THE VALUE OF FINANCIAL INVESTMENTS (D) 19.4 4.7

E) EXTRAORDINARY INCOME AND (CHARGES) 20 income a) gains on disposals 0.7 10.9 b) other extraordinary income 1.3 5.3 Total extraordinary income 2.0 16.2 21 charges a) losses on disposals (0.4) (0.6) b) other extraordinary charges (3.8) (6.1) Total extraordinary charges (4.2) (6.7)

TOTAL EXTRAORDINARY INCOME AND (CHARGES) (E) (2.2) 9.5

Profit before taxation 1,254.6 1,134.9 22 income taxes for the year a) current taxation 566.6 470.8 b) deferred taxation (132.1) 7.2 Total income taxes for the year 434.5 478.0

Profit (loss) for the period 820.1 656.9 profit (loss) attributable to minority interests 0.2 0.2

26 PROFIT (LOSS) FOR THE YEAR 819.9 656.7

71 MEDIASET GROUP

2000 Annual Report Notes to the consolidated financial statements

MEDIASET GROUP Notes to the consolidated financial statements as of December 31, 2000

STRUCTURE AND CONTENT

The consolidated financial statements as of December 31, 2000 and these explanatory notes have been prepared in accordance with CONSOB deliberation no. 11971 of May 14, 1999 (and subsequent modifications) and with the regulations governing the preparation of consolidated financial statements introduced by Law Decree no. 127 of April 9, 1991 to implement EEC Directive VII. The financial statements included in the consolidation are those approved by the General Meetings of each company. These financial statements have been adjusted as necessary to bring them in line with Group accounting policies, which are in line with current regulations and the accounting policies recommended by the National Councils of Professional Accountants and Bookkeepers. The consolidated financial statements include the financial statements of Mediaset S.p.A. and of those companies in which it holds a direct or indirect absolute majority in the share capital and voting rights, as well as the financial statements of those companies belonging to the joint-venture with the Kirch Group, for the 50% share belonging to the Mediaset Group. Mediaset Ireland Ltd. and Epsilon TV Production S.r.l. have been consolidated at cost, rather than on a line-by-line basis, even though these are (directly and indirectly) controlled by Mediaset S.p.A., since these companies are inactive. Thasos GmbH, where the Mediaset Group holds a 50% stake within the aforementioned joint venture, has also been consolidated at cost, as it was not considered significant.

MAIN CHANGES IN THECONSOLIDATION AREA A ND INVESTMENTS IN SUBSIDIARY AND AFFILIATEDIATED COMPANIESCOMPANIES MADEMADE ININ 20002000

The following corporate operation that brought about changes in the consolidation area of the Mediaset Group over the previous year took place during 2000: n Class Financial Network S.p.A.: on January 25, 2000 the subsidiary company Mediadigit S.r.l. acquired 10% (9.9% at December 31, 2000 because of a capital increase reserved to third parties) of Class Financial Network S.p.A, the company that produces the contents of the economic and financial theme channel CFN, distributed by Stream. This company is consolidated using the cost method. n Fivefactor S.p.A.: on March 8, 2000 the parent company Mediaset S.p.A. sold to a third party its stake (10%) in the company Fivefactor S.p.A.. The company has therefore been excluded from the consolidation area. n TV Breizh S.A.: on April 28, 2000 the subsidiary company Mediaset Investment S.a.r.l. subscribed a 13% shareholding in this newly established French company,

74 whose objective is the creation of a television channel in Breton language to be distributed on the main satellite and cable French platforms. This company is consolidated using the cost method. n R.T.I.. MusicMusic EspanaEspana S.A.S.A.: on June 30, 2000 the subsidiary company Mediaset Investment S.a.r.l. cancelled its shareholding in R.T.I. Music Espana S.A., following the liquidation of this company , which has therefore been excluded from the consolidation area. n Euromedia Luxembourg Two S.a .: on July 25, 2000 the subsidiary company Mediaset Investment S.a.r.l. joined the Euromedia Venture Fund by acquiring 11.8% of the share capital of Euromedia Luxembourg Two S.a. This company is consolidated using the cost method. n Veleno S.p.A.: on November 3, 2000 Mediaset S.p.A. acquired, by means of a reserved capital increase, 24% of this company, formerly Realweb S.r.l., which will develop contents for multimedia use. This company, held by the Mediaset Group only in late 2000, is consolidated using the cost method. n Epsilon TV Production S.r.l.: on December 20, 2000 the subsidiary company Mediaset Investment S.a.r.l. established this company, which in the future will be jointly owned by the Mediaset Group and the Kirch Group, and will be active in the field of production and co-production of international television contents. This company is still inactive and is consolidated at December 31, 2000 using the cost method. n Epsilon Group: Euroset S.a.r.l. parent company of the European Joint-venture established in October 1999 with the Kirch Group and consolidated at December 31, 1999 using the cost method, starting with this year is consolidated on a proportional basis, like its subsidiary companies. The consolidated financial statements of the Mediaset Group as of December 31, 2000 therefore include in each balance sheet item, a 50% balance from the companies belonging to the Epsilon Group, equal to the percentage held by the Mediaset Group. More information about this consolidation method can be found in the relevant section included in these notes. To facilitate the interpretation of the situation of the year 2000, and make comparisons with the previous year possible, these notes are drafted by highlighting for each described item the effect arising from the proportional consolidation of the jointly-owned companies. A complete list of the companies included in the consolidation area is provided in the relevant attachment.

GROUP OPERATIONS AND REGULATORYREGULATORY FRAMEWORFRAMEWORK

75 249/97 and that on the development of satellite/cable users, that should lead to clarifications about the performances required by article 3 clause 7. The former came to a positive conclusion, since the Authority determined that ours is a legitimate position according to Law. The second investigation has not come to an end yet. In January/February this year, following an investigation started in September 2000, the Authority refused twice to authorize the purchase of TMC and TMC2 by Telecom through SEAT, based on the prohibition included in article 4 clause 8 of Law 249/97. The case started by Telecom against this decision is still pending. Bill 1138, after over 4 years of discussions in Parliament, was not passed; its regulations shall be examined in the next legislature. As shown in the Report on Operations, in the section devoted to Significant Events after December 31, 2000, on March 7, 2001 Decree no. 5, dated January 23, 2001 was turned into Law. It includes the awaited regulations for the start of broadcasting by means of digital technique (the only matter left from Bill 1138). The Law specifically considers the start of the experimentation stage of digital broadcasting, the possibility to acquire equipment/frequencies for the experimentation, the possibility for owners of more than one national television authorisation to use up to 60% of their broadcasting capacity for every digital frequency, the 2006 deadline, by which the whole television system should migrate to the sole digital broadcasting technique. The Authority is also approving the regulations regarding advertising and the creation of the Register of Communication Operators.

CONSOLIDATION METHOD

The financial statements of subsidiary companies are consolidated on a lineline-by-lineline basis, replacing the book value of investments in these subsidiaries with their assets and liabilities. The difference between acquisition cost and shareholders’ equity reflected in the financial statements of subsidiaries at the time of their acquisition, net of any negative adjustments, is recorded as difference arising from consolidation and amortised using the methods indicated in the valuation criteria. All intercompany receivables and payables, expenses and revenues and unrealised profits or losses are eliminated. Minority interests in the shareholders’ equity and the result for the year of consolidated companies are reported separately. The financial statements of companies jointly owned with the Kirch Group (European Joint-venture) are consolidated on a proportional basis, replacing the book value of investments in these companies with their assets and liabilities in line with the Group’s share (50%).

76 The difference between acquisition cost and shareholders’ equity reflected in the financial statements of subsidiaries at the time of their acquisition, net of any negative adjustments, is recorded as difference arising from consolidation and amortised using the methods indicated in the valu ation criteria. All intercompany receivables and payables, expenses and revenues and unrealised profits or losses are eliminated on a proportional basis. The financial statements of affiliated companies are included in the consolidated financial statements primarily on the basis of the net equity method. Inactive subsidiary companies, and those whose financial statements figures are not material, are not consolidated but recorded at cost.

77 VALUATION CRITERIA A ND ACCOUNTING POLICIES

The valuation criteria and accounting policies used in preparing the consolidated financial statements as of December 31, 2000 are, in general, the same as those used for the financial statements as of December 31, 1999, and may be summarised as follows:

IntangibleIntangible fixedfixed assetsassets Intangible fixed assets are recorded at purchase or production cost, including ancillary charges, and amortised on a straight-line basis over the period of their projected future use. “Start“Start- up and expansion costs” are recorded at purchase cost, including ancillary charges. This item primarily includes costs incurred into by the parent company Mediaset S.p.A. at the time of the private placement of its stock on international markets and costs incurred for obtaining approval to list securities on the Electronic Trading System of the Italian Stock Exchange. The aggregate of these costs is amortised on a straight-line basis over five years, since the estimated utility of share capital increases following public and private placements extends for a minimum of five years in the form of savings on financial charges.

“Television“Television rights”rights” for films and television series were recorded at appraisal value for the portion related to the transfer of the business of Reteitalia S.p.A. to Mediaset S.p.A. and at cost for purchases made in 1994 and after. Amortisation is calculated on a straight-line basis over the period of the relevant contract and, in any event, over a period not exceeding 120 months. Rights to sports and news programmes are amortised almost entirely (90%) in the year the rights take effect with the remainder being expensed the following year. The straight-line amortisation method was adopted (except for sporting rights) rather than any other method in use in the sector, in the light of the difficulty in identifying objective components for making a correlation between advertising revenues and the amortisation of rights that would support the case for using a different principle; the presence of several television networks in the Group, resulting in various alternatives for the use of rights, was also taken into account. Regardless of the amortisation already charged if all showings made available under rights contracts have been used up, the remaining value is fully expensed.

“Trademarks”“Trademarks” are recorded at acquisition cost and amortised on a straight-line basis over 10 years. ”Goodwill””Goodwill” is recorded on the basis of the appraisal regarding the transfer of the Reteitalia S.p.A. business to Mediaset S.p.A. in 1993. It is amortised on a straight-line basis over 10 years, the period deemed to reflect future utility given the ability to use, over time, the company’s know-how in the field of acquiring and making use of television rights. This know-how has brought certain competitive advantages, in terms of both purchase and price guarantees, resulting from the transfer of contracts of

78 major US producers and the transfer of human resources with their respective knowledge and contacts. The benefits from this competitive advantage are further confirmed by the widespread demand and fondness of the Italian viewing public for the Group’s networks. “Differences“Differences arisingarising fromfrom consolidation”consolidation” are amortised over a period commensurate with the estimated profitability of the companies involved and, in any event, over a period not exceeding 10 years for the reasons given above with regard to goodwill. Other intangible fixed assets (“research,“research, developmentdevelopment andand adveradvertisingtising costs”,costs”, “patents“patents and intellectual property rights”, “concessions” and “other“other intangibleintangible fixedfixed assets”)assets”) are recorded at acquisition or production cost, including ancillary charges, and amortised on a straight-line basis over the period of their estimated future utility.

Tangible fixed assets Tangible fixed assets are recorded at acquisition, production or transfer cost. Cost includes ancillary charges, and the share of direct or indirect costs that can reasonably be allocated to the asset. Tangible fixed assets are depreciated in each accounting period on a straight-line basis, using depreciation rates which are determined in relation to the remaining potential use of the assets. For newly acquired assets, the depreciation rates used are: – Buildings 3% – Plant and machinery 10 - 20% – Light construction and equipment 5 - 16% – Office furniture and equipment 8 - 20% – Motor vehicles 10 - 25% Regardless of the depreciation already charged, if there is a permanent loss in value, the fixed asset in question is written down accordingly. If in future accounting years, the reasons for the write-down cease to be applicable, the original value is restored and adjusted only for depreciation. All ordinary maintenance costs are charged in full to the income statement. incremental maintenance costs are attributed to the related assets and depreciated over their residual useful life.

Leases In the case of finance leases for fixed assets, if their amount is large and the term is substantially shorter than the useful life of the relevant assets, their market value at the beginning of the lease is booked to fixed assets and depreciated. If these conditions do not apply, lease payments are charged to the income statement on an accruals basis.

79 Equity investments Investments in companies that are not consolidated on a line-by-line basis are primarily recorded using the equity method, or, in the case of certain subsidiary and affiliated companies, using the cost method as indicated in the relevant comments and introductory section of these notes. If the equity method is used, investments in subsidiary and affiliated companies are recorded in the financial statements for an amount equal to the corresponding portion of the shareholders’ equity, less dividends, and adjusted as required using the appropriate principles for preparing consolidated financial statements. In the case of investments in foreign companies valued using the equity method, no adjustments have been made to reflect adjustments arising from inevitable differences in the accounting policies applied in those countries as the local accounting policies are considered more suitable in arriving at a true and fair view of the result for the year of these companies. If the cost method is applied, the value recorded in the financial statements is determined on the basis of the purchase or subscription price, or the value attributed to assets transferred. The cost is reduced in the event of a permanent impairment of value if the subsidiary or affiliated companies incur into losses and profits are not expected in the near future for an amount sufficient to offset the losses incurred. The original value is restored in subsequent accounting periods if the assumptions underlying the write-down no longer apply.

Receivables Receivables are stated at their estimated realisable value. Receivables denominated in non-EMU area foreign currencies were translated into Italian Lira using December 31, 2000 exchange rates. Hedging contracts are valued consistently with the receivables being hedged.

Financial assets (which are not fixed assets) These assets are recorded at the lower of cost or estimated realisable value determined from the market situation. If written down, the lower value is not maintained in subsequent years if the reason for the write-down no longer applies.

Prepayments and accrued income, accruals and deferred income These items include portions of revenues and expenses common to two or more periods in accordance with the accruals concept.

Provisions forfor risksrisks andand chargescharges The provisions for risks and charges are created to cover certain or likely losses or liabilities for which the exact value or effective date could not be determined at the period end. Amounts provided reflect the best possible estimate on the basis of

80 available information. Risks in respect of which only a liability might arise, are disclosed in the notes to the Balance Sheet without setting up a provision.

Employee termination indemnity The provision for employee termination indemnity is established to cover the entire liability accruing to employees in accordance with current laws, collective agreements and local company agreements. This liability is subject to revaluation using indices.

Payables Payables are stated at face value; those in non-EMU area foreign currencies were translated using the December 31, 2000 exchange rate. Forward contracts used to hedge payables are valued consistently with the payables being hedged.

Revenue recognition The main revenue flows are recognised as follows: n for advertising, at the time the insert or advertising commercial appears; n for goods, when they are shipped or delivered. If a right is rented, the related revenue is recognised in each year on an accruals basis according to the length of the rental contract; n for services, at the time when such services are rendered.

Dividends Dividends are recorded in the accounting period in which distribution is approved. The tax credit for dividends received is accounted for in the accounting period that such dividends are received.

IncomeIncome taxestaxes Income taxes are recorded, for each individual company, based on an estimate of taxable income as calculated under existing legislation, considering available exemptions and tax credits due. Pursuant to new Italian Accounting Standard no. 25, deferred tax assets have been calculated by the individual companies based on timing differences between the value attributed to an asset or liability under statutory reporting requirements and that attributed to it for tax purposes. Suitable adjustments in the event of a future change in the tax rate are made provided that the law providing for such a change has already been issued at the annual report drafting date. Deferred taxation has also been provided in respect of adjustments arising from consolidation.

81 Financial instruments Financial instruments used to hedge exchange risk regarding assets and liabilities denominated in currencies other than Italian Lire are valued consistently with the assets and liabilities being hedged. Those used to optimise financial income and charges are booked by recognising income and charges in the income statement on an accruals basis.

CONVERSION OF FINANCIALIAL STATEMENTSSTATEMENTS ININ N ON-EMU AREA FOREIGN CURRENCIES

The financial statements of foreign subsidiary companies drafted in non-EMU area foreign currencies are converted using the current exchange rate , i.e. by converting all assets and liabilities at the period end exchange rate, the net shareholders’ equity at the historical exchange rate and the income statement at the average period exchange rate. The difference arising between the result in the income statement and that converted at the closing exchange rate, and the differences arising from the conversion of the net shareholders’ equity at different exchange rates from that of the closing date are included in an appropriate item of shareholders’ equity called Conversion Reserve.

ADDITIONAL INFORMATION

Adaptation of previous year financial statements The current consolidated financial statements include the amounts of the corresponding items as of December 31, 1999. To make the classification criteria of the 1999 financial statements comparable with those of the 2000 financial statements, the following reclassifications were carried out: n a part of the assets direct write-down reserve (B.1.4) of the financial statements as of December 31, 1999, equal to ITL 5.4 billions, was reclassified in 2000 as follows: – in the provision for risks penalties and contracts (B.3) for an amount of ITL 4.3 billion, since it had been previously allocated to potential penalties for higher transfers than those allowed; – in the provision for write-down of contracts in progress (B.1.6) for an amount of ITL 1.1 billions.

Write-up of corporate assets according to Law no.342 of November 21, 2000 Assets that have been written-up on a voluntary basis, in line with Law 342/2000 are recorded in the consolidated financial statements at their original recording value, since the one-off character of the application of this rule included in the financial statements of consolidated companies may mar a homogeneous application of

82 accounting principles and the opportunity to compare Group’s financial statements over time. The tax benefit produced on the corporate financial statements starting from this year, up to the total amortisation of this write-up is recorded in the consolidated income statement on an accruals basis, and therefore fully advanced in this year net of the substitute tax, and neutralised in future years.

Exceptions permitted by article 2423 clause 4 of the Italian civil code No exceptions to standard accounting practices as per article 2423 clause 4 of the Italian Civil Code were made in these financial statements.

83 COMMENTS ON THE MAIN ASSETASSET ITEMSITEMS

(amounts in ITL billions)

Fixed assets Tables included in the attachments have been prepared for the three categories of fixed assets (intangible assets, tangible assets and financial assets). For each item, these tables show opening balances, movements during the year and closing balances. In order to have an immediate understanding of the changes, these tables show separately the effect arising from the proportional consolidation of the Epsilon Group, which is carried out for the first time this year.

IntangibleIntangible fixedfixed assetsassets Start- u p and expansion costs include expenses associated with the start up or capital increase of consolidated companies and costs incurred for the flotation of the parent company at the stock exchange.

31/12/2000 31/12/1999

Start-up and expansion costs 8.7 24.7

Total 8.7 24.7

The effect arising from the proportional consolidation of Euroset S.a.r.l. and Euroset Television S.a.r.l., implied an increase in this item, for the amount pertaining to the Mediaset Group, equal to ITL 2.1 billion for the capitalisation of registration dues on the capital increases received by them. As to the other Group’s companies, increases in the year, equal to ITL 1.1 billion, can be attributed to the capitalisation of registration dues on the capital increase of the subsidiary company Mediaset Investment S.a.r.l. Decreases, of ITL 19.2 billion, refer to amortisation quotas, ITL 0.5 billion of which regard start-up costs of the Epsilon Group. As to companies subject to Italian law, pursuant to article 2426 of the Civil Code, until these costs have been fully amortised, dividends may only be paid if there are sufficient free reserves to cover the balance of capitalised costs still to be amortised. Research, development and advertising costs, whose balance at December 31, 2000 was equal to ITL 6.4 billion (ITL 4.1 billion at December 31, 1999) , includes the capitalisation of consulting expenses for the creation of in-house information systems. Increases in the year, equal to ITL 4.9 billion represent the progress in this project, while decreases are attributable to amortisation quotas (ITL 1.9 billion) and to the disposal of the television signal broadcasting equipment design branch (ITL 0.7 billion). Patents and intellectual property rights shows the following balances:

84 31/12/2000 31/12/1999

Patents and intellectual property rights 15.7 16.2

Total 15.7 16.2

During the period, increases totalled ITL 10.6 billion, mainly as a result of software purchased and updated, among which the digitalisation of TV news and the development of the Mediavideo IT system and reclassifications of payments on account which were classified as intangibleintangible assetsassets underunder formationformation andand advancesadvances last year (ITL 1.0 billion). Decreases totalling ITL 11.2 billion mainly related to amortisation quotas. Concessions, licences, trademarks and similar rights include the following:

31/12/2000 31/12/1999

Television rights 3,415.5 3,341.8 Trademarks 52.6 69.1 Concessions 0.2 0.2

Total 3,468.3 3,411.1

televisiontelevision rightsrights: in 2000, there were investments of ITL 1,100.6 billion (ITL 1,816.2 billion in 1999). ITL 85.8 billion of advance payments previously made to suppliers were capitalised under this heading (classified under intangibleintangible assetsassets underunder formationformation and advances at December 31, 1999) following the finalisation of the related contracts. ITL 67.0 billion of these advances relate to contracts with Medusa Film S.p.A., and ITL 14.2 billion to investments by the Epsilon Group. The overall balance at December 31, 2000 of the Group’s share of rights owned by the Epsilon Group was ITL 27.0 billion. These rights, the so called “tail rights” for movies currently exploited by others, are the guarantee on an “output deal” agreement between the Kirch Group and the distribution company of the independent US producer New Regency. Since these rights will become effective only in 2007, they did not generate any amortisation in 2000. Rights that have not come into effect yet amount on the whole to around ITL 1,206.7 billion (ITL 1,411.7 billion approx at December 31, 1999). In addition, around ITL 17.5 billion (ITL 31.7 billion at December 31, 1999) of rights remain from the transfer of the business activity of Reteitalia S.p.A., the value of which was based on a special appraisal prepared at the time of the transfer. Decreases for the period of ITL 1,125.5 billion were mainly due to amortisation totalling ITL 1,103.0 billion (ITL 1,019.0 billion in 1999), and the cancellation of prior year contracts of around ITL 21.7 billion and write-downs for ITL 0.8 billion. Trademarks includes network and television production trademarks. They increased by ITL 0.8 billion during the year, and decreased by ITL 17.3 billion, mainly as a result of amortisation. The revaluation of this category of assets by subsidiary company R.T.I. S.p.A. according to Law no. 342/2000 is reversed in the consolidated financial statements as is

85 described in the section of these notes devoted to Valuation criteria and accounting principles. Goodwill fell by ITL 8.0 billion during the year as a result of amortisation. It consists of the goodwill recorded in 1994, following the transfer of the business activity of Reteitalia S.p.A. to Mediaset S.p.A.. Amortisation of this goodwill began in 1994 and will take 10 years, as explained in the section valuationvaluation criteriacriteria. IntangibleIntangible assetsassets underunder formationformation andand advancadvances, amounted to ITL 195.5 billion at December 31, 2000 (ITL 195.6 billion at December 31, 1999). They consist of payments made to suppliers for the acquisition or rights, advances paid for dubbing services, for options on the completion of programmes and production start-ups. The most significant element of this balance is advances of ITL 88.6 billion (ITL 105.1 billion at December 31, 1999), paid to Medusa Film S.p.A., a Fininvest Group company operating in the film industry, under contracts which will see Mediaset S.p.A. acquire exclusive rights to films made and distributed by Medusa Film S.p.A. The price of these rights is contractually determined based on elements connected to the box-office takings of single films in Italian movie theatres. Increases during the year amounted to ITL 131.5 billion. They primarily consisted of advances paid to suppliers of TV rights, including Medusa Film S.p.A. for ITL 39.7 billion. These increases also include advances of ITL 24.7 billion paid for the production of long serial dramas. Decreases amounted to ITL 145.7 billion, ITL 11.9 billion of which regarded write- downs. They mainly resulted from the finalisation of contracts under negotiation at December 31, 1999; these balances were reclassified to televisiontelevision rightsrights (ITL 85.8 billion) and contract cancellations (ITL 48.0 billion). Among them, during the year the option (value: ITL 30.0 billion) with the company Cecchi Gori Communications S.p.A. to acquire a package including films from the 1997/98 cinema season, which will be available to be shown on television as from the 1999/2000 season, expired and was not exercised. As to the Epsilon Group, advances regarding the previously described contracts with New Regency, equal to ITL 14.2 billion, are written-off following the finalisation of these contracts and their subsequent recording in televteleviision rights. Other intangible assets, at December 31, 2000 amounted to ITL 20.2 billion. They consist of the following: n ITL 7.8 billion regarding the 50% Group’s share of the put option garanted by the Kirch Group to Euroset Television S.a.r.l. This irrevocable and unconditioned option gives the company the right to sell by December 31, 2002, at a value equal to the initial investment plus interest, its shareholding in PKS GmbH, the holding company that held 59% of the Sat 1 Group and of Media 1 GmbH, and currently indirect holding company of a 16.53% stake in the newly established ProSiebenSat1MediaAg Group. This right of option is recorded in fixed assets and amortised based on duration, according to the number of months. n ITL 12.4 billion mainly regarding leasehold improvements (ITL 12.6 billion at December 31, 1999).

86 Increases in the year, equal to ITL 9.5 billion, are mainly attributable to works carried out on television posts, recording studios and leased premises. The decrease is mainly due to amortisation during the year, totalling ITL 13.6 billion. ITL 3.9 billion of these are the proportional amortisation of the put option on the Epsilon Group described before. Differences arising from consolidation include, net of amortisation, the difference between the book value and the corresponding shareholders’ equity of consolidated companies insofar as it could not be attributed to specific fixed assets. The balance at December 31, 2000, equal to ITL 139.2 billion including the effects arising from the proportional consolidation of the Epsilon Group, can be analysed as follows: n ITL 38.9 billion represent the overall net goodwill generated on Mediaset Group following acquisitions previous to the setting up of the Joint-venture company with the Kirch Group (ITL 45.8 billion at December 31, 1999); n ITL 164,8 billion represent 50% of the overall goodwill generated following the establishment of the Epsilon Group, and precisely: – ITL 161.1 billion from the goodwill recognised with respect to the accounting shareholders’ equity of Beta Film GmbH; – ITL 3.7 billion from the goodwill recognised with respect to the accounting shareholders’ equity of Publieurope Ltd.; n Minus ITL 64.5 billion, deducted from the figures above; this item is the difference arising from the consolidation of Epsilon in Mediaset the corresponds to the surplus in the shareholders’ equity quota of the Joint-venture company with respect to the percentage held by the Mediaset Group. Increases for the year other than the effect arising from the new proportional consolidation, equal to ITL 1.0 billion, are the result of purchases made by Group companies of minority interests in companies already controlled by the Group. Decreases of ITL 19.1 billion included ITL 7.9 billion of amortisation quotas of the goodwill generated before the Joint-venture agreement, and ITL 11.2 billion of amortisation quotas of the goodwill of the Epsilon Group.

Tangible fixed assets Increases for the year, totalling ITL 122.2 billion (ITL 80.2 billion in 1999) net of reclassifications for advances for the finalisation of contracts (ITL 2.6 billion on the whole), were primarily related to the expansion of the signal broadcasting network and the process of updating technical equipment used in television studios. The main increases are analysed below by asset category: n buildings: ITL 4.6 billion; n plant and machinery: ITL 77.2 billion; n industrial and commercial equipment: ITL 7.0 billion; n other tangible fixed assets: ITL 10.2 billion.

87 The balance includes ITL 0.8 billion, net of period amortisation equal to ITL 0.2 billion, arising from the proportional consolidation of the Epsilon Group and mainly related to industrial buildings and equipment. Fixed assets under construction and payments on account amounted to ITL 23.5 billion, with a net increase of ITL 20.4 billion over December 31, 1999. This increase is mainly connected to the implementation of digital editing for news programmes and the construction of the new broadcasting system in Segrate. These increases also include advances paid to suppliers for the construction of the new studio in Cologno Monzese. Overall decreases in tangible assets mainly resulted from amortisation for the year, totalling ITL 69.3 billion and disposals equal to ITL 14.8 billion.

Financial fixed assets

InvestmentsInvestments The following investments are valued by means of the equity method:

31/12/2000 31/12/1999

Affiliated companies Gestevision Telecinco S.A. 477.5 457.9 Publiespana S.A. 87.4 79.8 PKS GmbH 220.0 -

Other companies Albacom S.p.A. 139.5 89.8 Total investments calculated by the net equity method 924.4 627.5

The figure booked for these investments at December 31, 2000 reflects their valuation under the equity method as explained in greater detail in the comments on the Income statement. PKS GmbH,, holding company with 59% of Sat 1 and Media 1, indirectly holds a 16.53% stake in the new company ProSiebenSat1MediaAg, deriving from the merger of the operations of the Sat1 group and the ProSieben group. PKS, 49% of which is held by Euroset Television S.a.r.l. (the latter is 100% controlled by Euroset S.a.r.l) therefore belongs to the Mediaset Group, by means of the Joint-venture with Kirch Media, for a 24.5% stake. The value of this investment at December 31, 2000 was adjusted with respect to the original acquisition cost, equal to ITL 230.2 billion for the Group’s share, to take into consideration the change in the shareholders’ equity portion belonging to the Group, as well as of the amortisation of goodwill recognised with respect to the accounting values at the date of acquisition of shareholders’ equities of PKS GmbH and Sat 1GmbH. As to the investment in Albacom, during the year capital increases were subscribed for an amount of ITL 99,6 billion. The value of the investment was then adjusted following

88 the change in the Group’s portion of shareholders’ equity and the goodwill amortisation. The following investments are valued at cost:

31/12/2000 31/12/1999

Subsidiary companies: Euroset S.a.r.l. - 380.0 R.T.I. Music Espana S.A. - 0.1 Other 0.1 -

Affiliated companies Consorzio Aeromobili Fininvest 0.5 0.4 Other 2.8 0.1

Other companies

Fivefactor S.p.A. - 2.1 Blu S.p.A. 135.0 27.0 Monarchy Holding (New Regency) 38.4 - Other 19.5 3.9

Total investments valued at cost 196.2 413.7

Changes over December 31, 1999 mainly regard the different consolidation criterion adopted for the Joint-venture company Epsilon, and precisely: n Euroset S.a.r.l.: this company, holding company of the Joint-venture with the Kirch Group, was consolidated at December 31, 1999 at cost, since the operation was completed at the end of the year. As already mentioned in detail, in 2000 Euroset S.a.r.l., like its subsidiary companies, was consolidated by means of the proportional method, and the value of the investment was replaced by the assets and liabilities of the affiliated and subsidiary companies, in line with the Mediaset Group’s share. n Thasos GmbH: following the proportional consolidation of the Epsilon Group this company, entirely controlled by Beta Film GmbH and therefore at 50% by the Mediaset Group, is included in the consolidated financial statements under subsidiary companies. It was consolidated at cost since it was not significant. The Group’s share in this investment totalled at December 31, 2000 ITL 0.03 billion. In the first half of the year Kappalibrae Gmbh was consolidated under similar terms, to be then sold during the year. n Mercury Film GmbH: 50% of this company is owned by Betafilm GmbH, therefore the Mediaset Group has a 25% stake. It is included in affiliated companies with a value of ITL 0.2 billion. n Monarchy Holding: the Mediaset Group’s share in the financial holding company heading the US independent production house New Regency and its distribution network equals to 1.975% As to other investments valued at cost, the following changes took place in: n Class Financial Network S.p.A.: on January 25, 2000 subsidiary company Mediadigit S.r.l. acquired a 10% stake (9.9% at December 31, 2000, following a dilution

89 brought about by the entry of new shareholders) of Class Financial Network S.p.A, the company that makes the economic and financial theme channel CFN, distributed by Stream. n DMT S.p.A.: on February 18, 2000 subsidiary company Elettronica Industriale S.p.A. acquired a 30% stake in D.M.T. S.p.A., to which it had sold on January 1, 2000 its television signal broadcasting equipment design and assembly branch. On November 8, 2000 the main shareholder in D.M.T. S.p.A. exercised the right of option for the repurchase of this stake. The company, not included in the consolidation area at December 31, 2000, was consolidated at cost in intra-year accounting situations. n Fivefactor S.p.A.: on March 8, 2000 the parent company Mediaset S.p.A. sold to a third party its stake in the company Five Factor S.p.A., equal to 10%. n TV Breizh S.A.: on April 28, 2000 the subsidiary company Mediaset Investment S.a.r.l. took part, with a 13% stake, in the establishment of the French company for the creation of a television channel in Breton language for pay TVs. n R.T.I. Music Espana S.A.: on June 30, 2000 the subsidiary company Mediaset Investment S.a.r.l. carried out the write-off of its shareholding in R.T.I. Music Espana S.A. following the liquidation of the company. n Euromedia Luxembourg Two S.A.: on July 25, 2000 the subsidiary company Mediaset Investment S.a.r.l. joined the Euromedia Venture Fund by subscribing an 11.8% stake in the share capital of Euromedia Luxembourg Two S.A. n Veleno S.p.A.: on November 3, 2000 Mediaset S.p.A. subscribed, by means of a reserved capital increase, a 24% stake in this company, already called Realweb S.r.l., that will develop contents for multimedia use. n Epsilon TV Production S.r.l.: this company was not operating yet at the closing of the year. It was set up on December 20, 2000 by the subsidiary company Mediaset Investment S.a.r.l. and will be jointly owned by the Mediaset Group and the KirchMedia Group. It will be active in the international area of television contents. n B lulu S.p.A.S.p.A.: during the year capital increases were subscribed, in line with the Group’s share, equal to ITL 108.0 billion. Though the company recorded a loss for the year connected to its start-up character, the cost of the investment is kept in the balance sheet since, based on future plans, this loss is considered to be temporary. n VEP Investors: during the year subsidiary company Mediaset Investment S.a.r.l. acquired further quotas of this equity fund, for an amount of ITL 0.7 billion. The overall value, equal to ITL 4.3 billion is classified in investments in other companies, in line with the specific character of this investment. Attached is a list indicating the information required for each subsidiary and affiliated company by current regulations on consolidated financial statements. Further information about investments during the year can be found in the Report on Operations.

90 Receivables This item includes medium and long-term receivables to which no value adjustments have been made. Receivables from other companies, amounted to ITL 13.0 billion at December 31, 2000 (ITL 14.5 billion at December 31, 1999). It includes ITL 2.8 billion in guarantee deposits made for leases and utilities and ITL 10.2 billion due from taxation authorities for advance taxation paid on the Employee termination indemnity reserve. Of the total balance, ITL 9.1 billion is due after more than one year.

Current assets

InventoryInventory At the end of the year, this item consisted of:

31/12/2000 31/12/1999 Gross Write-down Net value Net value

Raw materials, consumables and supplies 8.2 (4.4) 3.8 6.2 Work in progress and semi-finished products 6.2 - 6.2 8.5 Contracts in progress 0.5 - 0.5 0.7 Finished goods and products 35.2 (10.2) 25.0 23.1

Total 50.1 (14.6) 35.5 38.5

Raw materials, consumables and supplies primarily include spare parts for radio and television equipment. The write-down concerns slow-moving items, which have been written down to their estimated realisable value. Work in progress and semi-finishedfinished productsproducts primarily consist of screenplays and television productions in progress. Finished goods and products primarily include: n television productions held by R.T.I. S.p.A. totalling ITL 15.5 billion (ITL 8.4 billion at December 31, 1999); n television broadcasting equipment and equipment for system construction purposes totalling ITL 8.9 billion (ITL 12.6 billion at December 31, 1999); The total write-down was carried out of the library of rights in Spanish held by the subsidiary company Mediatrade S.p.A. and used for trading activities, whose residual value at December 31, 1999 was equal to ITL 2.0 billion. Part of the write-down for the year was made by using a provision prudentially allocated in 1999.

Receivables At the end of the year, this item could be broken down as follows:

91 Balance at 31/12/2000

Due Balance at Total within 1 year after 1 year 31/12/1999

Trade receivables 1,260.7 1,257.5 3.2 1,109.5 due from subsidiary companies 24.3 24.3 - 8.9 due from affiliated companies 6.1 6.1 - 14.2 due from parent company 11.6 11.6 - 11.9 due from Fininvest Group and Mediolanum Group companies 34.8 34.8 - 35.8 other receivables 188.0 188.0 - 236.7 Total 1,525.5 1,522.3 3.2 1,417.0

Trade receivables

31/12/2000

Gross Write down Net

Due from customers within one year 1,330.5 (73.0) 1,257.5 Due from customers after one year 8.3 (5.1) 3.2

Total 1,338.8 (78.1) 1,260.7

Trade receivables primarily relate to the sale of advertising space to Italian clients (ITL 1,064.4 billion net of the allowance for doubtful accounts; ITL 979.5 billion at December 31, 1999). The balance at December 31, 2000 includes ITL 52.0 billion of Epsilon Group’s receivables mainly connected to rights distribution and advertising contracts. The remainder consists of receivables for the sale of rights and television productions and for the sale of radio and television equipment. The allowance for doubtful accounts reflects adjustments to bring receivables in line with their estimated realisable value. During the year, ITL 10.1 billion of the allowance for doubtful accounts was utilised, mainly in respect of advertising clients, while a further ITL 13.4 billion was provided. Receivables sold to factoring companies without recourse totalled ITL 454.1billion (ITL 430.4 billion at December 31, 1999). Receivables not yet collected at December 31, 2000 amounted to ITL 92.4 billion; none of these receivables was collected in advance.

Receivables due from subsidiary companies, affiliated companies, parent company and Fininvest Group and Mediolanum Group companies This item includes short-term receivables and may be analysed as follows:

31/12/2000 31/12/1999

Receivables from subsidiary companies 24.3 8.9 Receivables from affiliated companies 6.1 14.2 Receivables from parent company 11.6 11.9 Receivables from companies belonging to the Fininvest Group and the Mediolanum Group 34.8 35.8

Total 76.8 70.8

The above receivables, which do not include amounts due after more than one year, are all considered to be recoverable and, accordingly, no value adjustments have been made in respect of them.

92 Receivables due from subsidiary companies are due by Thasos GmbH to Beta Film GmbH because of rights sold by the latter. Receivables due from affiliated companies relate to Publiespana S.A. for recharged services (ITL 0.2 billion), to Gestevision Telecinco S.A. mainly for the sale of rights (ITL 5.9 billion, ITL 0.4 billion of which to the Epsilon Group). Receivables due from parent company, relating to Fininvest S.p.A., regard requests for compensation made by Group companies, under the guarantee issued by Fininvest S.p.A. to Mediaset S.p.A. and its subsidiary companies on June 6, 1996, equal to ITL 11.5 billion, and recharged services amounting to ITL 0.1 billion. Receivables due from Fininvest Group and Mediolanum Group companies mainly relate to the sale of advertising and recharged services. The balance includes ITL 0.1 billion of receivables belonging to the Epsilon Group. For a detailed breakdown of these items, please see the table covering relations with Fininvest Group and Mediolanum Group companies included in the Report on Operations.

Other receivables This item is made up as follows:

31/12/2000 31/12/1999

Sums due from taxation authorities 15.6 99.8 Advances to suppliers, temporary staff and agents 24.6 28.9 Advances to employees 2.3 1.8 Transfer of receivables 102.7 94.3 Other 42.8 11.9

Total 188.0 236.7

The above receivables do not include any amounts due after more than one year. They are all considered to be recoverable and no value adjustments have been made in respect of them. Receivables due from taxation authorities include ITL 1.7 billion of overpayments for direct taxes relating to prior years for which rebates have been requested. These amounts are due after less than one year. The balance also includes taxation paid on account by the various companies net of the related tax liability.

Advances to suppliers, outside contractors and agents includes advance payments made to advertising area consultants and suppliers amounting to ITL 7.5 billion, to suppliers, artists and other professionals for television productions amounting to ITL 13.3 billion and to sundry suppliers amounting to ITL 3.8 billion.

Advances to employees consists primarily of sums advanced for business travel. Factored receivables comprises the amounts due from factoring companies, following the sale of trade receivables without recourse, which had not been settled at year end.

93 Other receivables includes an ITL 14.8 billion receivable from U.E.F.A. regarding the recovery of the 5% withholding tax applied on payments; with reference to the possibility of recovering this receivable, an equal amount was prudentially allocated to the provision for future risks. The balance also includes ITL 5.3 billion belonging to the Epsilon Group.

Financial assets (which are not fixed assets)

Own shares This item include Mediaset S.p.A. shares purchased following the decisions taken by the General Meetings held on January 12, 1998 and April 30, 1999. The value of own shares owned at December 31, 2000 amounts to ITL 69.6 billion, equal to no. 2,650,000 shares; this value is recorded net of a ITL 7.3 billion write- down made in order to adjust the book value to the market valuation represented by the average of the prices recorded in December 2000. During the year, in order to stabilise the share trend, a total of 6,268,500 shares were purchased for an amount of ITL 206.7 billion and 3,618,500 shares were sold for an amount of ITL 129.7 billion. The economic effect of these operations generated net income amounting to ITL 2.8 billion.

Other securities this items amounts to ITL 372.4 billion and includes: n shares and bonds held by the subsidiary company Mediaset Investment S.a.r.l. and worth ITL 65.6 billion, net of a write-down of ITL 3.5 billion to bring them in line with market value; n investment fund units of ITL 306.8 billion purchased by the subsidiary company Mediaset Investment S.a.r.l., net of a write-down of ITL 3.9 billion to bring them in line with market value, and managed by the relative fund management company in which it has a stake.

Liquid funds This item is made up as follows:

31/12/2000 31/12/1999

Bank and postal deposits 470.5 338.3 Cash-in-hand and cash equivalents 0.2 0.2

Total 470.7 338.5

The balance at December 31, 2000 includes ITL 8.4 billion, corresponding to our share of liquid funds of the Epsilon Group.

94 Net financial position The net financial position of the Mediaset Group at December 31, 2000, compared with the position for the previous year, is as follows:

31/12/2000 31/12/1999

Liquid funds 470.7 338.5 Securities and financial assets which are not fixed assets 442.0 323.0

Total financial assets 912.7 661.5

Due to banks (653.2) (316.2) Due to other financial institutions Factoring companies (5.1) (3.8) Leasing companies (1.2) (1.6) Other (10.5) -

Total financial liabilities (670.0) (321.6)

Net financial position 242.7 339.9

Financial liabilities are shown above only for the purpose of reporting the net financial position of the Mediaset Group at December 31, 2000 and comparing it with that at December 31, 1999. The decrease over the period is largely due to the increased level of new equity investments and is analysed in the Report on Operations.

Prepayments and accrued income

31/12/2000 31/12/1999

Accrued income 13.6 7.0 Prepayments 20.2 13.1

Total 33.8 20.1

Accrued income refers for an amount of ITL 10.3 billion to the splitting into instalments on an accruals basis of the positive deadlines of hedging operations of foreign exchange risks existing at December 31, 2000. The balance at December 31, 2000 also includes ITL 2.3 billion generated by the consolidation of the Epsilon Group, which basically refer to the Group’s share of Publieuros Ltd. and Publieurope International Ltd. advertising contracts. Prepayments mainly relates to rent payable, insurance premiums not pertaining to the period and the bartering arrangements involving the subsidiary company Promoservice Italia S.r.l.

95 COMMENTS ON THE MAIN SHAREHOLDERS’SHAREHOLDERS’ EQUITEQUITY AND LIABILITIES ITEMS

(amounts in ITL billions)

Shareholders’ equity Movements in shareholders’ equity are provided in an attachment as is a reconciliation of the shareholders’ equity of Mediaset S.p.A. to consolidated shareholders’ equity. The main items making up shareholders’ equity and the movements therein during the year are as follows:

Share capital At December 31, 2000 the share capital of the Mediaset Group, which is the same as that of the parent company, was fully subscribed and paid up and consisted of 1,181,227,564 shares with a par value of ITL 1,000 each for a total of ITL 1,181.2 billion. The increase compared to December 31, 1999, equal to ITL 0.9 billion, can be fully attributed to the increase reserved to those taking part in the Employee Stock Plan, approved by the General Meeting of April 20, 2000.

Share premium reserve At December 31, 2000 the share premium reserve, which is the same as that of the parent company, amounted to ITL 1,432.3 billion. The ITL 5.0 billion increase since last year relates to the payment of the rights issue portion of the increase in share capital subscribed by persons belonging to the Employee Stock Plan.

Legal reserve At December 31, 2000 this reserve amounted to ITL 87.5 billion (ITL 74.9 billion at December 31, 1999). It increased during the year following the allocation of 5% of 1999 net profit of Mediaset S.p.A., as approved by the General Meeting held on April 20, 2000. This reserve is the same as that reported in the financial statements of the parent company.

Reserve for own shares At December 31, 2000 the reserve for own shares amounted to ITL 69.6 billion. During the year, the company bought and sold 6,268,500 and 3,618,500 of its own shares, respectively.

Other reserves At December 31, 2000, other reserves amounted to ITL 165.6 billion (ITL 413.5 billion at December 31, 1999); the decrease of ITL 247.9 billion over the year was the result of the following movements:

96 n the allocation of ITL 178.6 billion of the net profit for the payment of 1999 dividends as decided by the General Meeting of April 20, 2000; n transfer of ITL 69.6 billion to the reserve for own shares, following the purchase of own shares; n setting up of the provision for foreign exchange risks, regarding the conversion of the financial statements in foreign currency outside the EMU area of the subsidiary companies of Euroset S.a.r.l., Publieurope International Ltd. and Publieuros Ltd., for an amount of ITL 0.3 billion. Other reserves also include ITL 16.6 billion in capital grants; taxes are deferred on 50% of the grants received and this portion of grants will be included in the income for the year if utilised for purposes other than to cover losses. The remaining portion of the grants is taxed over ten years and is recorded here net of deferred tax.

Retained earnings This item has increased following the retention of a position of consolidated net profit for the year ended December 31, 1999 and decreased due to dividends paid during the year (ITL 418.6 billion), with the exception of the amount taken from the extraordinary reserve. This item also includes the Mediaset Group’s share of Epsilon Group’s accumulated loss at December 31, 2000, equal to ITL 0.4 billion.

Profit for the year This item includes the net profit for the year from January 1 to December 31, 2000, equal to ITL 819.9 billion. As described in further detail in the Income statement section, this result includes a loss amounting to ITL 17.7 billion which represents the share of the Epsilon Group’s loss pertaining to the Mediaset Group.

Provisions for risks and charges The make up of these reserves and movements therein are set out below:

1/1/2000 Provisions UtilisationsOther changes 31/12/2000

1 . Provisions for retirement benefits 4.7 1.2 (0.3) - 5.6 and similar obligations

2 . Provisions for taxation: Deferred taxes 114.2 33.0 (165.6) - (18.4) Current taxes - - - - -

3 . Other provisions 61.2 119.8 (29.7) - 151.3 Total 180.1 154.0 (195.6) - 138.5

The reserves included in item 1 mainly consist of the supplementary social security reserve established pursuant to the supplementary corporate agreement stipulated on July 4, 1992 and incorporated in the supplementary corporate agreement of January 13, 1997.

97 Tax reserves (item 2) entirely consist of the provision for deferred taxation relating to consolidation adjustments and temporary differences between taxable earnings and liabilities and the value reported in the financial statements used for consolidation purposes. At December 31, 2000 this reserve was adjusted to include the effect arising from the change in the Corporate tax rate envisaged in Law no. 388 of December 23, 2000 (2001 Budget). This reserve also includes deferred tax assets deriving from the allocation on an accruals basis of the overall tax benefit, equal to ITL 141.6 billion, generated by the voluntary write-up of the network trademarks pursuant to Law 342/2000, as previously described. This benefit was calculated on the tax savings connected to the higher depreciation of these assets, and before the substitute tax paid. The net effect of this write-up on the reserve at December 31, 2000, equal to ITL 118.7 billion, includes the allocation of deferred taxation regarding the writing-off of the first depreciation quota. For most Group companies, tax years from 1995 onwards are still open to review for income tax purposes. Publitalia ’80 S.p.A. has settled all periods up to and including 1990 by means of a tax amnesty and Mediaset S.p.A. has agreed open tax years for direct and in direct (VAT) taxes up to 1993, by accepting a Tax settlement. The merged company Reteitalia Productions S.p.A. is excluded from this arrangement and its results are significant for tax purposes from 1990 onwards. Should Reteitalia S.p.A. (the grantor) prove to have failed to meet income tax requirements for the 1993 tax period, taxation authorities could proceed against the grantee to collect the amount due. With regard to contingent tax liabilities, no provision has been made in the consolidated financial statements in relation to events preceding July 15, 1996, the date Mediaset S.p.A. became listed on the stock exchange. All such liabilities are covered by a guarantee issued by Fininvest S.p.A., as is explained in the section contingent liabilities guaranteed by the parent company.

As to the sphere of application of this guarantee, it should be noted that Publitalia ’80 S.p.A. has received tax assessments that have been forwarded to the parent company Fininvest S.p.A.; in particular, Publitalia ’80 S.p.A. paid additional tax assessments totalling ITL 7.7 billion and requested reimbursement thereof from Fininvest S.p.A.. Other reserves (item 3) mainly consist of the following: n reserve for litigation risks (ITL 15.8 billion): the pur pose of this reserve is to cover likely liabilities resulting from lawsuits involving compensation requested for defamation or the violation of personal rights, sanctions imposed by the Regulatory Authority and compensation for damages. The outcome of these cases is uncertain and, accordingly, the amount provided represents a prudent estimate of the potential liability; n reserve for ongoing disputes with employees and social security institutions (ITL 19.7 billion): at the time being, the outcome of these disputes is uncertain and the amount provided represents a prudent estimate of the potential liability. The amount provided during the year relates to social security disputes, the amount expected to be paid to employees and other staff in the form of settlements and

98 damages arising under claims not covered by the guarantee issued by Fininvest S.p.A. on June 6, 1996, as examined elsewhere in these explanatory notes; n reserve for contractual risks (ITL 23.6 billion): the most significant elements of this reserve include the amount provided in respect of the risk that artistic resources will be under-utilised compared to contractual provisions and amounts provided in respect of possible disputes with suppliers of rights and bad debts in the form of goods (resulting from the sale of advertising under bartering arrangements). n reserve for other risks (ITL 77.3 billion): this item includes the charges deriving from the valuation of the financial operations on securities already described in the Report on Operations. No provisions have been made for potential charges and liabilities regarding events prior to July 15, 1996 as these are covered by the guarantee issued by Fininvest S.p.A.. For charges that have already been incurred or whose amount was ascertained during the period, the companies belonging to the Mediaset Group have made requests for reimbursement to Fininvest S.p.A., as reported in the comments on value of production and receivables. No provision has been made in respect of potential liabilities and risks that are only possible. The Group companies have informed Fininvest S.p.A. about the type and amount of these risks.

99 Employee termination indemnity Changes in this reserve during the period were as follows:

Balance at 1/1/2000 156.4

Amount accrued and allocated in the income statement 38.0 Indemnities paid in the year and changes in the consolidation area (29.7)

Balance at 31/12/2000 164.7

Payables Details of the make-up of this item, together with movements therein are provided below:

Due to banks Amounts due to banks are analysed as follows:

Balance at 31/12/2000 Due Balance at Totalwithin 1 year 1-5 years after 5 years 31/12/1999

Payables without real securities: Lines of credit 651.8 648.0 2.2 1.6 303.0 Liable current accounts 1.4 1.4 - - 13.2 Total 653.2 649.4 2.2 1.6 316.2

Due to other financial institutions Amounts payable to other financial institutions totalled ITL 16.8 billion at December 31, 2000. They include ITL 10.5 billion of amounts due for “lending” operations on securities carried out by the subsidiary company Mediaset Investment S.a.r.l., ITL 5.1 billion due to factoring companies with recourse and ITL 1.2 billion due to leasing companies (ITL 1.8 billion at December 31, 1999). The balance due concerns real estate leased for the television group and is entirely of a short-term nature.

Advance payments received This items, totalling ITL 6.5 billion at December 31, 2000 (ITL 7.1 billion at December 31, 1999), primarily consists of advance payments received from customers for advertising services to be provided.

Trade accounts The main components of this item, which totalled ITL 1,829.5 billion at December 31, 2000 and the main changes since 1999 are analysed below:

100 Balance at 31/12/2000

Due Balance at Total within 1 year 1-5 years after 5 years 31/12/1999

Due to suppliers 1,829.5 1,390.5 439.0 - 1,878.3 Total 1,829.5 1,390.5 439.0 - 1,878.3

n payables for the purchase of rights totalling ITL 1,250.7 billion (ITL 1,432.5 billion at December 31, 1999). This item includes a long-term element of ITL 439.0 billion regarding the purchase of rights that have not yet taken effect; n payables for the completion of television productions totalling ITL 310.5 billion (ITL 258.8 billion at December 31, 1999); n payables to free-lance artists and professionals of the television group totalling ITL 74.9 billion (ITL 66.5 billion at December 31, 1999); n payables to artists and professionals in the music group totalling ITL 1.7 billion (ITL 3.3 billion at December 31, 1999) ; n payables to agencies and miscellaneous suppliers of the advertising group totalling ITL 85.4 billion (ITL 84.9 billion at December 31, 1999); n payables for the purchase of miscellaneous goods and technical services totalling ITL 16.9 billion (ITL 35.5 billion at December 31, 1999); n payables totalling ITL 89.4 billion, representing the Mediaset Group’s share, regarding rights distribution operations and the sale of advertising under licence agreements carried out by the Epsilon Group.

Due to subsidiary companies, affiliated companies, parent company and Fininvest Group and Mediolanum Group companies Amounts due to subsidiary companies, affiliated companies, parent company and Fininvest Group and Mediolanum Group companies are analysed below:

Balance at 31/12/2000

Due Balance at Total within 1 year after 1 year 31/12/1999

Due to subsidiary companies - - - 1.0 Due to affiliated companies 2.1 2.1 - 1.0 Due to parent company 0.6 0.6 - 0.5 Due to companies belonging to the Fininvest Group and the Mediolanum Group 61.5 61.5 - 46.0

Total 64.2 64.2 - 48.5

Due to affiliated companies The balance at December 31, 2000, equal to ITL 2.1 billion (ITL 1.0 billion at December 31, 1999), includes the following: n trade payables to Gestevision Telecinco S.A. equal to ITL 0.7 billion, ITL 0.5 billion of which from the Epsilon Group;

101 n amounts due to the Consorzio Aeromobili Fininvest amounting to ITL 0.7 billion (ITL 1.0 billion at December 31, 1999). n amounts due to the Consorzio Servizi Vigilanza totalling ITL 0.1 billion as it is the case in this case n amounts due by Betafilm (Epsilon Group) to the affiliated company Mercury Film for an amount of ITL 0.6 billion

Due to parent company At December 31, 2000, this sum amounted to ITL 0.6 billion (ITL 0.5 billion at December 31, 1999) to be paid to the parent company Fininvest S.p.A., because of recharged services.

Due to Fininvest Group and Mediolanum Group companies Reference should be made to the table showing relations with Fininvest Group and Mediolanum Group companies (included in the Report on Operations) for further analysis of this item. The increase in this item, from ITL 46.0 billion at December 31, 1999 to ITL 61.5 billion at December 31, 2000, is mainly attributable to the increase in the amount owed to Medusa Film S.p.A., which rose from ITL 21.7 billion at December 31, 1999 to ITL 38.3 billion at December 31, 2000.

Due to taxation authorities This item may be analysed as follows:

31/12/2000 31/12/1999

Withholding taxes on income from work 16.8 17.0 Current taxes 29.6 274.1 Withholding tax on dividends - - VAT payables 3.4 13.2 Other payables 76.8 11.2

Total 126.6 315.5

The liability for current taxes at December 31, 2000 is shown net of payments on account equal to ITL 473.1 billion, tax credits on dividends of ITL 302.1 billion, and withholding taxes sustained totalling ITL 0.6 billion. The Group in 2000 used former losses for ITL 4.2 billion. Accumulated tax losses amounting to ITL 27.1 billion remain available for carry forward.

Other sums due to taxation authorities include ITL 76.5 billion corresponding to the 19% substitute tax to be paid pursuant to Law 342/2000 on write-ups. The Epsilon Group has amounts due to taxation authorities pertaining to the Group for an amount of ITL 9.1 billion. The following table contains a reconciliation of the theoretical tax rate in Italy for corporate taxes and the effective tax rate for the Group in 2000:

102 31/12/2000 31/12/1999

Current tax rate 41.25% 41.25%

Utilisation former losses -0.14% 0.00% Benefit from the application of "Dual Income Tax" -0.90% -0.30% Effect of losses of consolidated companies 0.02% 0.00% Effect of the introduction of accounting standard no.25 -0.30% Effect of non deductible IRAP charges 1.80% 1.50% Effect of the revaluation of assets as per Law 342/2000 -5.90% 0.00% Effect of tax rate reduction as per Budget Law 2001 -0.20% 0.00% Adjustments from consolidation which do not imply any tax effect, other items -1.30% -0.03%

Actual tax rate 34.63% 42.12%

Due to social security institutions This item relates to year-end liabilities towards social security institutions for employer and employee social security contributions on wages and salaries for December. The balance at December 31, 2000 eas analysed as follows:

31/12/2000 31/12/1999

INPS 6.4 6.8 ENPALS 8.7 9.5 INPDAI and INPGI 3.5 3.1 FASI and FASDAC 0.2 0.2 Other 2.2 1.6

Total 21.0 21.2

Other sums payable This item may be analysed as follows:

31/12/2000 31/12/1999

Personnel (holidays, 13th month pay, etc.) 37.7 37.5 Employees 36.3 34.8 Record industry royalties - 0.5 Participants to game shows and awards 5.4 2.8 Retributions to Directors and Statutory Auditors 1.5 2.0 Other 132.0 41.3

Total 212.9 118.9

Amounts due to employees include ITL 25.5 billion for incentives accruing but not yet paid (ITL 27.6 billion at December 31, 1999). Other sums payable primarily include: n ITL 18.2 billion, equal to the Mediaset Group’s share of the amounts due by MiReg I GmbH, a subsidiary company of Euroset S.a.r.l., to Monarchy Holding, regarding the purchase of its stake in New Regency;

103 n ITL 31.3 billion, equal to the Mediaset Group’s share of the amounts due by MiReg II GmbH, a subsidiary company of Euroset S.a.r.l., to Monarchy Holding and connected to the acquisition of the package of rights of New Regency described in these notes in the section devoted to intangible fixed assets. n ITL 11.0 billion regarding advance payments on options n ITL 61.3 billion regarding the unpaid portion of share capital to the affiliated companies Blu S.p.A. and Euromedia Luxembourg Two S.A., equal to ITL 54.0 billion and ITL 7.3 billion respectively.

Accruals and deferred income At December 31, 2000 this item was analysed as follows:

31/12/2000 31/12/1999

Accrued expenses: Forex 29.7 3.6 Other accrued expenses 10.1 3.3 Total accrued expenses 39.8 6.9

Deferred income: Revenues for long-term leases 23.2 31.0 Other deferred income 5.0 0.1 Total deferred income 28.2 31.1

Total 68.0 38.0

The balance of the item other accruals includes accruals of the Epsilon Group equal to ITL 5.7 billion pertaining to the Mediaset Group, connected to advertising operations carried out by Publieurope.

The item other deferred charges includes ITL 2.8 billion amounting to the 2001 share of the authorisation to use the rights to Champions League matches given to the company Stream S.p.A.

104 COMMENTS TO THE MEMORANDUM ACCOUNTS

(amounts in ITL billion)

Personal sureties given At December 31, 2000 the Group has outstanding guarantees given to third parties, primarily on behalf of affiliated companies, totalling ITL 364.8 billion (ITL 13.1 billion at December 31, 1999). The main element of these sureties is represented by the guarantee given to B.N.L. so that the company BLU S.p.A. could take part in the bid for the allocation of the UMTS licences, for an amount of ITL 360.0 billion.

Commitments The main commitments of the Mediaset Group companies may be summarised as follows: n long-term commitments mainly relating to contracts for the rental of satellite channels. These contracts have various duration times and will involve outlays totalling around ITL 101.5 billion (ITL 100.6 billion at December 31, 1999) over the coming years. Long-term commitments also include ITL 1.5 billion of lease commitments, ITL 0.2 billion of which regarding lease contracts stipulated by Publieurope Ltd.; n commitments for artistic services, television productions and press agency agreements totalling around ITL 247.3 billion (ITL 132.6 billion at December 31, 1999); n commitments to acquire rights: the Group has entered into “volume deal” contracts with several major US studios to guarantee the availability of their films and television productions. These contracts ensure that the Group can maintain the level of investments it made in previous years and entail a total commitment of around ITL 1,976.1 billion (ITL 1,804.0 billion approx. at December 31, 1999) ITL 187.9 billion of which with Medusa Film S.p.A. Beta Film GmbH has also commitments totalling ITL 297.3 billion regarding agreements stipulated prior to the Joint-venture; these commitments have been accepted jointly and severally with some companies belonging to the Kirch Group, which are not part of the Epsilon Group. Pursuant to the Joint-venture Agreement regarding the establishment of the aforementioned Joint-venture, Kirch Media KGaA shall keep Beta Film GmbH exempt from any detrimental effects that may arise to the latter from such commitments. n commitments for financial foreign currency operations to hedge the exchange risk, and for the purchase and sale of securities, totalling ITL 2,718.0 billion; n commitments for the design and construction of the new Cologno Monzese studio and commitments for works and supplies to the company offices totalling ITL 19.2 billion; n commitments for long-term leases and rents totalling ITL 57.6 billion.

105 Contingencies Contingencies include around ITL 5.4 billion in equipment owned by third party companies which is stored at Mediaset Group companies. At December 31, 2000 there were also ITL 2.5 billion of discounted bills.

Potential liabilities counter-guaranteed by the parent company Fininvest S.p.A. In connection with the public offering for the sale and subscription of shares in Mediaset S.p.A., Fininvest S.p.A. issued an irrevocable guarantee for an unlimited amount, covering a period corresponding to that applying to the prescription of tax liabilities, whereby it agrees to hold harmless and indemnify Mediaset S.p.A. and its subsidiary companies as at June 30, 1996 against any damage, cost, liability, out-of- period liability (resulting from a primary debt or fine), substantiated capital loss, reversal of assets or detrimental effect, including legal expenses (the “losses”) which may arise to any of these companies in relation to a breach of contractual obligations or obligations regarding civil, criminal, administrative and tax proceedings, breach of law and breach of conditions set forth in television broadcasting licences, which occurred prior to the listing date. On the basis of this guarantee, Fininvest S.p.A. will pay any applicable damages, at the time the loss actually occurs, net of any provisions existing at the time in respect of such risks and net of out-of-period extraordinary items solely due to agency refunds that are subject to a 10 year prescription and were recorded in the liabilities of Publitalia ’80 S.p.A. in its 1995 financial statements. No compensation is due for any losses in respect of which Fininvest S.p.A. has already compensated Mediaset S.p.A. With respect to the above, Fininvest S.p.A. has agreed, for the entire duration of the guarantee, to comply with the following parameters: (i) the absolute difference between (a) liquid funds (cash, deposits, government bonds and similar securities, securities traded in regulated markets including the securities of subsidiary companies) and (b) payables due to third parties (financial payables, payables due to taxation authorities, excluding trade accounts) must not be less than ITL 3,000 billion and (ii) the ratio of liquid funds to payables due to third parties, as defined above, must not be less than 3:1. In the event of a breach of these conditions, Fininvest S.p.A. will be required to provide a first call bank guarantee to Mediaset S.p.A., for an amount equal to that required to restore the level of the parameters described above. Based on the financial statements for the year ended December 31, 1999 and the balance sheet and income statement at June 30, 2000, Fininvest S.p.A. is in compliance with the covenants indicated in the text of the aforementioned guarantee. The following events were covered by the guarantee in 2000: n with regard to expenses that have already been verified and recorded in the 2000 financial statements, Mediaset Group companies have requested Fininvest S.p.A. to receive compensation totalling ITL 16.2 billion, as is described in the notes on v a luelue ofof productionproduction and receivables;

106 n with regard to potential liabilities that have not yet become certain, the total risk has been put at ITL 25.9 billion; this amount relates almost entirely to litigation and other matters regarding R.T.I. S.p.A. A request for compensation will be made once the loss has been finalised; n the parent company Fininvest S.p.A. has been informed of the potential tax liabilities of the subsidiary company Publitalia ’80 S.p.A., as required by the guarantee. In relation to the guarantee and related interpretative agreements, on December 16, 1997, upon request of Fininvest S.p.A., the Board of Directors of Mediaset S.p.A., resolved to accept the request of Fininvest S.p.A. concerning non-operating income recorded in the financial statements of Publitalia ’80 S.p.A. for the years from 1997 onwards. This non-operating income is limited to that resulting from agency refunds subject to a 10-year prescription period and recorded as a liability in the financial statements of Publitalia ’80 S.p.A. as at December 31, 1995. Pursuant to these agreements, Publitalia ’80 S.p.A. has acknowledged to Fininvest S.p.A. ITL 1.9 billion of agency refunds that have fallen into ten-year prescription (recorded under other operating costs). It should also be noted that Fininvest S.p.A. has given Mediaset S.p.A. a guarantee for an unlimited amount to cover any overstated assets and/or capital losses resulting from mistakes or problems regarding the ownership of television rights of the Mediaset Group, as reported in the consolidated financial statements as at December 31, 1995 or in the accounting records as at March 31, 1996; in the years 1996, 1997, 1998, 1999 and in 2000 there have been no material circumstances involving the application of this guarantee.

107 COMMENTS ON THE MAIN ITEMSITEMS OFOF THETHE INCOMEINCOME STATEMENTSTATEMENT

(amounts in ITL billions)

Value of production

Revenues from sales and services Revenues from sales and services may be analysed as follows:

2000 1999

Television advertising 4,144.0 3,664.5 Press advertising 4.9 4.4 Other advertising sales 62.6 39.5 Right rental 30.3 15.0 Sale of television rights and productions 203.7 57.8 Sale of goods 13.8 13.0 Creation and maintenance of television equipment 35.9 56.6 Sale of records 0.4 23.5 Other 19.1 15.3

Total 4,514.7 3,889.6

Revenues from the sale of television advertising mainly consist of: n revenues from the sale of advertising slots on the three national television networks, totalling ITL 4,083.6 billion, net of agency discount, over ITL 3,630.7 billion in 1999, with a 12.5% increase; n revenues from the sale of television time in exchange for goods and printed advertising carried out by Promoservice Italia S.r.l. following the acquisition of advertising space from Publitalia ’80 S.p.A. Such revenues amounted to ITL 23.5 billion (ITL 27.6 billion in 1999); n revenues from the international operations of Publieurope and Publieuros carried out within the framework of the Epsilon Group for ITL 28.5 billion, representing the consolidated amount belonging to the Mediaset Group.

Revenues from the sale of printed advertising entirely consist of the resale by Promoservice Italia S.r.l. of advertising space acquired from third party publishers. Other advertising revenues in the year mainly consist of advertising bill posters in sports stadiums and revenues from advertising on the Internet. The latter increased notably over the previous year. Revenues from rental of rights were mostly earned from the creation of schedules for theme channels carried out by the subsidiary company Mediadigit S.r.l.

The item sale of rights and television products primarily includes the following: – amounts included in the consolidation of the revenues from the distribution of television rights carried out by Beta Film GmbH, a company belonging to the Epsilon Group, for ITL 121.7 billion;

108 – revenues from the sale to Stream S.p.A. of the rights to “Grande Fratello” and a few Champions League matches, equal to overall ITL 54.2 billion; – sale of rights for trading operations amounting to ITL 13.2 billion, ITL 4.0 billion of which to affiliated company Gestevision Telecinco S.A – long-term revenues for the use of television productions of the Mediaset Group, in the amount pertaining to the period, equal to ITL 9.0 billion.

Revenues from the sale of goods primarily relate to the sale of goods and services received from Promoservice Italia S.r.l. in exchange for advertising sold.

Revenues from construction and maintenance of television equipment relate to the sale of equipment by Elettronica Industriale S.p.A. to third party customers totalling around ITL 6.3 billion (ITL 27.9 billion approx. in 1999) and sales and maintenance of television equipment to the Telepiù Group for around ITL 29.6 billion (ITL 28.7 billion approx. in 1999). The decrease in this item must be connected to the sale to a third party of the signal broadcasting equipment design and assembly branch of Elettronica Industriale S.p.A., which took place on January 1, 2000.

The marked decrease in item sale of records is due to the sale of the company P.D.U. S.A. and the record company of RTI Music S.r.l. carried out at the end of 1999. Other revenues includes various revenues from the consolidation of the Epsilon Group, amounting to ITL 4.4 billion.

Changes in the inventories of work in progress, semi-finished and finished goods This item shows a positive balance of ITL 5.5 billion, mainly as a result of changes recorded by R.T.I. S.p.A. in relation to television programmes produced, which are reflected as inventory until they are broadcast; these changes were partly offset by the reduction in the inventories of Elettronica Industriale S.p.A., following the sale of the aforementioned branch.

Own work capitalised During the year, costs totalling ITL 31.9 billion were capitalised relating to devices and equipment used for the maintenance and operation of the signal broadcasting network (ITL 38.8 billion in 1999).

Other revenues and income This item is made up as follows:

109 2000 1999

Lighting services 10.8 10.6 Other record revenues - 0.7 Income for indemnifications from Fininvest S.p.A. 16.2 33.6 Other 34.8 32.4

Total 61.8 77.3

Other income from the lighting service refers to the sub-let of television posts and the recharge of electricity costs to the Telepiù Group.

The reduction to nil of other recording revenues is connected to the sale of the company P.D.U. S.A. and of the record company of RTI Music S.r.l.. The item compensation from Fininvest S.p.A. consists of claims made to the parent company Fininvest S.p.A. in relation to liabilities (mainly law suits and related costs, settlements with personnel and tax amnesties) covered by the guarantee it issued on June 6, 1996. The item other is made up of ordinary out-of-period revenues and gains, equal to ITL 14.3 billion, mainly deriving from the recovery of agency discount and the sale of rights, and revenues for the sale of technical services and the lease of posts to third party customers.

Cost of production

Raw materials, consumables and supplies This item can be broken down as follows:

2000 1999

Raw and ancillary materials and goods 50.2 78.9 Consumables 10.0 10.8 Advertising space 29.7 9.0 Other purchases 31.0 29.5

Total 120.9 128.2

The main components of raw materials, consumables and supplies are as follows: n purchases of ITL 21.7 billion (ITL 24.7 billion in 1999) from the company that manages the merchandise barter operations. The decrease may be explained by the gradual downsizing of the merchandise barter operations carried out by Promoservice Italia S.r.l.; n purchases from third party suppliers of rights for resale, equal to ITL 16.0 billion (ITL 14.4 billion in 1999); n purchases of materials used for the construction of television devices and equipment for resale and purchases for the maintenance of the Group’s own equipment, totalling ITL 12.5 billion (ITL 39.7 billion in 1999). The decrease can also be attributed to the sale to a third party of the equipment design and assembly operations.

110 The purchase of advertising spaces is mainly made up by the Mediaset Group’s share of the cost incurred into by Publieurope International Ltd., connected to the activities of advertising sub-rentals, equal to ITL 25,6 billion.

The main elements of other purchases are prizes for games and quiz shows for ITL 10.9 billion (ITL 9.7 billion in 1999) and purchases of materials for sets of ITL 17.0 billion (ITL 16.7 billion in 1999).

111 Services This item is made up as follows:

2000 1999

Consultancies, free-lancers and performances 316.0 306.0 Emoluments of Directors and Statutory Auditors 4.0 4.3 Commissions and charges 36.1 34.6 SIAE, AFI and FIMI rights 123.2 116.2 Productions 182.0 91.9 Publishing rights 98.6 - Auditel 16.4 15.9 Advertising space and external relations 65.1 40.4 Maintenance costs 27.8 37.5 Travel expenses 20.2 22.8 Electricity, water and gas 20.2 17.7 Post and telephone expenses 13.6 16.1 Information Technology 32.3 26.9 Canteen, cleaning and security service 27.6 27.8 Research, training and other personnel expenses 2.6 2.2 Transport and deliveries 13.1 14.1 Bank charges 1.4 2.2 Insurance 6.1 7.2 Other services 40.1 37.1

Total 1,046.4 820.9

The main items included in service costs are analysed below: n consulting, outside contractors and services: the most significant items are artistic services for ITL 156.3 billion (ITL 154.8 billion in 1999), television filming for ITL 24.9 billion (ITL 27.5 billion in 1999) and journalism services equal to ITL 19.8 billion (ITL 18.9 billion in 1999); n emoluments to directors and statutory auditors: include fees paid to directors totalling ITL 3.2 billion (ITL 3.4 in 1999) and statutory auditors amounting to ITL 0.8 billion (ITL 0.9 billion in 1999). Total fees for 2000 to directors and statutory auditors of the parent company for performance of duties for other Group companies amounted to ITL 2.2 billion (ITL 2.4 billion in 1999) and ITL 0.4 billion (ITL 0.7 billion in 1999); n fees and commissions: these entirely refer to fees paid to agencies and media centres in relation to the sale of advertising space (ITL 33.2 billion in 1999); n SIAE, AFI and FIMI dues: these are the payments made to the said associations for the use of intellectual property under their protection. In 2000, the total amount includes the accrual made in order to meet new rules regarding copyright (fair payment); n publishers’ fees: the balance at December 31, 2000, equal to ITL 98.6 billion, is exclusively represented by the share of Beta Film GmbH operating costs included in the consolidation area;

112 n production services: these increased by ITL 90.1 billion over 1999 mainly as a result of the different recording in the income statement of the costs regarding the production of soap operas, whose rights were acquired in 1999 and then amortised. This change was also affected by the start of the domestic drama production. n purchase of advertising space and public relations: this item includes the purchase of advertising space by Publitalia ’80 S.p.A. for bill posters in stadiums and on the Internet, as well as the purchase of advertising space from third party publishers to promote the Group’s activities. The increase compared to the previous year is attributable to the increased advertising purchases on the Internet, and the purchase of advertising space in new stadiums and the search for sponsors for the Italian football national teams.

Leasing and rental This item may be analysed as follows:

2000 1999

Property rentals 44.0 39.3 Royalties 25.7 35.8 Signal broadcasting 30.3 27.3 Leases and rentals 50.9 44.6

Total 150.9 147.0

Real estate rentals consist of lease payments for the companies’ premises and signal broadcasting stations. Lease payments pertaining to the Group for the premises of the Epsilon Group amounted at December 31, 2000 to ITL 0.4 billion.

Royalties primarily consist of recording royalties totalling ITL 1.0 billion (ITL 14.2 billion in 1999) and licensing royalties regarding television productions amounting to ITL 15.5 billion (ITL 11.7 billion in 1999); this item also includes a market rate accrual for the use of the “Biscione” trademark owned by Fininvest S.p.A. which, over the previous three years, had been made available for use free of charge in order to help with the Company’s stock market flotation. Rent and leasing costs are for the use of studios, television equipment and motor vehicles.

Personnel expenses In 1999, the following changes occurred in the personnel levels of the Group companies, with the exclusion of the companies consolidated by means of the proportional consolidation method (Epsilon Group):

113 Workforce Mediaset Group 01/01/2000 31/12/2000 Medio

Managers 267 270 268 Middle managers 612 609 600 Office workers 3,304 3,141 3,165 Industry workers 99 70 70 Journalists 280 294 279

Total 4,562 4,384 4,382

The total number of employees decreased by 178. This reduction is mainly due to the disposal of the design and assembly branch of television signal broadcasting equipment carried out by Elettronica Industriale S.p.A., which involved the departure of 113 employees from the Group. The remaining drop can be attributed to the negative balance between leavers and starters and to a lower use of entertainment temporary staff. Personnel expenses for the workforce above decreased from ITL 560.1 billion in 1999 to ITL 557.8 in 2000: the decrease therefore amounts to ITL 2.3 billion (-0.41%) and can be largely attributed to the disposal of the aforementioned branch. Personnel expense can be broken down as follows:

2000 1999

Ordinary remunerations 284.3 277.0 Extraordinary remunerations 10.2 11.4 Special benefits 50.9 53.4 13th and 14th monthly pay 42.0 40.9 Accrued holidays 4.0 1.3

Total wages and salaries 391.4 384.0

Social charges 117.4 114.3 Employee termination indemnity 38.0 34.8 Pension retirement and similar obligations 1.1 1.1 Other costs 10.0 25.8

Total personnel expenses 557.8 560.1

At December 31, 2000, the employees of the Epsilon Group amounted to 64, located in the various operating companies as follows: – Beta Film GmbH: 43 employees – Publieurope International Ltd.: 20 employees – Publieuros Ltd.: 1 employee The average for the year is 63.5 employees. Personnel expenses attributable to the Mediaset Group in line with its share, i.e. equal to 50% of the overall figure, amount to ITL 4.3 billion.

Amortisation, depreciation and write- downs Details on the amortisation of intangible assets and the depreciation of tangible assets, as well as the relevant write-downs, are provided in the tables analysing the changes, and are commented upon in the section of these notes devoted to fixed assets.

114 The overall amount of amortisation, depreciation and write-downs at December 31, 2000 includes the effect arising from the proportional consolidation of the Epsilon Group, shown below. As to intangibleintangible assetsassets the amounts regarding the Joint-venture refer to the following categories: n start- up and expansion costs, equal to ITL 0.5 billion, for the capitalisation of establishment cost and for the registration duty on the capital increases of Euroset S.a.r.l. and Euroset Television S.a.r.l.; n other intangible assets, equal to ITL 3.9 billion, regard the amortisation of the put option granted by the Kirch Group to Euroset Television S.a.r.l., as is described in the section of these notes regarding intangible fixed assets; n differences arisingarising fromfrom consolidationconsolidation, equal to ITL 11.2 billion, as overall net goodwill amortisation that the Joint-venture operation determined on the Mediaset Group, whose detail is provided in the relevant section of these notes. As to tangibletangible fixedfixed assetsassets,, depreciation arising from the Epsilon Group, equal to ITL 0.2 billion, regard industrial buildings and equipment. The item provision for doubtful receivables represents the change for the year necessary to bring the value of receivables in line with their estimated realisable value.

Provisions for risks and other provisions The most significant components of other provisions, which are shown net of utilisations, are accruals for risks regarding disputes with employees and litigation (which arose in the period following Mediaset S.p.A.’s market flotation and are, thus, not covered by the guarantee issued by Fininvest S.p.A.), and for risks and losses caused by the inability to recover contractually set artists’ fees through television productions. There is also a prudential provision for the risk of non recovery of the UEFA receivable regarding the withholding tax on purchases, as already commented upon in the section devoted to receivables from others.

Sundry operating costs This item may be analysed as follows:

2000 1999

Television concessions 34.7 2.1 Taxes 7.7 4.5 Other 49.3 39.3

Total 91.7 45.9

The main cause for the increase in these costs over the previous year is represented by the introduction of new criteria for the determination of the annual fees for television concessions with respect to previous regulations.

115 Financial income and charges This item may be analysed as follows:

2000 1999

Income from investments: Dividends 0.4 0.2

Other financial income: Receivables which are fixed assets 0.3 0.3 Securities which are fixed assets 0.1 - Securities which are current assets 24.8 19.0

Other income: Interest on bank accounts and deposits 11.1 7.1 Positive exchange rate differences 81.9 66.9 Interest on commercial receivables 1.5 1.3 Other 18.3 4.1

Total income 138.4 98.9

Financial interest and charges: Interest on bank accounts (1.1) (0.2) Interest on short-term financing (20.6) (6.3) Foreign exchange losses (110.4) (50.7) Foreign exchange losses on companies belonging to the Fininvest Group - (0.3) Interest on advances and discounts (1.8) (2.3)

Interest on commercial payables (0.3) (0.1) Other financial income (105.7) (3.0)

Total charges (239.9) (62.9)

Total financial income and (charges) (101.5) 36.0

IncomeIncome fromfrom investmentsinvestments includes the dividends paid by E.I.S. S.p.A and Radio e Reti S.r.l. Other financial income includes the gains made with respect to stabilisation operations regarding the Mediaset stocks, equal to ITL 12.2 billion (ITL 4.1 billion in 1999), and gains arising on financial operations in security derivatives amounting to ITL 3.3 billion. Foreign exchange gains and foreign exchange losses resulted in a net loss of ITL 28.5 billion (ITL 16.2 billion gain in 1999). Among the losses, ITL 51.3 billion were unrealised, regarding the restatement at market price of foreign exchange financial positions at year end. These positions are subject to long-term hedging operations, whose economic effect will emerge in the next few years. The contribution to the balance of the Epsilon Group, showing a loss of ITL 7.0 billion, includes ITL 2.9 billion of realised losses, and ITL 4,1 billion from the valuation of the indebtedness in US dollar of Betafilm GmbH, and the payable of MiReg I GmbH and MiReg II GmbH to Monarchy Holding, as is described in the section of these notes regarding other sums payable.

Other financial charges mainly include unrealised charges, determined the restatement at market price of financial operations under way on securities, amounting to ITL 80.9

116 billion, held by Mediaset Investment S.a.r.l. for ITL 7.4 billion (ITL 1.6 billion at December 31, 1999) and Mediaset S.p.A. own shares held for an amount of ITL 7.3 billion. This item also includes losses on the sale of securities for ITL 4.5 billion and costs connected to the stabilisation of Mediaset stocks for ITL 3.1 billion.

Adjustments to the value of financial investmentsinvestments

Write- ups of investments This item regards the income statement effect of the valuation using the net equity method of the investment in the Telecinco Group (Publiespana S.A., Gestevision Telecinco S.A.). It includes: n income of ITL 119.9 billion representing the change in the shareholders’ equity of the companies belonging to the Telecinco Group, with respect to the Group’s share; the dividend totalling ITL 53.5 billion received by the Group has been reclassified to this item; n a change of ITL 39.1 billion representing the amortisation change for the year on the goodwill allocated to the assets of subsidiary companies. The gross value of the said goodwill is ITL 390.1 billion. ITL 143.5 billion of this amount arose a the time of the purchase of 25% of the above companies by Mediaset S.p.A. in 1996 and 1997 while ITL 246.6 billion arose on June 30, 1999 when Mediaset Investment S.a.r.l. acquired a further stake of 15%. Both portions of goodwill are being amortised over ten years from the date that they arose.

Write- downs of investments This item primarily relates to the valuation of the investment in Albacom S.p.A. by means of the net equity method, and the effect on the Mediaset Group arising from the valuation by means of the net equity method of PKS GmbH, holding company of the investment in Sat 1 GmbH and Media 1 GmbH. The balance at December 31, 2000 therefore includes: n the portion of losses of Albacom S.p.A. pertaining to the Group, equal to ITL 45.7 billion; n the amortisation of Albacom S.p.A. goodwill, equal to ITL 4.2 billion; n the portion of profits of the PKS /Sat 1 Group pertaining to the Mediaset Group, equal to ITL 7.4 billion; n the amortisation of PKS goodwill on the Epsilon Group pertaining to the Mediaset Group, equal to ITL 17.6 billion. As to the PKS Group, during the year, following the merger of Sat1 and Media 1 operations with the ProSieben Group, PKS acquired by means of Sat1 a shareholding in the newly established ProSiebenSat1MediaAg Group. The change in the shareholders’ equity of PKS therefore also reflects the equity valuation of this new investment. For more information on these corporate operations, see the Report on Operations.

117 The balance at December 31, 2000 also includes ITL 1.2 billion regarding the cover of the losses incurred into by Blu S.p.A. at December 31, 1999, pertaining to the Group, and ITL 0.1 billion regarding the write-down, by Mediaset Investment S.a.r.l., of the shareholding in R.T.I. Music Espana S.A., written-down to nil following the liquidation of the company.

118 Extraordinary income and charges The above item may be analysed as follows:

2000 1999

Income: Gains on disposals 0.7 10.9 Out-of-period gainls 1.3 5.3

Charges: Losses on disposals (0.4) (0.6) Out-of-period losses (3.8) (6.1)

Extraordinary income and (charges) (2.2) 9.5

Capital gains on disposals, equal to ITL 0.7 billion (ITL 10.9 billion in 1999), relates to the disposal of the 10% stake in Fivefactor S.p.A. to the company Mediofactoring S.p.A., which took place on March 8, 2000.

IncomeIncome taxestaxes forfor thethe yearyear Current taxes, totalling ITL 566.6 billion, are shown net of tax credits on dividends received for ITL 302.1 billion. This item includes a ITL 67.4 billion change, corresponding to the 19% substitute tax due on the write-up of the network trademarks carried out by the subsidiary company R.T.I. S.p.A. The equity nature of this tax, established by Law 342/2000 is adjusted in the consolidated financial statements, which in the 2000 income statement, together with the above charge, also include the overall tax benefit generated by the write-up operation. This benefit, calculated by applying the ordinary tax rates on the write-up amortisation annual quotas, and therefore equal to ITL 141.6 billion, is recorded in deferred tax assets . The overall value of deferred taxation shown in the income statement includes the restatement of the provision at December 31, 1999, based on the tax rates in force starting with 2001, following the changes brought about by the 2001 Budget. This restatement generated a positive economic effect of ITL 2.6 billion.

for the Board of Directors the Chairman

119 ATTACHMENTS

The following attachments supplement the information provided in the notes to the financial statements, of which they form an integral part: n analysis of changes in shareholders’ equity for the year ended December 31, 2000; n analysis of changes in intangible assets for the year ended December 31, 2000; n analysis of changes in tangible assets for the year ended December 31, 2000; n analysis of changes in financial assets for the year ended December 31, 2000; n consolidated cash flow statement for the years ended December 31, 2000 and December 31, 1999; n reconciliation between shareholders’ equity and period results for Mediaset S.p.A. with consolidated data for the years ended December 31, 2000 and December 31, 1999; n list of companies included in the consolidated financial statements at December 31, 2000; n Balance sheet and Income statement converted in Euro for the years ended December 31, 2000 and December 31, 1999.

120 Analysis of changes in shareholders’ equity for the year ended December 31, 2000

(ITL billions)

Share Share Legal Reserve for Other Retained Profit Total

capital premium reserve company's reserves earnings (loss) shareholders'

reserve own shares (accumulated losses) for the year equity

Balance at 31/12/1999 1,180.3 1,427.3 74.9 - 413.5 463.8 656.7 4,216.5

Issue: rights issue 0.2 5.0 - - - - - 5.2 bonus issue 0.7 - - - - (0.7) - - Allocation of 1999 net income - - 12.6 - (178.6) 822.7 (656.7) - 121

Dividends paid in 1999 - - - - - (418.6) - (418.6)

Other changes:

purchase of own shares - - - 69.6 (69.6) - - - changes in the consolidation area - - - - 0.3 (0.4) - (0.1)

Profit / (loss) for the year ------819.9 819.9

Balance at 31/12/2000 1,181.2 1,432.3 87.5 69.6 165.6 866.7 819.9 4,622.8

Analysis of changes in intangible assets for the year ended December 31, 2000

(ITL billions)

Consolidation Changes during the year

Opening Epsilon Group Amortisation, Changes in the Closing

balance as of balance at Purchases Other Net depreciation consolidation balance as of

31/12/1999 31/12/1999 changes disposals and write-downs area 31/12/2000

Start-up and expansion costs 24.7 2.1 1.1 - - (19.2) - 8.7

Research, development and advertising costs 4.1 - 4.9 - (0.7) (1.9) - 6.4

Patents and intellectual property rights 16.2 - 9.6 1.0 (0.2) (11.0) - 15.7 122

Television rights 3,341.8 12.8 1,100.6 64.1 - (1,103.8) - 3,415.5

Brands 69.1 - 0.8 - - (17.3) - 52.6

Concessions 0.2 - - - - (0.1) - 0.2

Goodwill 32.2 - - - - (8.0) - 24.1

Intangible assets in progress and adv. payments 195.6 14.2 131.5 (133.8) - (11.9) - 195.5

Other intangible assets 12.6 11.7 9.1 0.4 (0.1) (13.6) - 20.2

Differences arising from consolidation 45.8 183.3 1.0 - - (19.1) (72.0) 139.2

Total 3,742.3 224.0 1,258.7 (68.3) (1.0) (1,205.9) (72.0) 3,878.1

Analysis of changes in tangible assets for the year ended December 31, 2000

(ITL billions)

Consolidation Changes during the year

Opening Epsilon Group Amortisation, Changes in the Closing

balance as of balance as at Purchases Other Net depreciation consolidation balance as of

31/12/1999 31/12/1999 changes disposals and write-downs area 31/12/2000

Land and buildings 110.9 0.4 4.6 1.3 (0.6) (5.0) - 111.5

Plant and machinery 185.1 - 77.2 0.7 (2.6) (50.3) - 210.1

Industrial and commercial equipment 35.0 0.3 7.0 0.6 (2.7) (6.1) - 34.0 1 23

Other tangible assets 36.2 0.2 10.2 - (8.9) (7.9) - 29.8

Assets under construction/payments on account 3.1 - 23.2 (2.8) - - - 23.5

Total 370.3 0.8 122.2 (0.2) (14.8) (69.3) - 408.8

Analysis of changes in financial assets for the year ended December 31, 2000

(ITL billions)

Consolidation Changes during the year

Opening Epsilon Group Closing

balance as of as at Purchases and Decreases (Write-downs) Other balance as of

31/12/1999 31/12/1999 increases write-ups changes 31/12/2000

Investments

Subsidiary companies:

124 valued at cost 380.1 (379.9) - - (0.1) - 0.1

Affiliated companies: valued at cost 0.7 0.3 - 2.6 (0.3) - - 3.3 recorded using the equity method 537.7 - 230.2 - - - 17.1 - 784.9

Other companies: valued at cost 33.0 - 38.4 - 123.6 (2.1) - - 192.9 recorded using the equity method 89.8 - - - 99.6 - (49.9) - 139.5

Total 1,041.2 (111.2) 225.9 (2.4) (32.9) - 1,120.7

Other securities 0.1 - - - - (0.1) -

Consolidated cash flow statement for the years ended December 31, 2000 and December 31, 1999

(ITL billions)

31/12/2000 31/12/1999

Net profit for the year 819.9 656.7 Amortisations, depreciations and write-downs 1,309.6 1,181.2 Provisions, net 91.1 2.2 Changes in net shareholders' equity attributable to minority interests (0.4) (0.2) Cash flow from operations 2,220.2 1,839.9

Change in receivables (154.1) (161.9) Change in prepayments and accrued income (13.7) (0.8) Change in payables 60.4 615.7 Change in accruals and deferred income 30.0 (2.8) Change in inventory 3.0 26.8 Change in tax payables (321.7) 253.6 Change in employee termination indemnity 8.3 14.4 Changes in other assets/liabilities 68.2 62.0

Change in working capital and other assets/liabilities (319.6) 807.0

Cash generated by operations 1,900.6 2,646.9

Revenues from the sale of intangible assets 1.0 9.0 Revenues from the sale of tangible assets 14.8 4.0 Revenues from the sale of financial assets 2.4 - Total revenues from disposals 18.2 13.0

Total cash generated during the year 1,918.8 2,659.9

Investments in rights (1,186.0) (1,806.2) Investments in intangible assets (26.9) (31.8) Investments in tangible assets (122.0) (80.2) Investments in financial assets (225.9) (763.4) Total cash (invested) during the year (1,560.8) (2,681.6)

Changes in the consolidation area (41.8) (2.7)

Rights issue 5.2 3.8 Dividends paid (418.6) (323.5) Other changes in shareholders' equity - 0.5 Change in Group shareholders' equity (413.4) (319.2)

Change in net financial position (97.2) (343.6)

Liquid funds/short-term securities 661.5 751.2 Financial receivables from Fininvest Group - - Financial payables to banks / other financial institutions (321.6) (67.7) Opening net financial position 339.9 683.5

Liquid funds / short-term securities 912.7 661.5 Financial receivables from Fininvest Group - - Financial payables to banks / other financial institutions (670.0) (321.6) Closing net financial position 242.7 339.9

Change in net financial position (97.2) (343.6)

125 Reconciliation between shareholders’ equity and period results for Mediaset S.p.A. with consolidated data for the years ended December 31, 2000 and December 31, 1999

(ITL billions)

Shareholders' Profit Shareholders' Profit equity as of for the year ended equity as of for the year ended 31/12/2000 31/12/2000 31/12/1999 31/12/1999

As per balance sheet and income statement of Mediaset S.p.A. 3,538.7 618.8 3,333.2 252.4

Excess of shareholders' equity, including income for the year over book value of investments in subsidiary and affiliated companies. 1,010.8 656.2 655.6 584.5

Consolidation adjustments arising from:

Elimination of adjustments and provisions solely of a tax nature and adoption of Group accounting policies 337.9 (462.2) 494.5 (108.5)

Elimination of unrealised intra-group gains / losses (59.9) 15.9 (71.0) 12.1

Deferred taxation (197.1) (8.6) (187.8) (83.6)

Other adjustments (4.4) - (4.4) -

Total 4,626.0 820.1 4,220.1 656.9

Profit (loss) attributable to minority interests (3.2) (0.2) (3.6) (0.2)

As per consolidated financial statements 4,622.8 819.9 4,216.5 656.7

126 List of the companies included in the consolidated financial statements at December 31, 2000

(billions)

Companies consolidated on a line-by-line basis Registered office Currency Share capital % held by Group

Mediaset S.p.A. Milan ITL 1,181,228 -

Publitalia '80 S.p.A. Milan ITL 100,000 100.00%

Promoservice Italia S.r.l. Milan ITL 4,000 100.00%

R.T.I. S.p.A. Rome ITL 109,022 100.00%

Mediatrade S.p.A. Milan ITL 50,000 100.00%

Videotime S.p.A. Milan ITL 100,018 97.69% Elettronica Industriale S.p.A. Lissone (Milan) ITL 10,000 100.00%

RTI Music S.r.l. Milan ITL 500 100.00%

International Media Services Ltd. Malta ITL 100 99.99%

Mediaset Investment S.a.r.l. Luxembourg ITL 130,090 100.00%

Mediadigit S.r.l. Milan ITL 11,000 100.00%

Companies consolidated with the proportional method Registered office Currency Share capital % held by Group

* Euroset S.a.r.l. Luxembourg ITL 100,000 50.00%

* Euroset Television S.a.r.l. Luxembourg ITL 100,000 50.00%

* Publieuros Ltd. London GBP 5 50.00%

* Publieurope International Ltd. London GBP 0.6 50.00%

* Beta Film GmbH Munich DM 0.05 50.00%

* Beta International GmbH Munich DM 0.05 50.00%

* MiReg I GmbH Munich DM 0.05 50.00%

* MiReg II GmbH Munich DM 0.05 45.20%

Companies recorded using the net equity method Registered office Currency Share capital % held by Group

Albacom S.p.A. Rome ITL 543,423 19.50%

Gestevision Telecinco S.A. Madrid Pesetas 15,394 40.00%

Publiespana S.A. Madrid Pesetas 100 40.00%

* PKS GmbH Munich DM 1 24.50%

* Sat 1 GmbH Berlin DM 200 14.45%

* Media 1 GmbH Berlin DM 1 14.45%

* ProSiebenSat1MediaAg Berlin DM 1 4.05%

Companies valued at cost Registered office Currency Share capital % held by Group

Auditel S.r.l. Milan ITL 60 30.00%

Beigua S.r.l. Milan ITL 99 24.50%

Blu S.p.A. Naples ITL 1,500,000 9.00%

Class Financial Network S.p.A. Milan ITL 1,207 9.94%

Consorzio Aeromobili Fininvest (Cafin) Milan ITL 1,000 45.00%

Consorzio Servizi Vigilanza Milan ITL 1,000 8.95%

E.I.S. S.p.A. Sesto S. Giovanni (Milan) ITL 1,000 10.00%

Epsilon TV Production S.r.l. Milan EUR 0.01 100.00%

Euromedia Luxembourg Two S.a. Luxembourg USD 42.50 11.76%

Mediaset Ireland Ltd. Dublin ITL 0.1 100.00%

* Mercury Film GmbH Munich DM 1 25.00%

* Monarchy Holding USA USD 0.05 1.98%

Radio e Reti S.r.l. Milan ITL 500 10.00%

Società Consortile Fonografici per Azioni Milan EUR 0.5 12.50%

* Thasos GmbH Munich DM 0.05 50.00%

TV Breizh S.A. Boulogne (France) EUR 15.00 13.00%

Veleno S.p.A. Milan EUR 5.00 24.00% * companies belonging to the Epsilon Group

127 MEDIASET GROUP Consolidated balance sheet as of December 31, 2000 (EUR millions)

ASSETS 31/12/2000 31/12/1999

A) RECEIVABLES FROM SHAREHOLDERS - -

B) FIXED ASSETS

I Intangible fixed assets 1 start-up and expansion costs 4.49 12.76 2 research, development and advertising costs 3.31 2.12 3 industrial patents and intellectual - - property rights 8.11 8.37 4 concessions, licences, trademarks and similar rights - - a) television rights 1,763.94 1,725.90 b) trademarks 27.17 35.69 c) concessions 0.10 0.10 5 goodwill 12.45 16.63 6 intangible assets under formation and advances 100.97 101.02 7 other 10.43 6.51 8 differences arising from consolidation 71.89 23.65

Total 2,002.86 1,932.75

II Tangible fixed assets 1 land and buildings 57.56 57.28 2 plant and machinery 108.48 95.60 3 industrial and commercial equipment 17.56 18.08 4 other tangible fixed assets 15.39 18.70 5 fixed assets under construction and payments on account 12.14 1.60

Total 211.13 191.26

III Financial fixed assets 1 investments in: a) subsidiary companies 0.03 196.31 b) affiliated companies 407.07 277.96 c) other companies 171.67 63.47

Total 578.77 537.74

2 receivables: a) Fininvest Group and Mediolanum Group companies 0.05 0.05 b) other companies 6.71 7.49

Total 6.76 7.54

3 other securities - 0.05

Total 585.53 545.33

TOTAL FIXED ASSETS (B) 2,799.52 2,669.34

128 MEDIASET GROUP

Consolidated balance sheet as of December 31, 2000 (EUR millions)

ASSETS 31/12/2000 31/12/1999

C) CURRENT ASSETS

I Inventory 1 raw materials, consumables and supplies 1.96 3.20 2 work in progress and semi-finished products 3.20 4.39 3 contracts in progress 0.26 0.36 4 finished goods and products 12.91 11.93

Total 18.33 19.88

II Receivables 1 trade receivables 651.10 573.01 2 due from subsidiary companies 12.55 4.60 3 due from affiliated companies 3.15 7.33 4 due from parent company 5.99 6.15 5 due from Fininvest Group and Mediolanum Group companies 17.97 18.49 6 other receivables 97.09 122.25

Total 787.85 731.83

III Financial assets (which are not fixed assets) 5 own shares 35.95 - 6 other securities 192.33 166.82 7 receivables due from subsidiary and affiliated companies - -

Total 228.28 166.82

IV Liquid funds 1 bank and postal deposits 242.99 174.72 3 cash in hand and cash equivalents 0.10 0.10

Total 243.09 174.82

TOTAL CURRENT ASSETS ( C) 1,277.55 1,093.35

D) PREPAYMENTS AND ACCRUED INCOME 1 accrued income 7.04 3.62 2 prepayments 10.43 6.77

TOTAL PREPAYMENTS AND ACCRUED INCOME (D) 17.47 10.39

TOTAL ASSETS 4,094.54 3,773.08

129 MEDIASET GROUP

Consolidated balance sheet as of December 31, 2000 (EUR millions)

SHAREHOLDERS' EQUITY AND LIABILITIES 31/12/2000 31/12/1999

A) SHAREHOLDERS' EQUITY I Share capital 610.04 609.57 II Share premium reserve 739.72 737.14 III Revaluation reserve - - IV Legal reserve 45.19 38.68 V Reserve for own shares 35.95 - VI Statutory reserves - - VII Other reserves 85.53 213.57 VIII Retained earnings (losses) 447.61 239.53 IX Profit (loss) for the year 423.46 339.15

Total Group shareholders' equity 2,387.50 2,177.64

Shareholders' equity attributable to minority interests 1.65 1.86

TOTAL CONSOLIDATED GROUP SHAREHOLDERS' EQUITY

AND ATTRIBUTABLE TO MINORITY INTERESTS (A) 2,389.15 2,179.50

B) PROVISIONS FOR RISKS AND CHARGES 1 for pension benefits and similar obligations 2.89 2.43 2 tax reserves (9.50) 58.98 3 Other reserves 78.16 31.65

TOTAL PROVISIONS FOR RISKS AND CHARGES (B) 71.55 93.06

C) EMPLOYEE TERMINATION INDEMNITY 85.06 80.77

D) PAYABLES 3 due to banks 337.37 163.30 4 due to other financial institutions 8.68 2.79 5 advance payments received 3.36 3.67 6 trade accounts 944.88 970.07 8 due to subsidiary companies - 0.52 9 due to affiliated companies 1.08 0.52 10 due to the parent company 0.31 0.26 10bis due to Fininvest Group and Mediolanum Group companies 31.76 23.75 11 due to taxation authorities 65.38 162.94 12 due to social security institutions 10.85 10.95 13 other sums payable 109.98 61.38

TOTAL PAYABLES (D) 1,513.65 1,400.15

E) ACCRUALS AND DEFERRED INCOME 1 accruals 20.57 3.56 2 deferred income 14.56 16.04

TOTAL ACCRUALS AND DEFERRED INCOME (E) 35.13 19.60

TOTAL LIABILITIES 1,705.39 1,593.58

TOTAL NET SHAREHOLDERS' EQUITY AND LIABILITIES 4,094.54 3,773.08

130 MEDIASET GROUP

Off- balance sheet items as of December 31, 2000 (EUR millions)

31/12/2000 31/12/1999 personal securities given 188.40 6.77 collateral security - - commitments 2,797.60 1,311.53 contingencies 4.85 8.08 potential liabilities coutner-guaranteed by the parent company 13.38 11.66

TOTAL OFF-BALANCE SHEET ITEMS 3,004.23 1,338.04

131 MEDIASET GROUP Consolidated income statement as of December 31, 2000 (EUR millions)

31/12/2000 31/12/1999

A) VALUE OF PRODUCTION 1 revenues from sales and services 2,331.65 2,008.81 2 changes in inventories of work in progress, semi-finished and finished goods 2.84 (4.49) 3 changes in contracts in progress 0.10 (1.86) 4 own work capitalised 16.47 20.25 5 other revenues and income 31.92 39.91

TOTAL VALUE OF PRODUCTION (A) 2,382.98 2,062.62

B) COST OF PRODUCTION 6 raw materials, consumables and supplies 62.44 66.21 7 services 540.44 423.96 8 leasing and rental 77.96 75.92 9 personnel expenses: a) wages and salaries 204.31 198.37 b) social security contributions 60.63 59.03 c) employee termination indemnity 19.63 17.97 d) pension benefits and similar obligations 0.57 0.57 e) other expenses 5.16 13.32 Total personnel expenses 290.30 289.27 10 amortisation, depreciation and write-downs a) amortisation of intangible fixed assets 616.26 557.46 b) depreciation of tangible fixed assets 35.89 34.29 c) write-downs of fixed assets 6.56 9.19 d) write-downs of receivables included in current assets and liquid funds 7.02 11.93 Total amortisation, depreciation and write-downs 665.74 612.88 11 changes in the inventories of raw materials, consumables and supplies (1.65) 8.68 12 provisions for risks - - 13 other provisions 8.88 1.81 14 sundry operating costs 47.38 23.69

TOTAL COST OF PRODUCTION (B) 1,691.49 1,502.42

DIFFERENCE BETWEEN VALUE AND COST OF PRODUCTION (A-B) 691.49 560.20

C) FINANCIAL INCOME AND (CHARGES) 15 income from investments a) Fininvest Group and Mediolanum Group companies - 0.10 b) other companies 0.21 - Total income from investments 0.21 0.10

132 MEDIASET GROUP

Consolidated income statement as of December 31, 2000 (EUR millions)

31/12/2000 31/12/1999

16 other financial income a) from receivables included in fixed assets 0.15 0.15 b) from securities included in fixed assets 0.05 - c) from securities included in curent assets 12.81 9.81 d) other income 58.26 41.01 Total other financial income 71.27 50.97 Total financial income 71.48 51.07

17 interest and financial charges a) subsidiary companies - - b) parent company (0.10) - c) Fininvest Group and Mediolanum Group companies - (0.15) d) other (123.79) (32.33) Total interest and other financial charges (123.89) (32.48)

TOTAL FINANCIAL INCOME AND (CHARGES) (C) (52.41) 18.59

D) ADJUSTMENTS TO THE VALUE OF FINANCIAL INVESTMENTS 18 write-ups a) investments 41.73 21.85 19 write-downs a) investments (31.71) (19.42)

TOTAL ADJUSTMENTS TO THE VALUE OF FINANCIAL INVESTMENTS (D) 10.02 2.43

E) EXTRAORDINARY INCOME AND (CHARGES) 20 income a) gains on disposals 0.36 5.63 b) other extraordinary income 0.67 2.75 Total extraordinary income 1.03 8.38 21 charges a) losses on disposals (0.21) (0.31) b) other extraordinary charges (1.96) (3.16) Total extraordinary charges (2.17) (3.47)

TOTAL EXTRAORDINARY INCOME AND (CHARGES) (E) (1.14) 4.91

Profit before taxation 647.96 586.13 22 income taxes for the year a) current taxation 292.62 243.15 b) deferred taxation (68.22) 3.72 Total income taxes for the year 224.40 246.87

Profit (loss) for the period 423.56 339.26 profit (loss) attributable to minority interests 0.10 0.10

26 PROFIT (LOSS) FOR THE YEAR 423.46 339.16

133 MEDIASET GROUP

2000 Consolidated Financial Statements Indipendent Auditors’ report

AUDITOR’S REPORT IN ACCORDANCE WITH ARTICLE 156 OF LEGISLATIVE DECREE OF FEBRUARY 24, 1998, N. 58

To the shareholders of MEDIASET S.p.A.

We have audited the consolidated financial statements of Mediaset S.p.A. as of Decem- ber 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the Auditing Standards recommended by Consob, the Italian Stock Exchange Commission. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. The December 31, 2000 accounts of some subsidiary and affiliated companies, which represent 8.5% of consolidated total assets and 2.8% of consolidated sales, have been audited by other audit firms who have supplied us with their audit reports. Our opinion, as expressed in this report, with regard to the amounts regarding those companies included in the consolidation area, has also been based on the reviews conducted by other audit firms. We believe that our audit provides a reasonable basis for our opinion.

For the opinion on the consolidated financial statements of the prior year, presented for comparison in accordance with legal requirements, reference should be made to the auditor’s report issued by us on April 5, 2000.

In our opinion, the consolidated financial statements present fairly the financial position of the Company as of December 31, 2000, and the results of its operations for the year then ended, and comply with the principles which regulate the preparation of financial statements in Italy.

This report has been translated into the English language solely for the convenience of international readers.

DELOITTE & TOUCHE S.p.A.

Patrizia Arienti Partner

Milan, 23 March 2001

MEDIASET S.p.A.

Financial statements as of December 31, 2000 Board of Directors’ Report on operating performance

MEDIASET S.p.A. Financial statements as of December, 31 2000 Board of Directors’ Report on operating performance

Dear Shareholders, We submit for your examination and approval the financial statements for the year ended December, 31 2000, which close with a net profit of ITL 618,846,904,218 after amortisation, depreciation and write-downs of ITL 599,023,112,371, and income tax provisions of ITL 302,579,348,694, net of deferred taxation of ITL 16,341,635,306. Mediaset S.p.A. and its Group had a very strong growth in 2000 over 1999. While for the parent company the marked increase in its economic results was mainly generated by the increase in dividends received from its subsidiary and affiliated companies, at Group level the increase in operating profitability was mainly responsible for 2000 results, a year when the extraordinary increase in advertising sales was accompanied by a constant growth in viewing figures and an effective control on operating costs.

The further strengthening of Mediaset’s competitive position in its core business, now allows the Group to primarily focus on content production and delivery operations, which are strategically fundamental in the situation of gradual convergence between the various media and with a view to the transition process to the terrestrial digital television broadcasting system which is expected to take place in 2006. The beginning of the integration between Television and New media and the presence in potentially synergetic telecommunications fields, provides Mediaset with distinctive know-how and the leverages necessary to start, direct and manage the necessary adaptation and reviewing process of current business models that is dictated by this evolution, safeguarding and capitalising of the competitive advantage and the economic returns guaranteed by the current general television model. In a year marked by the sharp, though appropriate, correction of the excesses in the generalised growth expectations in the fields of the so called New economy and the first attempt to carry out aggregation operations between players in the name of convergence in Italy as well, general television confirms to be the medium with which most time is passed in our country; Auditel data show a further increase in 2000 (amounting to 2.7% over the average detected in 1999) of television viewing, which reached 230 minutes every day, and an increase in overall television viewing, which grew in both Day Time and Prime Time, also due to the three events which marked the television year: European Football championships, Olympics and Big Brother. In 2000 the advertising market on classic media recorded, according to Nielsen data, an unprecedented growth of 14.5% (under the same terms for the same media and broadcasters analysed in 1999) , and confirm the irreplaceable role played by classic media and television in particular in communication and marketing strategies for both emerging and consolidated (i.e. connected to mass consumption goods) industries.

140 In the framework of an extraordinarily expanding market, Publitalia ‘80 obtained a remarkable increase in television advertising on our networks. Based on the estimates made by Nielsen, this increase, amounting to 12.6%, is higher than that of the television advertising market which was equal, under equal conditions, to 12.4% over 1999. As to audience shares, 2000 represented for Mediaset the best out of the last six television years. In the day time average, Mediaset networks reached a 43.4% share, and improved the 1999 average data by almost one percentage point. In a situation marked by an increase in the overall television viewing, this result was accompanied by a 4.5% increase in contacts in Mediaset networks average minute. This result is extremely positive, since it was reached in the year when our main competitor had the exclusive rights to the European football championships and the Olympic Games, broadcasting them live. These audience shares mirror the ever greater effectiveness and co-ordination network publishing strategies, aimed at creating strong, innovative and profiled schedules, functional to the achievement of adequate cost sizing and investments optimisation objectives. In 2000, network scheduling was characterized by the establishment of new production formats, especially in the fields of game shows, entertainment and investigations into matters connected to information and the news. Significant audience successes were also recorded in domestic self-produced drama, thus rewarding the large investments devoted to series, miniseries and soaps. Content acquisition and creation is more and more connected to the growing ability of the Group to maximize their commercial value, by joining publishing objectives and economic efficiency. In 2000, this strategy was implemented by reselling parts of some products to alternative distribution platforms (as was the case of Champions League and Big Brother) and in the start of brand extension projects connected to the development of proven and established television products in terms of their multimedia exploitation, as is the case of the scientific programme La macchina del tempo, offered both as specialist reviews and satellite theme channel. From this viewpoint, Big Brother, the programme broadcast by Canale 5, turned immediately to be the event of the autumn season, and represents the most astonishing, and under certain aspects, exceptional case of a product having a large television impact, which can be simultaneously experienced, with very good results in terms of users/subscribers, by means of multiple distribution channels (Internet, Pay tv, Wap), which are bound to have significant consequences in the near future in terms of conception, development and adaptation of television formats. The strategy of a progressive integration between television and the Internet represents the basis of the project that is being developed by Mediadigit, a company established in late 1999 to comprise the Group’s multimedia operations (teletext, theme channels, the Internet), by means of the Mediaset Online vertical portal and the sites of the three networks; the instant success of the on line versions of Passaparola and TG5 is the first tangible and encouraging sign along the road of the research into

141 and development of a strategy that will make it possible to benefit from the strong complementary character of these two media. Internationally, Mediaset’s strategy reflects its will to share synergic projects with European partners who have a similar competitive positioning and at the same time show significant opportunities for value creation. The two main existing international partnerships are to be seen in this light. Our established presence in the Telecinco Group, which recorded excellent performance in terms of revenues in 2000 as well, was accompanied by the strategic alliance with the Kirch Media Group, already our partner in Telecinco and Mediaset shareholder, with which the Joint-venture Epsilon had been established at the end of 1999. The revision of equity investment and industrial agreements based on that Joint-venture, formally established in a preliminary agreement between the two Groups, envisages in 2001 the conversion of Mediaset’s investment in Epsilon into a 2.34% shareholding in Kirch Media KgaA capital, to date the most significant commercial television company in Germany. According to the agreement, the two Groups will also develop a cinema and television content production and co-production activity aimed at international distribution.

CORPORATE GOVERNANCE

The Board of Directors of Mediaset S.p.A., carries on with the implementation of the Code of Self-Discipline it started last year, as mentioned in the communication dated March 28, 2000, and has approved its own Code of Self-Discipline at its meeting of March 20, 2001. With regard to the above, we provide you with some information about the making-up and powers of the Board of Directors and Executive Committee, as well as the list of directors and their charges and responsibilities. The latter is also provided pursuant to the CONSOB recommendation of February 20, 1997, number of protocol DAC/RM/97001574).

Board of Directors The Board of Directors includes 19 members, 8 of which are executive, and 11 non- executive. The Board of Directors, in line with its powers since Mediaset listing at the Stock Exchange, made efforts to include an appropriate number of independent directors. To date, there are 5 of them. By exercising its statutory powers, the Board of Directors appointed an Executive Committee, a Deputy Chairman and a Managing Director. Delegated activities are always reported to the Board of Directors by means of the relevant bodies on the occasion of Board’s meetings. In particular, in accordance with article 21 of the articles of association, the Board of Directors has exclusive powers on the following issues, for which relevant deliberations must be taken by a qualified majority (3/4 of the directors present, among which at least 1 appointed among minority lists): n the stipulation of every contract or legal relationship amounting to over ITL 25,000,000,000 per single operation with a shareholder in the company holding a

142 company stake higher than 5% (or with companies belonging to the same Group of the shareholder, meaning subsidiary companies, parent companies or natural persons and subsidiary companies of the latter); n the stipulation of every contract or legal relationship amounting to over ITL 250,000,000,000 for single operation. In the year 2000, the Board of Directors met nine times.

Chairman Fedele Confalonieri (1) has powers of ordinary and extraordinary administration within the maximum limit of ITL 25,000,000,000 per single operation, with the exclusion of those powers which, under article 21 of the articles of association, exclusively belong to the Board of Directors. According to the Statute, the Chairman is the legal representative of the company with respect to third parties and in court. Deputy Chairman Pier Silvio Berlusconi (1) pursuant to the Statute, the Deputy Chairman replaces, as legal representative of the company, the Chairman when he is absent or subject to an impediment, and its acts as legal representative of the company with respect to third parties and in court. The fact that the Deputy Chairman acts as legal representative shows in itself the absence or impediment of the Chairman and keeps third parties exempt from any verification or responsibility thereon.

143 Managing Director Giuliano Adreani (1) has powers of ordinary administration, within the maximum limit of ITL 10,000,000,000 per single operation, with the exclusion in any case of the granting of loans and of the powers which, under article 21 of the articles of association, exclusively belong to the Board of Directors and those which belong to the Chairman. Under the Statute, the Managing Director is the legal representative of the company with respect to third parties and in court. Directors Franco Amigoni (3) Tarak Ben Ammar (3) (4) Marina Berlusconi (2) (4) Pasquale Cannatelli (5) Enzo Concina (3) Maurizio Costa (2) Mauro Crippa Gilberto Doni Bruno Ermolli (2) Adriano Galliani (2) Marco Giordani Alfredo Messina (2) (5) Jan Mojto (3) (4) Gina Nieri (1) Roberto Ruozi (3) (5) Claudio Sposito (1) (2)

(1) Member of the Executive Committee (2) Non executive directors (3) Independent directors (4) Members of the Employee Stock Plan (5) Members of the Internal Control Committee

Executive Committee Currently the Executive Committee includes 5 members. The Board of Directors gave the Executive Committee all powers of ordinary and extraordinary administration within the maximum limit of ITL 250,000,000,000 per single operation, with the exclusion of the matters expressly reserved to the Board of Directors by law and by article 21 of the articles of association. In the year 2000, the Executive Committee met five times.

144 In line with CONSOB regulation no. 11971 of May 14, 1999 (article 79), we report the following information with regard to shares held by directors and statutory auditors of the Company and its subsidiary companies, according to criteria included in table 3), as provided by attachment 3c) of the aforementioned regulation.

Mediaset S.p.A. Shares held by directors, statutory auditors and general managers

Full name Invested Number of shares Number of Number of Number of shares company held as at shares shares sold held as at purchased

31-dic-99 31-dic-00 (*)

Confalonieri Fedele Board of DirectorsMediaset S.p.A. 803,000 - 110,500 954,400

Berlusconi Pier Silvio Board of Directors - - - -

Adreani Giuliano Board of DirectorsMediaset S.p.A. 265,500 - 43,900 317,100

Amigoni Franco Board of Directors - - - -

Ben Ammar Tarak Board of Directors - - - -

Berlusconi Marina Board of Directors - - - -

Butcher David Travor Board of Directors - - - -

Cannatelli Pasquale Board of DirectorsMediaset S.p.A. 44,000 - 6,800 56,500

Carlotti Maurizio Board of DirectorsMediaset S.p.A. 217,000 - 15,000 202,000

Concina Enzo Board of Directors - - - -

Costa Maurizio Board of Directors - - - -

Crippa Mauro Board of DirectorsMediaset S.p.A. 75,000 - - 102,600

Doni Gilberto Board of DirectorsMediaset S.p.A. 135,000 - - 178,300

Galliani Adriano Board of DirectorsMediaset S.p.A. 401,500 - - 401,500

Messina Alfredo Board of Directors - - - -

Mojto Jan Board of Directors - - - -

Nieri Gina Board of DirectorsMediaset S.p.A. 113,000 - - 149,100

Preda Michele Board of DirectorsMediaset S.p.A. 65,500 - 13,500 88,100

Ruozi Roberto Board of DirectorsMediaset S.p.A. - - - -

Seragnoli Giorgio Board of Directors - - - -

Sposito Claudio Board of DirectorsMediaset S.p.A. - - 23,500 34,200

Thoulouze Michel Board of Directors - - - -

Frattini Achille Internal auditor - - - -

Giampaolo Francesco Antonio Internal auditor - - - - Perotta Riccardo Internal auditor - - - -

(*) Drafted based on information provided by the people involved and inclusive of assigned, purchased or subscribed shares as reported in the Table no. 2 of the notes to the Financial Statements

145 THE GENERAL ECONOMIC SITUATIO N

146 In Italy, 2000 ended with a GDP growth amounting to 2.9%, double as much as that of 1999, though lower than the rate of the main countries in the Euro area (Germany: 3%, France: 3.3%; Spain: 4.1%). Inflation, conversely, amounted in 2000 to the almost physiological rate of 2.5%. In 2000, Italy confirmed to be one of the EMU countries with the greater propensity to consumption, and benefited from an increase in income available to households and a reduction (from 11.4% in 1999 to 10.7% in 2000) of the unemployment rate. The sustainability of these favourable situations will have to be assessed over the next few months, since the stimulating function carried out by the tax reduction in the last couple of years took place in the presence of a level of public debt which in 2000 was still higher than European average. The Italian economy, as was recently pointed out by the EU Commission, remains vulnerable, until the structural reforms regarding public and social security and pension expenditure are completed, and the rigid structure of the labour market is overcome. Such reforms must be accompanied by far-reaching measures fostering technological innovation and market liberalization, without which the competitiveness of Italian companies may be further reduced. The commercial surplus of our country shrunk in the last two years; the Euro's depreciation, which fostered exports to non-EMU countries, simultaneously reduced those directed within the EMU.

FINANCIAL RESULTS

We shall now look at the company’s economic and financial results for 2000.

Economic results A summary of Mediaset’s income statements is provided below, with comparative figures for 1999:

2000 1999 2000 1999 (ITL billions) (EUR millions)

Revenues from sales and services 811.7 973.7 419.20 502.86 Other revenues and income 7.5 13.7 3.87 7.08 Total net revenues 819.2 987.4 423.07 509.94

Goods and services purchased 31.9 40.6 16.47 20.97 Leases and rentals 18.9 19.7 9.74 10.17 Personnel expenses 35.9 42.4 18.56 21.90 Amortisation, depreciation and write-downs 599.2 784.6 309.42 405.21 Other operating costs 5.6 14.8 2.92 7.64 Total operating costs 691.5 902.1 357.11 465.89

Operating profit 127.7 85.3 65.96 44.05

Dividends and other income/(charges) from investments 867.9 263.6 448.25 136.14 Interests and other financial income/(charges) (73.6) 3.8 (38.01) 1.96 Net valuation and financial income/(charges) 794.3 267.4 410.24 138.10

Sundry and extraordinary income/(charges) (0.6) 24.2 (0.31) 12.50

Profit (loss) before taxation 921.4 376.9 475.89 194.65

Income taxes 302.6 124.5 156.28 64.30

Profit (loss) for the year 618.8 252.4 319.61 130.35

147 Net revenues Net revenues decreased by ITL 168,2 billion, mainly because of the reduction in operations regarding the marketing of television rights which, starting from 1999, have been carried out by the subsidiary company Mediatrade S.p.A.. This reorganisation led to a new definition of the contract for the rental of television rights. Under this new agreements, a yearly lump sum shall be paid, which is ITL 150.0 billion lower than that of previous year, considering the fact that Mediaset S.p.A.’s library has not been expanded in 2000 and its quantity and quality further decreased.

Operating costs Operating costs decreased markedly, from ITL 902.1 billion in 1999 to ITL 691.5 billion in 2000. The main reasons for this decrease are as follows: n the significant decrease of amortisation, depreciation and write-downs (- ITL 185.4 billion), following the reduction in the rights library, for the abovementioned reasons; n the decrease in the costs for goods and services purchased, which fell from ITL 40.6 billion in 1999 to ITL 31.9 billion in 2000, and of personnel expenses which decreased by ITL 6.5 billion (mainly as a result of a drop in Mediaset S.p.A. workforce), due to the gradual transfer of operating activities to subsidiary companies in the Commercial Television area, following the Group’s reorganisation; n the reduction of other operating costs, down from ITL 14.8 billion in 1999 to ITL 5.6 billion in 2000.

Operating profit The marked reduction in operating costs over net revenues led to an increase in operating profit, which rose from ITL 85.3 billion in 1999 to ITL 127.7 billion in 2000, with an ITL 42.4 billion increase.

Financial income /(charges) This items shows an increase, from ITL 267.4 billion in 1999 to ITL 794.3 billion in 2000.

The most significant increase is showed in dividends and other net income/charges from investments thanks to the dividends received from subsidiary and affiliated companies; subsidiary companies which paid higher dividends in 2000 over the previous year are the following: R.T.I. S.p.A. (ITL 392.5 billion in 2000, compared to ITL 38.2 billion in 1999), Publitalia ’80 S.p.A. (ITL 120.0 billion in 2000, over ITL 70.0 billion in 1999) and Mediaset Investment S.a.r.l (ITL 80.0 billion in 2000, whereas no dividends were paid in 1999).

The item interest and other financial income /(charges) went from a positive balance of ITL 3.8 billion in 1999 to a negative balance of ITL 73.6 billion in 2000. This was primarily generated by the write-down of own shares held and by other valuation

148 charges from financial operations on securities in order to adjust their book value to the market value.

Sundry and extraordinary income/(charges) This item went from a positive balance of ITL 24.2 billion in 1999 to a negative balance of ITL 0.6 billion in 2000; the reduction to almost nil of this item can be attributed to the fact that in 1999 it benefited from tax advances regarding previous years until 1998, that had been calculated and allocated in the income statement in line with Accounting Standard no. 25.

Profit before taxation The increase of income from investments and the simultaneous reduction in operating costs determined an ITL 544.5 billion increase in profit before taxation.

Profit for the year It amounted to ITL 618.8 billion, compared to ITL 252.4 billion in 1999, with a tax rate of 32.8%, which basically remained unchanged over the previous year.

Balance sheet and financial position

Balance sheet summary 31/12/2000 31/12/1999 31/12/2000 31/12/1999 (ITL billions) (EUR millions)

Investments and other financial fixed assets 1,942.2 1,801.7 1,003.04 930.50 Television rights 1,200.8 1,668.2 620.20 861.55 Other intangible and tangible fixed assets 39.8 157.1 20.54 81.14 Net working capital and other current assets/liabilities 173.9 181.2 89.79 93.58 Provision for employee termination indemnity (6.1) (9.9) (3.15) (5.11)

Net invested capital 3,350.6 3,798.3 1,730.42 1,961.66

Net financial position 188.1 (465.1) 97.15 (240.20)

Net shareholders' equity 3,538.7 3,333.2 1,827.57 1,721.46

Sources and applications 31/12/2000 31/12/1999 31/12/2000 31/12/1999 (ITL billions) (EUR millions)

Cash flow from operations 1,254.4 1,032.9 647.84 533.45

Total investments incl.: (160.6) (1,023.9) (82.94) (528.80) financial fixed assets (102.3) (831.1) (52.83) (429.23) intangible/tangible fixed assets (58.3) (192.8) (30.11) (99.57)

Share capital increases 5.2 3.8 2.69 1.96

Dividends paid (418.6) (323.5) (216.19) (167.07)

Other changes affecting cash flow (27.2) 150.0 (14.05) 77.47

Net cash flow 653.2 (160.7) 337.35 (82.99)

Net invested capital It amounted to ITL 3,350.6 billion at December, 31 2000, compared to ITL 3,798.3 billion at December, 31 1999; the most significant component of net invested capital is

149 Investments and other financial fixed assets, which amounted to ITL 1,942.2 billion; the 140.5 increase was primarily due to the capitalisation of the following companies: Albacom S.p.A. and Mediaset Investment S.a.r.l. The item television rights fell markedly (- ITL 467.4 billion) as a result of the aforementioned operations connected to the management of television rights.

Shareholders’ equity Shareholders’ equity rose from ITL 3,333.2 billion to ITL 3,538.7 billion; the ITL 205.5 billion increase primarily related to the positive balance between net profit for the year (ITL 618.8 billion) and the allocation for the payment of dividends (ITL 418.6 billion).

Net financial position Net financial position, with a negative balance of ITL 465.1 billion at December, 31 1999, improved to a positive balance of ITL 188.1 billion at December, 31 2000. This increase (+653.2 ) is essentially related to the dividends received from subsidiary and affiliated companies and to the cash flow from operations, partly offset by financial expenses caused by the capitalisation of Mediaset Investment S.a.r.l and Albacom S.p.A. and by the payment of dividends.

KEY EVENTS DURING THE YEAR

Company activities n Within the process of rationalisation of the company and of core business activities, we point out the following: – on January 25, 2000 the General meeting of Picienne Italia S.p.A. approved the final financial statements for the company liquidation; the paid-up capital was given back to the shareholders, according to the relevant shares; – on February 18, 2000 the company Elettronica Industriale S.p.A., 100% subsidiary of R.T.I. S.p.A., acquired, for ITL 300 million, a 30% stake in the company Digital Multimedia Technologies – DMT S.r.l. (now S.p.A.), the company to which on January 1, 2000 it had sold the company branch, including 113 employees, regarding the design and assembly of television broadcasting equipment. Elettronica Industriale S.p.A. retains the design and maintenance activities of the signal broadcasting network as well as the acquisition activity, on behalf of R.T.I. S.p.A., of the systems necessary to guarantee the development of the network. Within this operation, DMT’s majority shareholder had been given a right of option for the repurchase of the stake above, to be exercised upon the full payment of the purchase price of the branch. On November 8, 2000, DMT’s majority shareholder made the payment of this amount (ITL 14.2 billion) to Elettronica Industriale S.p.A., and simultaneously exercised the right of option above for an amount equal to that originally paid by Elettronica Industriale S.p.A.;

150 – on March 8, 2000 the parent company Mediaset Group S.p.A. sold to a third party its 10% stake in the company Fivefactor S.p.A.; – on April 28, 2000 the company Mediaset Investment S.a.r.l. took part in the establishment of the company TV Breizh S.A. by subscribing a 13% stake of the share capital for ITL 3.8 billion. The company, whose main shareholders are the TF1, Artemis and News International Groups, will set up a Breton regional television channel to be distributed on the main satellite and cable French platforms; – on June 30, 2000 the subsidiary company Mediaset Investment S.a.r.l. cancelled its stake in RTI Music Espana S.A., following the liquidation of the company; – on July 25, 2000 the subsidiary company Mediaset Investment S.a.r.l. joined the EuroMedia Venture Fund by subscribing a 11.8% stake in EuroMedia Luxembourg Two S.A. capital, for an overall amount of USD. 5,000,000; – on November 3, 2000 Mediaset S.p.A. subscribed a 24% share, for EUR 1.2 million (ITL 2.3 billion), of Veleno S.p.A., a company owned by Medusa S.p.A. (24%), Arnoldo Mondadori S.p.A. (24%), Newmedia Investment S.A. (24%) and the company management (4%). The company has an initial share capital of EUR 4.9 million, and it will develop and manage new formats and copyrights in order to foster the implementation of publishing projects to be distributed on different media, with the contribution of the main creative talents belonging to the shareholders; – on December 20, 2000 Mediaset Investment S.a.r.l. set up the company Epsilon Tv Production S.r.l., with head office in Milan and wholly paid-up share capital of EUR 10,000. This company, which Kirch Media is expected to join with a 50% stake, will develop the production and co-production of television contents on an international basis. n The following operations concern the area of activities connected to telecommunicationstelecommunications: – on April 7, 2000 the shareholders of Blu S.p.A. deliberated upon and subscribed a capital increase from ITL 300 to 1,500 billion. As of December 31, 2000, 5 tenths of this increase had been paid; ITL 54 billion was paid of the quota pertaining to Mediaset Investment S.a.r.l., equal to ITL 108 billion; – on July 26, 2000 and December 21, 2000, the Extraordinary Meeting of Albacom S.p.A. Shareholders, deliberated under article 2446 of the Italian Civil Code, the total coverage of the losses accrued by the Parent Company as at March 31, 2000 (ITL 280.5 billion) and as at October 31, 2000 (ITL 230.1 billion) by means of a reduction – by an equal amount – of the share capital (net of the use of the legal reserve for ITL 174 million) and the subsequent replacement of the share capital for the same amount. These capital increases were subscribed and paid by Mediaset S.p.A. in proportion to its share, for an overall amount of ITL 99.6 billion.

151 n As to multimedia activities, the following company operations regarded Mediadigit S.r.l.: – on January 14, 2000 the parent company Mediaset Investment S.a.r.l. subscribed a capital increase from ITL 20 million to ITL 20 billion (ITL 11 billion have been paid) mainly aimed at the purchase, by Mediadigit S.r.l. from R.T.I. S.p.A., of the branch involved in the activities of the theme channel Happy Channel and the Mediaset Online Internet site; – on January 25, 2000 Mediadigit S.r.l. subscribed a 10% shareholding in the company Class Financial Network S.p.A., for ITL 600 million. Class Financial Network S.p.A., which includes Class Editori S.p.A., produces CFN, a theme channel devoted to economic and financial newsn distributed by Stream since April 2000. Following the subsequent participation of new shareholders, at December 31, 2000 CFN shareholders are the following: Class Editori S.p.A. 52.8%, Mediadigit S.r.l. 9.9%, Newmedia Investment S.A. 9.0%, Mediolanum Comunicazione S.r.l. 2.5%, other shareholders represented by significant banks and financial institutions 25.8%.

Employee Stock Plans

Employee Stock Plan On June 28, 2000 the increase in the share capital of Mediaset S.p.A. was paid, which had been approved on May 15, 2000 by the Board of Directors under delegation from the General Meetings of May 19, 1998 and April 20, 2000. This operation, by virtue of which the share capital rose from nominal ITL 1,180,320,964,000 to ITL 1,181,227,564,000, was carried out by means of a capital increase amounting to ITL 151.7 million, by means of the issue of 151,700 ordinary shares with a par value of ITL 1,000 each at a price of ITL 34,431, and a bonus issue of ITL 754.9 million, by means of the issue of 754,900 ordinary shares through the use of the profit for the year 1999. With the latter operation, the Employee Stock Plan established by the General Meeting of April 30, 1998 for a duration of three years, came to a conclusion.

2000/2002 Stock Option Plan The General Meeting held on April 20, 2000, after noting the value in providing the company with an instrument that stimulates and brings about the loyalty of employees, with the aim of focusing their commitment towards the achievement of strategic objectives, like the previous 1997/1999 Employee Stock Plan, decided to promote the implementation of a Stock Option Plan in order to encourage the loyalty of participants to the Plan and have them share the responsibility of the Group management and improvement. The Meeting above approved the establishment of a Stock Option Plan on the company own shares, for employees of the company, of subsidiary companies and of the parent company selected by the Stock Option Plan Committee from among managers, journalists and department managers (or other company positions) who carry out functions of importance for achieving the Group’s strategic results, for the duration of three years, and also, if considered appropriate by the Board of Directors,

152 to start similar projects on shares of subsidiary companies or companies where the company directly or indirectly holds stakes. In 2000, the Stock Option Plan Committee selected 140 participants for the Plan and assigned rights of option to them for the purchase of company ordinary shares totalling 585,000 shares. The exercise of the options assigned is subject to the achievement of the performance indicators established by the committee and is exclusively allowed in one single time between January 1 of the third year and June 30 of the fourth year of calendar following the year of the assignation date.

Euro Projectject In the Mediaset Group the Euro Project was started in 1998, by means of the establishment of the Group Euro Committee, which had approved a preliminary planning of short-term solutions (contingency plan).

In 1999, an explanatory book titled “Pensare“Pensare iin Euro” (Thinking in Euro) was prepared and distributed to all Group employees, and the master plan was completed and approved, with the objective to adopt the Euro as unit of account starting from 2001. In the year 2000, the Euro Committee approved and distributed a document called: “Progetto“Progetto EuroEuro didi GruppoGruppo - lineelinee guidaguida perper lala transizionetransizione all’Euro”all’Euro” (Group Euro Project – guidelines for the transition to the Euro) including reference criteria and principles for the implementation of the Euro Project; this document was examined by the External Auditors and was sent to all the Boards of Auditors of the companies belonging to the Mediaset Group.

153 In all Group sections, operating projects have been started for the transition to the Euro, with the following objectives: n adoption of Euro in corporate accounting and in the sub-systems, in line with legal limits and taking advantage of business opportunities; n adjustment of IT systems and promotion of appropriate measures for the change of company procedures; n training of in-house personnel. The structure of the Euro Project envisages the adjustment of the SAP accounting system and other holding systems and processes at Group level, as well as the adjustment of vertical systems and processes of the advertising, broadcasting and contents areas. In particular, with respect to your Company, the working plans include the conversion into Euro of the Group’s accounting system and of some SAP company sub-systems in May 2001, while other sub-systems will be converted into Euro in the last four months of 2001.

154 STRUCTURE AND OPERATIONSIONS OFOF THETHE MEDIASETMEDIASET GROUPGROUP

The structure of Mediaset S.p.A.’s subsidiary companies at December, 31 2000, broken down by areas, is as follows:

MEDIASET GROUP

COMMERCIAL TELEVISION MULTIMEDIA/TLC

Italy International

Advertising Broadcasting and contents Epsilon Group Multimedia

- Telecinco S.A. - Publiespana S.A.

A comment on each business sector is provided below, along with a table showing the highlights from the major companies controlled directly or indirectly by your Company:

(ITL millions)

% held by revenues and profit (loss) for number of fixed assets share capital shareholders' the Group income 2000 the year employees equity

Commercial TV - Italy Publitalia '80 S.p.A. 100.00% 4,188,099 144,248 765 23,148 100,000 309,689 Promoservice Italia S.r.l. 100.00% 41,787 580 4 20 4,000 4,659 R.T.I S.p.A. 100.00% 3,766,487 444,597 1,416 1,414,393 109,022 907,478 Mediatrade S.p.A. 100.00% 1,265,556 20,633 104 1,557,536 50,000 123,975 Videotime S.p.A. 97.69% 313,386 1,976 1,220 75,592 100,018 113,929 Elettronica Industriale S.p.A. 100.00% 156,842 6,241 628 31,327 10,000 50,361 Rti Music S.r.l. 100.00% 10,905 827 14 667 500 4,045

Commercial TV - abroad Mediaset Investment S.a.r.l. (1) 100.00% 42,883 23,130 5 749,537 120,090 1,284,528 Publiespana S.a. (2) 40.00% 99,795 5,535 128 184 100 8,396 Gestevision Telecinco S.a. (2) (*) 40.00% 94,382 20,134 839 46,140 15,394 49,328

Multimedia Mediadigit S.r.l. 100.00% 35,015 (789) 37 8,529 11,000 10,195

Telecommunications Albacom S.p.A. (3) (*) 19.50% 668,621 (227,285) 985 500,406 543,423 247,735 Blu S.p.A. 9.00% 277,244 (648,632) 1,749 859,443 1,500,000 851,368

(1) latest approved financial statement: June 30, 2000 (2) data in PTS millions (3) latest approved financial statement: March 31, 2000 (*) figures from consolidated financial statements

155 Commercial Television – Italy:Italy: advertisingadvertising divisiondivision A substantial portion of the Mediaset Group’s revenues are generated from the sale of television advertising on Mediaset networks, over which Publitalia ‘80 S.p.A. has exclusive rights. Again in 2000 Publitalia ‘80 S.p.A. confirmed itself as market leader in advertising; television advertising revenues show an increase of 12.2% and this result was obtained by means of a careful pricing policy and an increasingly effective placement of advertisements.

The following table summarises advertising revenues in the so called traditional area for 2000, compared to 1999:

(source: Nielsen Adex – net values)

Media 2000 1999 Change

ITL billions % ITL billions % %

Newspapers 3,289 22.4% 2,783 22.1% 18.2%

Magazines 2,314 15.7% 2,038 16.1% 13.5%

Television (*) 7,928 53.8% 6,969 55.2% 13.8%

Radio 700 4.7% 528 4.2% 32.6%

Posters and billboards 387 2.6% 304 2.4% 27.3%

Cinema 123 0.8% - 0.0% 0.0% Total market 14,741 100.0% 12,622 100.0% 16.8%

(*) Television at '99 homogeneous values 7,830 6,969 12.4%

The advertising market grew again considerably in 2000. Overall advertising revenues amounted to ITL 14,741 billion with a 16.8% increase over the previous year; with equal analysed media, the increase amounted to 14.5%.

All traditional area media show considerable increases.

Television confirms to be the main media in absolute terms, though the percentage growth in 1999 comparable values shows better performances of radio, billboards and newspapers, caused by the availability of spaces. As to television, with ITL 7,928 billion revenues in absolute values and ITL 7,830 billion net of MTV advertising revenues, comparable growth over the same period in 1999 amounts to 12.4% . This was mainly attributable to Publitalia ’80’s significant performance (+16.6%), 0.6% higher than that of Rai, though the latter benefited from the broadcasting of two extraordinary events such as the European Football Championships in June 2000 and the Olympics in September 2000.

156 InternationalInternational AdvertisingAdvertising The Mediaset Group’s international advertising activities have been carried out since 2000, within the European Joint-venture Epsilon, by the companies Publieuros Ltd. and Publieurope International Ltd. Publieuros Ltd. started in early 2000 promotion and marketing activities with a view to keeping a check on the advertising investment strategies of the leading European multinationals, while Publieurope International Ltd. plays the role of advertising sub- agent and sells space on behalf of national agencies.

Commercial Television – Italy:Italy: broadcastingbroadcasting andand contcontents division The Broadcasting and contents division belongs to R.T.I. S.p.A. which, directly or by means of subsidiary companies, controls the following areas of activity: n management of television networks and programme scheduling n production of television programmes n technology for the production of television programmes n acquisition and management of television rights n management of the signal broadcasting network n record publishing.

Management of television networks and programme scheduling In 2000, each network broadcast 8,784 hours of programmes each for a total amount of 26,352 hours, including 11,880 hours of original programmes produced in-house. Mediaset achieved an average audience share of 43.4% in 2000; though this year’s results were affected by extremely significant sports events like the European Football Championships and the Olympics (both broadcast by Rai), Mediaset recorded one percentage point up on 1999, gaining audience from Rai, and minor channels.

Change Full day 2000 1999 over 1999

43.4% 42.6% 0.8% Mediaset Networks

RAI Networks 47.3% 47.6% -0.3%

Other 9.3% 9.8% -0.5%

Total 100.0% 100.0%

This is an excellent figure, and represents the highest level since 1995. This result combines the very fine performances of both Day Time (+0.9 share points), and Prime Time (+0.5). Results obtained in the last months of the year are even better: already in October, Mediaset networks achieved an overall 45.3%, only 0.4 share points below Rai; in November Mediaset networks outperformed their direct competitor (46.1% vs. 45.7%), and this result was confirmed also in December

157 The viewing figures of each of the Mediaset networks are analysed below.

Canale 5 2000 was an exceptional year for the main Mediaset network: over the 24 hours, it gained no less than 1.3 points over 1999, and obtained 22.5%; this result is outstanding, the highest in the last 14 years. The network’s success was evenly distributed throughout the year: n in January, a growth of 1.5 share points over 1999 was recorded, and the distance from Rai 1 was reduced to a few share decimal points; n in Spring, Canale 5 managed to catch up with the main state network (22.4% vs. 22.6%), thanks to an astonishing 2 point increase over the previous year; n Canale 5 performed well during the European Football Championships (in spite of the fact that the Italian national team reached the final), keeping a level of 19.3% n in the Autumn viewing results rocketed and it clearly became the main Italian network: in October, it was the leading network in October with a 24.4% share (vs. 23.2% of Rai 1) and further strengthened its position in the two following months achieving, on a 24 hour basis, 25.7%. The share increase was evenly distributed throughout the day, and Canale 5 has become the favourite network for most of the TV watching audience (it is the network of choice for the 15 - 64 years age target); in Day Time, Canale 5 achieved record audiences and with a 22.5% share it obtained its highest result since 1987, while In Prime Time, with 22.5%, it reached its the best result in the last 13 years, and became the network of choice for children and viewers aged 15 to 64.

ItaliaItalia 11 The year 2000 proved very positive for Italia 1 as well. In spite of the extraordinary strength of Canale 5 and the concentration of highly popular sports events on Rai networks, this network managed to stay at the same levels of the previous year. The very good health of this network is proved by the full day data regarding its target audience: n with a 26.5% share (almost 3 points more than in 1999) it strengthened its leadership on children aged 4 to 14, effectively countering Rai 2 programmes in Autumn; n with a 15.0% share it ranked third again with respect to young-adult audience aged 15 to 44, without being affected by Canale 5’s growth on the same target. In Day Time Italia 1 remained at the same values of last year, enjoying the good results guaranteed by library rights; In Prime Time, films shown improved last year’s data and achieved an average share of 11.9%.

R etequattro Over the full day, the network has been affected on the one hand by a not very good performance at year’s beginning, and on the other hand by the attack launched in

158 September by Rai 3, which had exclusive rights over the Olympics. In the last quarter, however, Retequattro gained ground in all the times, and returned to last year’s levels, showing new vitality. However, our network stays clearly ahead of Rai 3 and remained highly attractive for adult viewers, always ranking fourth for people over 45 years of age. In Day Time Retequattro was also this year above a viewing level of 10.0% and productions performed in a satisfactory way; in Prime Time, films continue to be precious for this network, which devoted as much as 208 nights to cinema.

Production of television programmes The production of television programmes is mainly given by R.T.I. S.p.A. to its subsidiary company Videotime S.p.A., a company that has been in the fore in the production sector for many years now. The number of original productions remained practically unchanged in the two years 1999/2000 (321 in 2000 compared to 318 in 1999). A total of 7,016 hours of programmes were produced in 2000 compared to 7,060 in 1999, with a 0.6% decrease. As to the product range, a significant shift can be detected from the News area (- 29.2%) to the Entertainment and talk shows (+7.1%) and Games and quiz shows (+20.3%) areas.

159 Acquisition and management of television rights Mediaset S.p.A. and its subsidiaries have the most important library of television rights in Italy and one of the largest in Europe. The following table contains details of the rights library by category as of December 31, 2000:

Type No. of titles No. of shows

Films 5,203 5,203

TV series 660 16,108

Telenovelas 14 1,710

Cartoons 758 21,569

Mini series 206 711

Soap operas 17 3,076

Tv movies 1,909 1,959

211 673 Various (Musicals, Entertainment, Theatre, etc..)

Total 8,978 51,009

Activities regarding the purchase and production of rights for the Italian television market have been primarily given by R.T.I. S.p.A. to the subsidiary company Mediatrade S.p.A., which also has the objective to manage the rights library of the group. New rights are bought up on a continuous basis from: n US Majors: the Mediaset Group has signed long-term agreements to buy rights from the leading US producers and distributors; these agreements typically involve purchases for an average of 5 years, with the possibility of 4 or 5 television screenings. n InternationalInternational televisionstelevisions producers:producers:

the Group has important, well-established rights purchase relations with US and US and European producers who supply very popular television products (TV movies, soap operas, mini-series and TV series). n ItalianItalian filmfilm producersproducers // distributors:distributors: From Italian companies, the Group buys packages including both the television rights to films produced by them and the rights to international films; the rights agreement in place with the associated company Medusa Film S.p.A., one of the leading distributors in Italy, plays a fundamental role in this context. n InIn- house drama production:

– the Mediaset Group has the know how and organisation to select projects and produce highly popular TV movies, mini-series and TV series. These programmes are produced in-house or together with leading international partners. In some cases, production costs are partially covered by exporting the programmes produced. In 2000, the Mediaset Group also made steps towards

160 further improving its rights library, by reaching many agreements which made it possible to acquire the availability (for the current and future years) of cinema blockbusters, the most successful television series and children programmes (specifically cartoons), as well the production of mini-series and television series with very prestigious subjects, casts and scriptwriters.

Management of the signal broadcasting network The signal broadcasting networks owned by R.T.I. S.p.A., is managed by the subsidiary company Elettronica Industriale S.p.A. The latter ensures the development of the network, i.e. network engineering function and around the clock maintenance and operation 365 days a year. The network carries the signals of R.T.I. S.p.A.’s three commercial television networks (Canale 5, Italia 1 and Retequattro) to over 99% of the country's population. This infrastructure is not only used to broadcast the signal of television programmes from the Segrate centre (distribution system), but also to carry semi-finished signals from any point on the network to the television production centres where the television programme is made (contribution system). In 2000, significant projects were carried out in the broadcasting area, which represents the origin of the distribution process of the television signal in Italy, while within the contribution system, a fibre optic cable loop owned by R.T.I. was completed between production and broadcasting centres in the Milan area. In the next few months, this loop will allow for a highly reliable system of links enabling a much faster service and allowing the transport of much more data than using current technology (radio repeaters). The new automatic assembly and broadcasting system for theme channels published by the subsidiary company Mediadigit has been working since April. This system, thanks to digital technology, makes it possible to manage the broadcasting of the current 4 theme channels (Happy Channel for Telepiù, Duel, Comedy Life and MT Channel for Stream) and can manage another channel from a single system, and this way broadcast a high number of channels with minimum staff. Downstream of this project for theme channels, the automation system of the assembly and broadcasting activity for the three R.T.I. commercial networks (Canale 5, Italia 1 and Retequattro) began its implementation stage, in order to exploit the benefits provided by technology to the core business network broadcasting. This project will enable us early next year to improve the quality of the current process, reducing the risk of error connected to several manual operations (e.g. handling of the magnetic support, sequence of events, etc.).

161 RTI Music S.r.l. made in 2000 the soundtracks to all films and television series produced by Mediatrade S.p.A., by Medusa S.p.A. and by external executive producers. It also performed audio work, on behalf of R.T.I. S.p.A., on many television productions. RTI Music S.r.l. also supplies an important music archive service with its “Music Bank”; it currently owns around 3,000 hours of music with own original recordings of works and around 5,000 hours of original recordings of works owned by third parties. This business generated revenues of ITL 8.4 billion.

Commercial Television - InternationalInternational

In 2000, the Epsilon Group showed a loss of ITL 52.4 billion, in spite of an ITL 45.0 billion positive balance of the gross operating profit; the result is significantly marred by goodwill amortisation quotas, arising from the consolidation of the assets included during the setting up of the Group. The consolidated net revenues, equal to ITL 344.4 billion, are primarily determined by the following activities: selling of television rights, carried out by Betafilm GmbH, sale of advertising spaces carried out by Publieurope International Ltd. for international customers, as well as the payments received for marketing work carried out by Publieuros Ltd. on large European multinational investors. On September 11, 2000, the Board of Directors of the companies involved approved a preliminary agreement between the Mediaset Group and the Kirch Media Group, aimed at developing the Joint-venture agreements stipulated on October 19, 1999, and the conversion of the financial resources invested by Mediaset Investment S.a.r.l. in Epsilon corporate structure, for the acquisition of an equity stake in Kirch Media KgaA. Kirch Media, Mediaset’s partner in Epsilon through CON Medien GmbH, a company that controls 50% of Euroset S.a.r.l., can now be considered the “German Mediaset”, since it owns an established activity of international trading of rights, the three German general commercial networks SAT 1, Pro 7 and Kabel 1, and the sports channel DSF and the news network N24. This structure was completed in late 2000, following the transfer to Kirch Media of the 20.8% share of Pro 7 capital held by Rewe, which obtained in e- xchange a 6.0% stake in Kirch Media (this operation was carried out in September last year) and the merging in the new ProsiebenSAT1MediaAG holding company of the television and advertising operations belonging to SAT 1 GmbH and Media 1 GmbH and those controlled by Pro 7.

162 By March 31, 2001, the parties shall define detailed agreements including the following contents: n return to each shareholder of the operations transferred in the Epsilon corporate structure: – Mediaset Investment S.a.r.l. shall hold again 100% of Publieuros/Publieurope capital, which will remain however the European concessionary for Kirch Media and Telecinco; – the Kirch Media Group shall hold again 100% of Betafilm and PKS capital; Betafilm will remain however the international distributor of the Mediaset Group’s television rights; – in addition to the return of transferred operations, Mediaset Investment S.a.r.l. shall receive cash amounting to ITL 391.3 billion (the cash investment connected to the setting up of Epsilon corporate structure in 1999 amounted to ITL 361.6 billion); these financial resources will make it possible to finance the acquisition of the above mentioned shareholding in Kirch Media, without the need for further resources; n Mediaset Investment S.a.r.l. will acquire a 2.34% stake in Kirch Media KgaA capital (i.e. equal to 2.48% before the dilution effect generated by the already mentioned acquisition of Kirch Media capital by Rewe) for an amount of ITL 391,3 billion. The acquisition of the shareholding in Kirch Media will be supported by the acceptance of an agreement between shareholders, whose parties are some companies belonging to the Kirch Group, Fininvest S.p.A., the Group of Prince Alwaleed and the Lehman Brothers Group. The acceptance of the agreement mentioned above shall imply the acquisition of significant rights, among which that regarding representation in corporate bodies, once consensus from other shareholders is obtained; n setting up of Epsilon Tv Production and Epsilon Motion Pictures, in Milan and Munich, respectively; the latter will also have a branch in Zurich. Epsilon Tv Production, already established at December 31, 2000, by Mediaset Investment S.a.r.l, will be equally owned by Mediaset Investment S.a.r.l and Kirch Media KgaA; Epsilon Motion Pictures, already established at December 31 by Kirch Media, will be controlled by Mediaset Investment S.a.r.l. (20%), Medusa Film S.p.A. (30%) and Kirch Media KgaA (50%). The stipulation of these new agreements shall supersede the Joint-venture agreement signed on October 13/14/15, 1999.

Telecinco Group In 2000, the Telecinco Group has continued to improve its economic performance. The operating results achieved 39.6%, the operating profit equalled PTS 40.2 billion (around ITL 468 billion), growing 49.3% over 1999; the net profit reached PTS 25.7 billion (around ITL 299 billion), with a 40% increase. Within the positive economic situation of Spain, which supported also in 2000 the good trend of advertising investments channelled into the Spanish television industry,

163 Publiespana S.A. television advertising sales showed an outstanding 15.6% growth, by far higher than the growth rate of the reference market, and went from PTS 92.8 billion in 1999 to PTS 107.3 billion in 2000 (around ITL 1,250 billion). An excellent performance was achieved during the year also with respect to the audience, both in overall terms and in connection with the commercial target, which amounted in the full day to 22.3% and 25% respectively (compared to 21% and 23.5% recorded in 1999, respectively). As to the commercial target, a most significant element for advertising investors, Telecinco performance was clearly higher than that of its two main competitors, Antena 3 and TVE-1, whose audience shares amounted to 23% and 19.7% respectively.

Multimedia and telecommunications division

Theme Channels The offer of Mediaset Group’s theme channels is based on the experience accrued in general television in order to develop unique proposals with special attention to contents. In April 2000, Mediadigit flanked Happy Channel (devoted to smile and good humour and distributed since 1998 within Telepiù’s Basic package) with two new theme channels (Comedy Life, for female viewers and Duel TV, an action channel) distributed though Stream’s digital platform; these were joined on January 8, 2001 by MT Channel, a channel devoted to science programmes. Since April 2000, Stream has also been distributing CFN channel, devoted to economic and financial news. Total revenues from the theme channel area amounted to ITL 22.8 billion in 2000.

164 collaboration with partners such as press agencies (ANSA), newspapers (Sole 24 ore), magazines. The Group’s revenues from this area amounted to ITL 8.4 billion.

InternetInternet Based on Federcomin data, in the last quarter of 2000, Internet users in Italy amounted to 25% of the population (equal to around 14 million people); and 30 million Internet users are estimated by the year 2004. The Internet area represents an exceptional opportunity for development for the Me- diaset Group, also because of the opportunity to maximize co-operation chances with other companies belonging to the Fininvest Group to achieve a consolidated leadership position in this market as well. In this context, Mediaset’s objective, through its own sites, is to be the market leader in the info-tainment area, and to create the most successful television vertical portal in Italy. According to Nielsen/Netratings data, in December 2000 the number of Italians who surfed the net for pure entertainment reasons increased by 40%. In particular, already in 2000, the Mediaset Online site has become more and more the information site, as well as the “site of the sites” of the Group’s networks (Canale 5, Italia1 and Retequattro), where the Internet versions of the main Group’s television programmes were concentrated. Mediaset Online and the three official sites of Canale 5, Italia 1 and Retequattro networks, jointly reached and exceeded 500,000 page views per day in the year average. In 2000, Mediadigit took part in the establishment of the Polymedia digital platform, an integrated system for the management and publishing of Group’s news, with the digital transformation of all sources, archives included, in the making and broadcasting of services, with the objective to foster content packaging activities that will be provided to Mediaset networks’ sites. Total revenues in the Group’s Internet area amounted to ITL 4.3 billion.

165 means of industrial and partnership agreements with national and local companies with a view to the opportunities connected to the so called privatising of the 'last mile'. In this view, in October 2000, Albacom won the competition for the acquisition of a 60% shareholding in Basictel S.p.A., a company that has been recently established by the Italian Railways with the objective to plan, implement and manage for telecommunication purposes a fibre optic infrastructure along the power lines placed beside a 4,000 km stretch of the railway lines owned by the Italian Railways. This operation will enable Albacom to have a highly sophisticated backbone available, for the supply of wide band services (voice, data, fast Internet, video streaming) which will also make it possible to increase the traffic share on its own network, thus significantly reducing interconnection costs. In the first nine months (April - December) of the current year, Albacom recorded a 40% increase in turnover over the same period of the previous year. The operating result of Albacom is still affected by the diseconomies of voice services due to the high influence of interconnection fees with Telecom Italia and mobile termination with current main domestic companies and of the simultaneous reduction in prices brought about by growing competitive pressures.

Mobile Telephony In the field of mobile telephony, Blu S.p.A. launched on May 15, 2000, its own commercial service and reached 800,000 customers at year’s end, equal to a 10% market share on net new users. These results are clearly above initial objectives and rewarded the effective and innovative differentiation strategy applied since its commercial launch. Blu managed to anticipate the evolution under way among industry companies, progressively shifting from the simple provision of voice services to the aggregation, customisation and supply of integrated contents and services for well identified business and consumer vertical markets, imposing its brand of dynamic company, extremely accessible for ease of use and capable of offering clear and competitive rating plans. The allocation of UMTS licences was in Europe and Italy the most significant event of 2000 in the industry. Blu was admitted to take part in the national bid for the allocation of one of the five UMTS licences. After taking part in the first ten rounds, with a maximum offer of ITL 4,490 billion, on October 23, before the eleventh round, it formally announced its withdrawal from the running. On the very same date, the Committee of Ministers deliberated the exclusion of the company from the bid and the start of the procedures necessary to cash the ITL 4,000 billion bank guarantee in line with article 6.4 of the bid regulations. This guarantee requested by the bid regulations to the benefit of the Mi- nistry of Communications for an amount equal to the basic auction price, equal to ITL 4,000 billion, had been released on October 9 by a pool of banks coordinated by the Banca Nazionale del Lavoro, including Montepaschi and Deutsche Bank and, on the same date, counter-guaranteed by Blu S.p.A. shareholders in proportion to their own stakes.

166 On October 25 and 27 and November 2, Blu filed a request of stay of proceeding with the Lazio Regional Administrative Court, to obtain the cancellation of this decision. On November 3, the Committee of Ministers formally allocated the licences to the five companies still taking part in the bid: Tim, Omnitel, Blu, Andala, Ipse 2000. On No- vember 9 the Lazio Regional Administrative Court ruled the temporary suspension of the payment of the above mentioned guarantee, whose annulment was decided in Ja- nuary 2001 within the relevant decision of the Court, as is shown in the section of the Report regarding Significant events after December 31, 2000. After the non allocation of the UMTS licence, Blu's positioning and strategic objectives do not change substantially: in December 2000 the company launched, the first in Italy, GPRS technology based services, capitalizing on the competitive edge that can be acquired as a first mover and is currently committed to exploring alternative strategic scenarios in order to have the UMTS technology in the future. As of December 31, 2000 the company has a workforce of 1,479 employees and invested over ITL 800 billion for the creation of network and information infrastructures, setting up six offices and a distribution network with 4,000 points of sale. The net loss as of December 31, 2000, the first year of operations of the company, amounted to ITL 649 billion; this result, together with the investments made and the financial needs guaranteed by the intervention of shareholders, are in line with the company plan prepared on the occasion of the release of the GSM licence.

TERRESTRIAL DIGITAL TELEVISION

The rules regarding digital television, under discussion in 2000 and turned into Law in early March 2001 (as is shown in the section devoted to Significant events after December 31, 2000) make it mandatory for Mediaset to get ready for the new roles that it will have to play in the transition to digital technology (network provider, service provider, content provider). So far, Mediaset has focused on its core business, analogue general television, but now it is obliged to be present in all the new fields of digital convergence between telecommunications, television, the Internet and interactivity. The Mediaset Group is able to cover a large part of the spectrum of the multimedia value chain, especially as content producer and packager. However, with the introduction of digital television, investments will become necessary in both content production and diversification operations (theme channels, adaptations and new productions for the web) in order to maximize the profits generated by multiple means of use (PC, new generation mobile terminals) for both the completion of the digital transformation of processes regarding the production of contents (digital news) and the broadcasting network infrastructures. This strategy shall face, downstream of the value chain, new processes and players active as Internet service providers, in the field of enabling technologies (set top box) and telecommunications in order to implement a multimedia integrated technological platform capable of enabling, by means of a business model based on the integration between content provider and customer access technology, the exploitation of the opportunities connected to interactive digital services.

167 To support these applications, broadcasters, also in the new framework connected to terrestrial digital television, shall implement a more articulated and integrated architecture (enhanced TV) with respect to the one characteristic of television linear offer, and will have the need for a return channel, a conditioned access system, a content selection and delivery interface (Electronic Program Guide). The Mediaset Group, by means of its shareholdings in Albacom (high broadcasting speed optic fibre infrastructure, voice, data services and services reserved to corporate users) and in Blu (fourth GSM mobile phone company) is present in industries that at the moment are only partly synergic with respect to this evolution, will therefore have to progressively assess the opportunity to channel investments and/or partnerships and/or commercial agreements towards a direction that will make it possible to acquire a competitive advantage with respect to the complex scenarios that will open up in the next few years. To be ready for the implementation of the most appropriate positioning strategies in the scenario of the future digital convergence and, in line with the need to remain flexible in defining the most suitable times and modes, Mediaset carried out, in the last months of 2000, financial operations on stocks connected to the convergence process. The valuation of these commitments as of December 31, 2000 implied a net charge of around ITL 50 billion, connected to the negative trend that characterized the market in these sectors. Besides, the adaptation process of Mediaset’s typical business model, arising from the introduction of digital broadcasting systems, already started with the primary objective to guarantee the progressive digital transformation of the whole television production process, implied overall investments amounting to around ITL 130 billion. In particular, around ITL 75 billion was used for the activities which are more directly related to television production (production, contribution, post- production, storage, assembly and broadcasting) and around ITL 55 billion for the creation of distribution infrastructures, completed in 1999.

168 PERSONNEL

The following table contains details of the Mediaset S.p.A. workforce as of December 31, 2000:

Workforce 31/12/2000 31/12/1999

Managers 26 38

Journalists 3 2

Middle managers 41 63

Office staff 121 170

Total workforce 191 273

The 82 employee decrease is mainly due to the Group reorganisation with the transfer of employees mainly to operating companies in the Commercial Television sector. The Company’s employees work at its sites in Milan and Rome. Personnel expenses increased as a result of the payment of the agreement quotas regarding the national contract for managers in the industrial sector, the national contract of private televisions and the payment of the result-related bonuses for supplementary agreements for office staff and journalists; this increase was however partly offset by the decrease in the number of employees in the Company in 2000; on the whole, personnel expenses decreased by ITL 6.5 billion. During 2000, the planning and implementation of training projects was considered as a qualifying element aimed at ensuring the development of professional skills, the update of managerial and technical know how as well as the maintenance of high skill levels. Training activities specifically developed along a few main lines: n developing cross-functional integration, human resource management, activities planning and scheduling capabilities in those who have co-ordination and management positions n updating IT know-how to keep it in line with the evolution of IT supports in order to optimise at best the use of hardware and software, which is the result of company investments n constantly increasing the average knowledge level of foreign languages, in both qualitative and quantitative terms; n strengthen the culture of work safety and prevention with specific focus on staff in change of videoterminals and workers’ representatives on safety.

LEGAL DEVELOPMENTS IN THE TELEVISION INDUSTRY

During the year, two significant investigations regarding our Group were carried out by the Authority for Guarantees in Communications: that on dominant positions according

169 to article 2 clause 9 Act 249/97 and that on the development of satellite/cable users, that should lead to clarifications about the performances required by article 3 clause 7. The former came to a positive conclusion, since the Authority determined that ours is a legitimate position according to Law. The second investigation has not come to an end yet. In January/February this year, following an investigation started in September 2000, the Authority refused twice to authorize the purchase of TMC and TMC2 by Telecom through SEAT, based on the prohibition included in article 4 clause 8 of Law 249/97. The case started by Telecom against this decision is still pending. Bill 1138, after over 4 years of discussions in Parliament, was not passed; its regulations shall be examined in the next legislature. As shown in the section devoted to Significant Events after December 31, 2000, on March 7, 2001 Decree no. 5, dated January 23, 2001 was turned into Law. It includes the awaited regulations for the start of broadcasting by means of digital technique (the only matter left from Bill 1138). The Law specifically considers the start of the experimentation stage of digital broadcasting, the possibility to acquire equipment/frequencies for the experimentation, the possibility for owners of more than one national television authorisation to use up to 60% of their broadcasting capacity for every digital frequency, the 2006 deadline, by which the whole television system should migrate to the sole digital broadcasting technique. The Authority is also approving the regulations regarding advertising and the creation of the Register of Communication Operators.

ADDITIONAL INFORMATION PURSUANT TO ARTICLE 2428 OF T HE CIVIL CODE

Research and Development Operations Research and development operations were carried out in relation to the business areas handled by subsidiary companies. Our comments can be found in the Structure and Operations of the Mediaset Group section of this report.

Own shares At December, 31 2000 the value of own shares, purchased following the resolutions of the General Meetings held on January 12, 1998 and April 30, 1999, was equal to ITL 69,609 millions, net of a write-down of ITL di 7,335 millions, carried out in order to adjust the book value of shares to the market value represented by the average share prices of December. During 2000, with a view to stabilising the share price, no. 6,268,500 shares were purchased for an amount of ITL 206,662 million and no. 3,618,500 shares were sold for an amount of ITL 129,719 million; these transactions generated net income totalling ITL 2,772 million.

170 Relationships with subsidiaries, affiliates, the parent company and related companies The following tables provide details of the relationships with subsidiaries, affiliates, the parent company and related companies. These operations took place at normal market conditions.

(ITL millions)

Financial Trade and Financial Trade and Value of Cost of Financial Financial receivables other payables other payables production production income charges receivables

Subsidiary companies Elettronica Industriale S.p.A. - 4 28,957 184 21 534 8 571 International Media Services Ltd. - - - 678 - - 513 630 Mediadigit S.r.l. - 533 11,642 1,607 470 - - 277 Mediatrade S.p.A. 985,983 252,242 - 9,684 792,794 247 72,034 44,813 Mediaset Investment S.a.r.l. - 20 - - 22 - 80,000 - Promoservice Italia S.r.l. - 222 7,015 693 4 532 14 110 Publitalia '80 S.p.A. - 530 364,505 5,139 635 282 120,003 18,735 R.T.I. S.p.A. 1,036 13,457 42,173 6,798 862 4,462 399,028 17,395 RTI Music Sr.l. - 362 3,146 160 310 7 8 101 Videotime S.p.A. 71 295 2,152 532 139 10 604 166 Total subsidiary companies 987,090 267,665 459,590 25,475 795,257 6,074 672,212 82,798

Affiliated companies Consorzio Aeromobili Fininvest - - - 354 - 4,315 - - Gestevision Telecinco S.A. - 514 - 35 - - 26,263 - Publiespana S.A. ------7,273 - Total affiliated companies - 514 - 389 - 4,315 33,536 -

Parent company Fininvest S.p.A. - 612 - 423 165 10,449 3,951 - Total parent company - 612 - 423 165 10,449 3,951 -

(ITL millions)

Financial Trade and Financial Trade and Value of Cost of Financial Financial receivables other payables other payables production production income charges receivables

Affiliated companies belonging to the Fininvest Group and the Mediolanum Group Alba Servizi Aerotrasporti S.p.A. - - - 3 - 110 - - Albacom S.p.A. - - - 125 8 861 - 59,097 Arnoldo Mondadori Editore S.p.A. - - - - - 36 - - Banca Mediolamum S.p.A. - 53 ------Beta Film GmbH - 7,365 - 15,449 326 23 - 353 Cinema 5 Gestione S.p.A. - 43 ------Consorzio Servizi Vigilanza - - - 2 - 27 - - Codi S.p.A - - - - - 7 - - E.I.S. S.p.A. - - - 13 - 19 - - EIS Roma S.r.l. - 3 ------Ellemme S.r.l. - - - 44 - 44 - - Euridea S.p.A. ------European Communication Ltd. - 250 - 152 151 23 47 4 Finedim Italia S.p.A. - 4 - - 4 - - - Fivefactor S.p.A. ------678 - Il Teatro Manzoni S.p.A. - - - 216 - 657 - - Isim S.p.A. - - - - - 1 - - Jumpy S.p.A. - 1 - - 3 - - - Mediolanum Assicurazioni S.p.A. - 1 ------Mediolanum S.p.A. - 12 - - 22 - - - Medusa Film S.p.A. - 910 - 6,971 6,126 - - - Medusa Video S.r.l. - 55 - - 145 - - - Mondadori Informatica S.p.A. - - - - 1 2 - - Pagine Italia S.p.A. - - - - - 285 - - Reteitalia S.p.A. - 81 - 17 21 3 - - Servizi Milan S.r.l. - - - 39 - 119 - - Trefinance S.A. - 237 - - - - 6 - Total Affiliated companies - 9,015 - 23,031 6,807 2,217 731 59,454

During 2000, your Company acquired television rights from Medusa Film S.p.A. (a company belonging to the Fininvest Group) for ITL 100,720 millions.

171 Significant events after December, 31 2000 n On January 8, 2001 Stream started broadcasting MT Channel, a science programmes channel made by Mediadigit S.r.l. within the framework of the brand extension policy of the television programme bearing the same name from which the monthly specialist magazine had already been conceived, whose first issue was distributed in November 2000. n On January 23, 2001 the signing of an agreement was announced, based on which KirchMedia Gmbh & Co. KgaA will acquire from News German Television Holding, a subsidiary company of News Corporation Limited, the activities of the German television network Tm3. As an exchange to this contribution, News German Television Holding will receive a stake in the share capital of KirchMedia Gmbh & Co. KgaA, equal to 2.48%, and a payment in cash. KirchMedia Gmbh & Co. KgaA’s shareholders, once this operation and the transaction regarding Mediaset’s entry are completed, will be the following: KirchHolding Gmbh & Co. KG 72.62%, Thomas Kirch 6.54%, Rewe 5.71%, Capital Research Management Funds 2.93%, Trefinance S.A. (Fininvest Group) 2.48%, Kingdom Holdings 8 B.V. 2.48%, Lehman Brothers Merchant Banking 2.48%, News German Television Holding 2.48%, Mediaset Investment S.a.r.l. 2.28%. n On January 24, 2001 the Regional Administrative Court of Lazio issued the memorandum decision which accepted the appeal of Blu S.p.A. and as a consequence annulled the decision taken by the Committee of Ministers on October 23, 2000, regarding the payment of the bank guarantee of ITL 4,000 billion, submitted by Blu to take part in the bid for UMTS licences. On February 19, 2001, the reasons for the decision of the Regional Administrative Court were made public, which ascertain the correct and legitimate behaviour of Blu during the bid and in its previous stages. The ruling of the Regional Administrative Court will become final either after the expiration of the terms for the appeal before the Council of State (this can be filed by the Attorney General and/or the Codacons Association by June 19, 2001 or within 30 days of the notice of the ruling by Blu) or, in the event of an appeal, following a favourable ruling by the Council of State. The procedure of the Authority for the Guarantee of Competition and Market, which so far has not communicated any breach to Blu, should come to an end by June 30, 2001. n On January 25, 2001, Blu S.p.A. shareholders made a payment of ITL 200 billion regarding the capital increase decided on April 7, 2000; Mediaset Investment S.a.r.l. paid ITL 18 billion, according to its shareholding. Following this payment, Blu's share capital (amounting to ITL 1,500 billion) is paid up for an amount of ITL 1,100 billion. n Negotiations for the acquisition by the Mediaset Group of a 5% stake in the share capital of Gestevision Telecinco S.A. and Publiespana S.A. from the Planeta Group, definitely stopped in January without carrying out this operation, because of new circumstances which did not depend on the behaviour of the Mediaset Group but which, however, notably prolonged these negotiations.

172 n Since March 5, 2001, Tgcom is on the net, the site which represents the new version of web information of Mediaset Online with real time updates 24 hours a day, comments, video services, polls and forums that will create interactions with the users. Tgcom is made within the new department of the Mediaset Group, bearing the same name, set up with the objective of developing journalistic contents that can be broadcast by means of different platforms, among which the Internet, Mediavideo and mobile terminals. n On March 7, 2001, the Senate turned into Law Decree no. 5 dated January 23, 2001, which regulates the start of national television programmes by means of digital technique.

Foreseeable developments n The trend of television advertising revenues seen in the first two months of 2001, is in line with our 6% growth objective, higher than that of the reference market. n In the first two months of 2001, Mediaset networks has won an audience share of 44.7% in the full day, with an increase of 2.2 share points over the same period of the previous year.

PROPOSALS OF THE BOARD OF DIRECTORS TO T HE GENERAL MEETING

1) Appointment of Directors Dear Shareholders, The Board of Directors, at the meeting held on February 22, 2001, following the resignation handed in by Director Michele Preda on June 30, 2000, appointed by cooptation Mr. Bruno Ermolli as Director. The Board of Directors, at the following meeting held on March 20, 2001, following the resignation handed in by Director Michel Thoulouze on January 8, 2001, appointed by cooptation Mr. Marco Giordani as Director. Both of these Directors, under Article 2386 of the Italian Civil Code, have held their position until this General Meeting. Dear Shareholders, You are therefore asked to complete the Board of Directors by confirming Mr. Bruno Ermolli and Mr. Marco Giordani as Directors. They will hold their positions until the ordinary conclusion of the mandate of the Board of Directors, which will be at the time of the approval of the financial statements at December, 31 2002. 2) Balance sheet and consolidated financial statements at December, 31 2000; Reports on Operations; Reports of the statutory auditors; resolutions of the General Meeting

Dear Shareholders, we are confident that you will agree with the format and accounting policies used in preparing the balance sheet, income statement and notes to the financial statements as of December, 31 2000, and we call on you to approve them along with this report on operations.

173 We also invite you to approve the allocation of the net profit for the year of ITL 618,846,904,218, after the necessary provision to the legal reserve for an amount of ITL 30,942,345,211, as required by law, and our proposal to distribute a dividend of ITL 465 per share to all shares in circulation and to allocate the remainder to the extraordinary reserve. 3) Authorisation to the Board of Directors for the purchase and sale of own shares, followingfollowing thethe revocationrevocation ofof currentcurrent authorisatioauthorisation; relevant resolutions

Dear Shareholders, We remind you that on October 20, 2001, the option to purchase own shares attributed to the Board of Directors will expire. We believe it is useful and in the interest of the company that this authorisation is renewed, in order to: – carry out a stabilising action on the stock exchange markets and/or – be in ownership of shares to give to Company’s, subsidiaries’ and parent company’s employees which take part in Stock Option Plans, also with a view to the exercising of purchase options granted within such Plans and/or – carry out operations for the development of Company’s operations as well as operations of its subsidiary companies. We therefore submit for your approval that the Board of Directors be granted the possibility to purchase, also by means of negotiation of options and derivatives on Mediaset shares, up to a maximum of 30,000,000 (thirty million) ordinary own shares with a current par value of ITL 1,000 each, (equal to 2.54% of the current share capital), one or more times, until the approval of the financial statements as of December, 31 2001 and however for not more than 18 months from the date of the General Meeting resolution and the revocation of the resolution taken at the General Meeting held on April 20, 2000. The amount above is covered by the available reserves, as is stated in the latest financial statements, appropriately approved. Purchases, to be made at the Stock Exchange where the shares are listed, shall be carried out at a price not higher than 20% and not lower than 20% of the reference price of the share in the Stock Exchange session previous to any single operation. These parameters are considered to be appropriate to find the value range within which the purchase is of interest to the company. The purchase operation shall not be made by means of public offering, but will be carried out on the market under the rules given by Borsa Italiana S.p.A. and pursuant to article 132 of Law Decree 58/98. The authorisation above is added to the authorisation to the purchase of own shares approved by the General Meeting held on April 20, 2000 with respect to the operations connected to the 1997/1999 Employee Stock Plan. Purchased shares shall not be used for share capital decrease operations. We also ask you to authorise the Board to sell purchased shares. Sales shall be carried out at the Stock Exchange where shares are listed and/or out of the Stock Exchange, at a price not lower than 90% of the reference price of the share in the

174 Stock Exchange session previous to any single operation. This authorisation is given without time limits. We also invite you, in accordance with article 2357-ter of the Civil Code to give authorisation to the Board of Directors, so that it can sell own shares purchased on the basis of this resolution or however already held by the Company to Company’s employees, or employees of subsidiary companies or of the parent company with respect to their exercise of purchase options of the shares that are granted to them, in line with the measures approved by the General Meeting of April 20, 2000 regarding the setting up of a Stock Option Plan for the year 2000 and following. This authorisation is given without time limits. 4) Conversion of the share capital into Euro; relevant and subsequent resolutions

Dear Shareholders, we submit to your approval the proposal to carry out the conversion of the share capital in Euro in line, on the one hand with rounding rules envisaged in Article 5 of Regulation no. 1103/97 dated June 17, 1997 of the Council of the European Union, and on the other hand of the provisions as per article 17 clauses 1 – 5 of Law Decree of June 24, 1998, no. 213 and subsequent modifications. The proposed conversion shall therefore take place by taking the face value of each share, to date equal to ITL 1,000. If we divide that amount by the amount of 1 Euro, equal to ITL 1.936,27, the result is equal to EUR 0.51645689908 which, under the aforementioned regulation must be rounded up to 0.52 euro. The rounding up shall take place, in line with aforementioned article 17, by using part of the extraordinary reserve as is stated in the Financial Statements, for an amount of ITL 8,103,693,580. As a consequence of the above, every share currently equal to ITL 1,000 will be converted into a share equal to EUR 0.52 and share capital, equal to ITL 1,181,227,564,000 will be equal to EUR 614,238,333.28. Dear Shareholders, We invite you to approve the proposal above and, as a consequence, to adjust all the amounts expressed in ITL included in the articles of association. 5) Modification article 13 of the Company articles of associations; relevant and subsequent resolutions Dear Shareholders, We submit for your approval the introduction in article 13 of the Company articles of association of a further clause including the forecast, in line with what is recommended by the “Code of self-discipline of companies listed at the Stock Exchange”, that the company may be provided with a General Meeting’s Regulation. Here follows the new text of article 13 of the Company articles of association: Article 13) The procedure for calling the meeting, whether ordinary or extraordinary and at first, second or third call, as well as passing resolutions are to comply with provisions enforced by law.

175 The Chairman of the Meeting has full powers : – to verify the existence of the quorum and the calling of the meeting by law; – to direct the discussion, regulate the orderly development of the Meeting’s activities and summarise in the minutes declarations as requested by the shareholders; – to declare the outcome of votes. The company can provide itself with a relevant Regulation, approved by means of a resolution of the ordinary general meeting, regarding the meeting’s operations. Dear Shareholders, We invite you to approve the proposal described above. 6) Proposal of adoption of the Regulation for the General Meeting of Mediaset S.p.A. shareholders; relevant and subsequent resolutions Dear Shareholders, In continuing with the implementation of the Code of Self-discipline, as recommended by Borsa Italiana S.p.A with regard to Corporate Governance, that was started last year, as included in the communication to Shareholders dated March 28, 2000 the Board of Directors approved its Code of Self-Discipline during the meeting held on March 20, 2001. We therefore submit to your approval the following meeting regulation which is in line with the fundamental principles of the Code above, as recommended by Borsa Italiana S.p.A.:

MEETING REGULATION

Article 1 – enforcementenforcement areaarea 1.1 This Regulation disciplines the course of the ordinary and extraordinary general meeting of Mediaset S.p.A.’s shareholders, with head office in Milan, via Paleocapa 3, except for that which has already been envisaged in the Company articles of association. 1.2 This regulation, adopted by a resolution of the General Meeting held on April 9, 2001, is available to the shareholders at the company head office and at the premises chosen for the General Meetings; its amendments are subject to the same forms and ways of approval.

Article 2 – accessaccess toto thethe meetingmeeting 2.1 Those who, under the law or the Company articles of association, have right of speech at the meeting, shall be identified, at the entrance of the premises where the meeting is held, by means of an appropriate proof of identity or another means of identification and shall exhibit valid documents for admission, in compliance with what has been set out in the notice of meeting. The Chairman may be called by the staff in charge to resolve any dispute regarding the

176 legitimacy of a person's right of speech. The verification of the legitimisation to the right of speech shall take place adequately in advance of the meeting's beginning, unless otherwise specified in the notice of meeting. 2.2. The employees of the Company and of the Group’s companies can take part in the meeting, as well as other subjects whose presence is deemed to be useful by the Chairman in relation to the issues to be broached or for the execution of the meeting. 2.3 Experts, financial analysis and authorised journalists can observe the meeting, under the Chairman’s consent. A speech by representatives of the external auditors does not need any formalities. 2.4 Unless otherwise decided by the Chairman for needs in line with the regular course of the meeting and for the taking down of the minutes, no video, communication or similar equipment, including any sort of recording device, shall be used at the premises of the meeting.

Article 3 - discussiondiscussion 3.1 In the description of the issues on the agenda and in the preparation of answers to comments and remarks, the Chairman can be supported by the Directors or the Statutory Auditors or those authorised to take part in the meeting under article 2.2 above, and he can ask them to describe the issues on the agenda and the proposals submitted to the meeting’s approval. The order of the issues, as results from the notice of meeting, can be changed and different issues on the agenda can be examined jointly, unless there is a different request by the meeting. 3.2 The Chairman establishes the ways to deal with the agenda, directs and chairs the discussion by giving the floor to shareholders who have requested with the possibility in compliance with this article, to directors and statutory auditors, and ensures the mutual respect of the rights of all shareholders present, and the Company’s interest. To this end, the Chairman establishes the ways to request the floor and the order of the remarks, and guarantees the possibility to briefly answer to those who requested the floor. The Chairman ensures that the discussion is correct and takes any decision appropriate to prevent anything detrimental to the course of the meeting. 3.3 All shareholders with a right to vote have the right to take the floor on the issues on the agenda to request clarifications and express their opinions. The remarks of the shareholders who requested the floor shall exclusively deal with the issues on the agenda. 3.4 The Chairman can define, at the opening of the discussion, in the light of the issues on the agenda, a maximum duration for the remarks and answers, in order to encourage the widest participation of shareholders’ in the discussion. The Chairman shall ask for remarks and answers that exceed maximum duration or are not relevant to the issues discussed to be concluded and, after the invitation to conclude, remove the right of speech from the non compliant shareholder.

177 The Chairman can also require shareholders to leave the meeting room who, during the discussion and in spite of calls to order, disturb the regular course of the meeting. During the meeting the Chairman, if it is the case, can suspend the meeting for short periods, providing the appropriate reasons. 3.5 The Chairman or, upon invitation, Directors, Statutory Auditors and Company employees present can join in the discussion and reply to shareholders according to the ways established by the Chairman. 3.6 At the end of all comments, replies and subsequent remarks, the Chairman closes the discussion.

Article 4 - votesvotes 4.1 Before beginning voting operations, the Chairman calls back to the meeting those who have been asked to leave the room under article 3.4 of this regulation. 4.2 Meeting votes take place by means of open ballot . Before beginning voting operations, the Chairman defines the modes of expression, detection and calculation of the votes and the devices to the used and can establish a maximum deadline for casting the vote. 4.3 At the end of the procedure, votes are counted, at the end of which the Chairman, with the support of the secretary or the notary public, declares the outcome of the votes to the meeting.

Article 5 – finalfinal provisionsprovisions For all matters not covered by this Regulation there shall apply the provisions of the Italian Civil Code, special laws on the matter and the Company articles of association. In particular, the Chairman, as per the Company articles of association, adopts the solutions which are deemed to be most appropriate for the orderly course of the meeting. We invite you to approve the proposal described above.

for the Board of Directors the Chairman

178 MEDIASET S.p.A.

2000 Financial Statements Balance sheet and Income statement

MEDIASET S.p.A. Balance sheet as of December 31, 2000 (amounts in ITL)

ASSETS 31/12/2000 31/12/1999

A) RECEIVABLES FROM SHAREHOLDERS - -

B) FIXED ASSETS

I Intangible fixed assets 1 start-up and expansion costs 91,063,012 16,160,438,723

3 industrial patents and intellectual property rights 581,681,118 1,104,027,218

4 concessions, licences, trademarks and similar rights 1,201,738,631,370 1,670,389,040,596

6 intangible assets under formation and advances 34,507,374,150 132,230,225,449 7 other 147,726,259 194,740,348

Total 1,237,066,475,909 1,820,078,472,334

II Tangible fixed assets

2 plant and machinery 483,802,699 530,255,453

4 other tangible fixed assets 3,107,628,020 4,712,389,096 5 fixed assets under construction and payments on account 12,500,000 -

Total 3,603,930,719 5,242,644,549

III Financial fixed assets 1 investments in:

a) subsidiary companies 1,575,139,486,827 1,475,139,486,827

b) affiliated companies 189,755,902,134 187,432,378,134 d) other companies 176,153,370,000 137,738,111,174

Total 1,941,048,758,961 1,800,309,976,135

2 receivables: d) other companies 1,104,990,434 1,268,360,307

3 other securities - 100,000,000 Total 1,942,153,749,395 1,801,678,336,442

TOTAL FIXED ASSETS (B) 3,182,824,156,023 3,626,999,453,325

C) CURRENT ASSETS

I Inventory Total - -

II Receivables 1 trade receivables 32,622,306,342 43,042,868,625

2 due from subsidiary companies 257,504,498,561 343,132,351,378

3 due from affiliated companies 514,292,286 7,984,821,440 4 due from parent company 612,248,086 91,244,935

4bis due from associated companies 10,019,493,195 4,459,079,843

5 other receivables - due within 1 year 86,003,769,850 92,369,585,862 - due after 1 year 45,215,994,875 28,874,359,569

Total 131,219,764,725 121,243,945,431 Total 432,492,603,195 519,954,311,652

III Financial assets (which are not fixed assets)

5 own shares 69,608,712,874 - 7 receivables due from subsidiary and affiliated companies 985,983,277,522 463,877,089,268 Total 1,055,591,990,396 463,877,089,268

181 MEDIASET S.p.A.

Balance sheet as of December 31, 2000 (amounts in ITL)

ASSETS 31/12/2000 31/12/1999

IV Liquid funds

1 bank and postal deposits 236,947,271,573 39,237,125,295

3 cash in hand and cash equivalents 85,565,542 142,912,183 Total 237,032,837,115 39,380,037,478

TOTAL CURRENT ASSETS (C) 1,725,117,430,706 1,023,211,438,398

D) PREPAYMENTS AND ACCRUED INCOME

1 accrued income 36,129,387,764 6,925,371,371 2 prepayments 427,607,859 364,316,581

TOTAL PREPAYMENTS AND ACCRUED INCOME (D) 36,556,995,623 7,289,687,952

TOTAL ASSETS 4,944,498,582,352 4,657,500,579,675

182 MEDIASET S.p.A.

Balance sheet as of December 31, 2000 (amounts in ITL)

SHAREHOLDERS' EQUITY AND LIABILITIES 31/12/2000 31/12/1999

A) SHAREHOLDERS' EQUITY

I Share capital 1,181,227,564,000 1,180,320,964,000

II Share premium reserve 1,432,343,710,650 1,427,272,227,950

III Revaluation reserve - -

IV Legal reserve 87,494,424,890 74,876,804,487

V Reserve for own shares 69,608,712,874 -

VI Statutory reserves - -

VII Other reserves - -

merger reserve 251,986,884 251,986,884

extraordinary reserve 140,814,458,222 389,003,075,664 reserve for dividends approved not paid 7,635,582,291 7,635,582,291

Totale altre riserve 148,702,027,397 396,890,644,839

VIII Retained earnings (losses) 445,100,000 1,491,000,000

IX Profit (loss) for the year 618,846,904,218 252,352,408,055

TOTAL SHAREHOLDERS' EQUITY (A) 3,538,668,444,029 3,333,204,049,331

B) PROVISIONS FOR RISKS AND CHARGES 1 for pension benefits and similar obligations 432,794,924 376,442,114

3 Other reserves 85,747,166,796 8,302,581,471

TOTAL PROVISIONS FOR RISKS AND CHARGES (B) 86,179,961,720 8,679,023,585

C) EMPLOYEE TERMINATION INDEMNITY 6,099,698,337 9,918,429,109

D) PAYABLES

3 due to banks 646,023,023,643 304,081,566,377 5 advance payments received 7,294,139 65,651,575

6 trade accounts - due within 1 year 69,290,374,552 169,033,883,479 - due after 1 year 5,260,540,545 48,898,762,264

Total 74,550,915,097 217,932,645,743

8 due to subsidiary companies 25,475,960,910 32,865,391,137 9 due to affiliated companies 389,801,524 517,493,788

9bis due to associated companies 22,057,417,285 18,722,859,993 10 due to the parent company 422,841,000 342,330,667

11 due to taxation authorities - due within 1 year 5,124,931,277 14,759,763,668 - due after 1 year 129,173,400 172,231,200

Total 5,254,104,677 14,931,994,868

12 due to social security institutions 950,107,711 1,234,241,948 13 other sums payable 11,452,990,789 5,758,664,338

14 sums due to subsidiary companies 458,485,157,467 664,233,789,496

TOTAL PAYABLES (D) 1,245,069,614,242 1,260,686,629,930

E) ACCRUALS AND DEFERRED INCOME 1 accruals 45,266,861,836 9,284,340,897

2 deferred income 23,214,002,188 35,728,106,823

TOTAL ACCRUALS AND DEFERRED INCOME (E) 68,480,864,024 45,012,447,720

TOTAL LIABILITIES 1,405,830,138,323 1,324,296,530,344

TOTAL NET SHAREHOLDERS' EQUITY AND LIABILITIES 4,944,498,582,352 4,657,500,579,675

183 MEDIASET S.p.A.

Balance sheet as of December 31, 2000 (amounts in ITL)

OFF-BALANCE SHEET ITEMS 31/12/2000 31/12/1999

Guarantees, sureties, andorsements

Unsecured guarantees given 406,681,221,464 28,395,623,811

Commitments and risks

Potential liabilitires guaranteed by parent company 650,000,000 450,197,409

Contractual commitments 4,871,389,080,643 1,122,816,821,989 Total 4,872,039,080,643 1,123,267,019,398

Other - -

TOTAL OFF-BALANCE SHEET ITEMS 5,278,720,302,107 1,151,662,643,209

184 MEDIASET S.p.A. Income statement as of December 31, 2000 (amounts in ITL)

31/12/2000 31/12/1999

A) VALUE OF PRODUCTION

1 revenues from sales and services 811,690,892,265 973,645,689,731

5 other revenues and income

- sundry 7,490,707,871 13,741,256,473

TOTAL VALUE OF PRODUCTION (A) 819,181,600,136 987,386,946,204

B) COST OF PRODUCTION

6 raw materials, consumables and supplies 578,630,384 1,061,778,622

7 services 31,262,877,104 39,627,161,930 8 leasing and rental 18,855,683,554 19,668,355,307

9 personnel expenses:

a) wages and salaries 21,252,955,017 27,485,969,907 b) social security contributions 5,930,254,655 7,160,760,667

c) employee termination indemnity 1,441,430,430 2,072,409,297

d) pension benefits and similar obligations 56,352,810 74,920,030 e) other expenses 7,247,844,877 5,540,052,053

Total personnel expenses 35,928,837,789 42,334,111,954

10 amortisation, depreciation and write-downs a) amortisation of intangible fixed assets 588,031,251,615 766,784,417,974

b) depreciation of tangible fixed assets 1,574,507,722 1,762,410,683

c) write-downs of fixed assets 9,417,353,034 14,301,215,672 d) write-downs of receivables included in current assets and liquid funds - 1,768,129,781

Total amortisation, depreciation and write-downs 599,023,112,371 784,616,174,110 12 provisions for risks 165,000,000 -

14 sundry operating costs

a) losses on disposals and out-of-period expenses 811,641,764 2,921,720,719 b) other costs 4,845,494,547 11,879,227,540

Total 5,657,136,311 14,800,948,259

TOTAL COST OF PRODUCTION (B) 691,471,277,513 902,108,530,182

DIFFERENCE BETWEEN VALUE AND COST OF PRODUCTION (A-B) 127,710,322,623 85,278,416,022

C) FINANCIAL INCOME AND (CHARGES)

15 income from investments a) subsidiary companies 893,458,234,160 244,699,596,569

b) affiliated companies 33,456,999,104 18,910,477,751

Total income from investments 926,915,233,264 263,610,074,320 16 other financial income

a) from receivables included in fixed assets

- other 28,170,877 37,238,627 d) other income

- subsidiary companies 48,131,034,289 15,843,041,268

- associated companies - 34,895,034 - other 16,442,171,751 6,910,710,594

Totale 64,573,206,040 22,788,646,896

e) foreign exchange gains 95,120,136,056 56,853,228,151 Total other financial income 159,721,512,973 79,679,113,674 Total financial income 1,086,636,746,237 343,289,187,994

185 MEDIASET S.p.A.

IncomeIncome statementstatement asas ofof DecemberDecember 31,31, 20002000 (amounts in ITL)

31/12/2000 31/12/1999

17 interest and financial charges

a) interest and financial charges

- subsidiary companies (26,669,655,684) (18,742,902,021) - other companies (109,432,821,389) (6,586,277,967)

Totale (136,102,477,073) (25,329,179,988)

b) foreign exchange losses (97,110,592,617) (50,624,884,542) Total interest and other financial charges (233,213,069,690) (75,954,064,530)

TOTAL FINANCIAL INCOME AND (CHARGES) (C) 853,423,676,547 267,335,123,464

D) ADJUSTMENTS TO THE VALUE OF FINANCIAL INVESTMENTS

19 write-downs a) investments (59,097,023,634) -

TOTAL ADJUSTMENTS TO THE VALUE OF FINANCIAL INVESTMENTS (D) (59,097,023,634) -

E) EXTRAORDINARY INCOME AND (CHARGES)

20 income - other 752,232,250 26,527,593,679

21 charges

- prior years' taxes (134,374,167) - - other (1,228,580,707) (2,253,578,110)

Total extraordinary charges (1,362,954,874) (2,253,578,110)

TOTAL EXTRAORDINARY INCOME AND (CHARGES) (E) (610,722,624) 24,274,015,569

PROFIT BEFORE TAXATION 921,426,252,912 376,887,555,055

22 income taxes for the year a) current taxation 318,920,984,000 129,503,390,000

b) deferred taxation (16,341,635,306) (4,968,243,000)

Total income taxes for the year 302,579,348,694 124,535,147,000

26 PROFIT (LOSS) FOR THE YEAR 618,846,904,218 252,352,408,055

186 MEDIASET S.p.A.

2000 Annual Report Notes to the financial statements

MEDIASET S.p.A. Notes to the financial statements as of December 31, 2000

STRUCTURE AND CONTENT

The financial statements have been prepared in accordance with Italian Civil Code regulations and consist of the balance sheet (drafted in line with the scheme included in articles 2424 and 2424 bis of the Civil Code), the income statement (drafted in line with the scheme included in articles 2425 and 2425 bis of the Civil Code) and these explanatory notes (which provide the information required as per article 2427 of the Civil Code). All additional information considered necessary to provide a true and fair reflection of the Company’s affairs has been provided, even if not specifically required by law.

GROUP OPERATIONS AND LEGISLATIVE FRAMEWORK

Even after the Joint-venture agreement with the Kirch Group, the bulk of the Mediaset Group’s activities continue to take place in Italy, especially in the fields involving the production and sale of television programmes and the sale of advertising. As to the regulatory framework, during the year, two significant investigations regarding our Group were carried out by the Authority for Guarantees in Communications: that on dominant positions according to article 2 clause 9 Act 249/97 and that on the development of satellite/cable users, that should lead to clarifications about the performances required by article 3 clause 7. The former came to a positive conclusion, since the Authority determined that ours is a legitimate position according to Law. The second investigation has not come to an end yet. In January/February this year, following an investigation started in September 2000, the Authority refused twice to authorize the purchase of TMC and TMC2 by Telecom through SEAT, based on the prohibition included in article 4 clause 8 of Law 249/97. The case started by Telecom against this decision is still pending. Bill 1138, after over 4 years of discussions in Parliament, was not passed; its regulations shall be examined in the next legislature. As shown in the Report on Operations, in the section devoted to Significant Events after December 31, 2000, on March 7, 2001 Decree no. 5, dated January 23, 2001 was turned into Law. It includes the awaited regulations for the start of broadcasting by means of digital technique (the only matter left from Bill 1138). The Law specifically considers the start of the experimentation stage of digital broadcasting, the possibility to acquire equipment/frequencies for the experimentation, the possibility for owners of more than one national television authorisation to use up to 60% of their broadcasting capacity for every digital frequency, the 2006 deadline, by which the whole television system should migrate to the sole digital broadcasting technique.

189 The Authority is also approving the regulations regarding advertising and the creation of the Register of Communication Operators.

190 VALUATION CRITERIA A ND ACCOUNTING PRINCIPLES

The accounting policies used in preparing the financial statements as of December 31, 2000 are, in general, the same as those used for the financial statements as of December 31, 1999. In particular: n there have been no exceptional circumstances making it necessary to depart from normal disclosure and valuation criteria; n changes in assets and liabilities are analysed under the comments on the items contained in the financial statements. Information is provided about the amount accrued to provisions and the amount utilised during the year; n risks and charges relating to the period have been accounted for, even if they were identified after December 31, 2000. The most important valuation criteria used in preparing the financial statements as of December 31, 2000, in accordance with article 2426 of the Civil Code are as follows:

IntangibleIntangible fixed assets Television rights were recorded at appraisal value for the portion related to the transfer of the business of Reteitalia S.p.A. to Mediaset S.r.l. (now S.p.A.) which took place on December 31, 1993, and at cost for purchases made in 1994 and after. Amortisation of rights with a limited duration is calculated on a straight-line basis over the period of the relevant contract and, in any event, over a period not exceeding 120 months. Amortisation of own rights and those with an unlimited duration is calculated on a straight-line basis over 60 months. In keeping with previous practice, rights are amortised at the highest rates allowed for fiscal purposes, so as not to lose the related tax benefits: n over three years for unlimited rights; n on a straight-line basis over the period of the relevant contract for right acquired with a limited duration. The effect of this is explained in these notes to the financial statements. In the event that, regardless of the amortisation already recorded, rights have been through all the showings available per contract, their residual value is totally expensed. Intangible assets under formation and advances are recorded at acquisition cost, net of accumulated amortisation. Start-up and expansion costs are amortised over five years. Leasehold improvements are amortised over the residual length of the lease contract of the relevant asset and, in any case, over a period not exceeding five years.

191 Tangible fixed assets Tangible fixed assets are recorded at acquisition or transfer cost. Cost includes ancillary charges, and the share of direct or indirect costs that can reasonably be allocated to the asset.

192 Tangible fixed assets are depreciated in each accounting period on a straight-line basis, using depreciation rates which are determined in relation to the remaining potential use of the assets. The depreciation rates used are: – Plant and machinery 10-20% – Motor vehicles 25% – Office furniture and equipment 12-20% – Equipment and fittings 8-10% In the year an asset is purchased, it is depreciated using 50% of the above rates.

Equity investments and securities (which are included in fixed assets) Equity investments are valued at cost. The amount recorded is determined on the basis of the purchase price. The cost is reduced in the event of a permanent loss of value where the subsidiary companies incur in losses and expected immediate future earnings are not sufficient to offset the losses incurred; the original value is restored in subsequent years if the reasons for the write-down are no longer present. Where the Company has made a payment to a subsidiary but it has not increased its share capital, such payments are recorded on the assets side of the balance sheet as capital contributions.

Receivables Receivables are stated at their estimated realisable value. Receivables denominated in non-EMU area foreign currencies were valued using December 31, 2000 exchange rates. Hedging contracts are valued consistently with the receivables being hedged.

Prepayments and accrued income, accruals and deferred income These items include portions of revenues and expenses common to two or more periods in accordance with the accruals concept.

Provisions for risks and charges The provisions for risks and charges are created to cover certain or likely losses or liabilities for which the exact value or effective date could not be determined at the period end. Amounts provided reflect the best possible estimate on the basis of available information. Risks in respect of which only a liability might arise, are disclosed in the notes to the Balance Sheet without setting up a provision.

193 Employee termination indemnity The provision for employee termination indemnity is established to cover the entire liability accruing to employees in accordance with current laws, collective agreements and local company agreements. This liability is subject to revaluation using indices.

Revenue recognition Revenues derive mainly from making the library of rights available to the subsidiary company Mediatrade S.p.A. on an exclusive basis and are recognised based on contractual agreements. If a right is rented, as is normally the case in relation to foreign television networks, the revenue is recognised on an accruals basis in each year based on the duration of the rental contract.

IncomeIncome taxestaxes Income taxes are recorded based on an estimate of taxable income as calculated under existing legislation, considering available exemptions.

Deferred taxes Current year taxation has been calculated in accordance with existing legislation. Pursuant to new Italian Accounting Standard no. 25, deferred tax assets have been calculated based on timing differences between the value attributed to an asset or liability under statutory reporting requirements and that attributed to it for tax purposes. The deferred tax balances have been calculated by applying the tax rate in force when the differences will reverse to the said difference. Adjustments in the event of a future change in the tax rate are made provided that the law providing for such a change has already been issued at the annual report drafting date. Deferred tax assets are recorded in accordance with the prudence concept and only where it is reasonably certain that, in the year the temporary differences will reverse, there will be taxable income not inferior to the timing differences.

Financial instruments Financial instruments used to hedge exchange risk regarding assets and liabilities denominated in non EMU-area foreign currencies are valued consistently with the assets and liabilities being hedged. Those are booked by recognising income and charges in the income statement on an accruals basis.

194 Dividends Dividends are recorded in the accounting period in which distribution is approved. The tax credit for dividends received is accounted for in the accounting period that such dividends are received. Where dividends are received the period after they were recorded, deferred tax is recognised in accordance with the aforementioned Accounting Standard no. 25.

Adjustments in value and provisions made exclusively for tax purposes As permitted by statutory reporting requirements, certain adjustments in value and provisions exclusively made for tax purposes have been recorded.

195 These operations consist of: n amortisation of owned rights or rights with unlimited duration over three years, rather than 60 months; n amortisation of fixed-term rights on a straight-line basis over the period of the contract, even when this is longer than 10 years. These items are booked to the same accounts of the income statement and balance sheet as similar value adjustments and provisions are calculated in accordance with statutory requirements. The effects of these tax related entries are shown under the individual items to which they refer. The effects on shareholders’ equity and on net income for the year are described in the section on shareholders’ equity. It should be noted that Law 449 of December 27, 1997 (issued in connection with the 1998 Budget) amended article 68 of the Tax Code so that it is no longer possible to amortise goodwill over five years. Accordingly, as from January 1, 1998, goodwill has been amortised charging one-tenth of its original value.

ADDITIONAL INFORMATION

Adaptation of previous year financial statements The financial statements at December 31, 2000, include the amounts of the corresponding items as of December 31, 1999. To make the classification criteria of the 1999 financial statements comparable with those of the 2000 financial statements, which have been adopted in line with Accounting Principle no. 25, the following reclassifications were carried out: n a part of the assets direct write-down reserve (B.1.4) of the financial statements as of December 31, 1999, equal to ITL 5,428,464,534, was reclassified in 2000 as follows: – in the provision for risks penalties and contracts (B.3) for an amount of ITL 4,302,582,471, since it had been previously allocated to potential contract penalties; – in the provision for write-down of contracts in progress (B.1.6) for an amount of ITL 1,125,883,063.

CONSOB resolution no. 11971 We have provided the information called for by article 78 of CONSOB resolution 11971 of May 14, 1999, concerning all sums of any kind paid to directors and statutory auditors by the company or its subsidiary companies; and the shares allocated to

196 directors under the Employee Stock Plan, according to the criteria required by tables 1) and 2) mentioned in attachment 3c) of the said resolution. It should be noted that, in line with tax regulations applicable to stock plans, the ordinary value of the bonus issue allocated was subject to taxation.

Table 11

Fees and other amounts paid to directors, statutory auditors and general managers

(ITL thousands)

Full name Position held in Mediaset S.p.A. Emoluments (3)

Position Term Emoluments Benefits Bonuses and Other

held of appointment at the office in kindother incentivesremuneration (2)

Confalonieri Fedele Chairman of the Board (1) 01.01.2000 - 31.12.2000 907,500 18,479 1,704,516

Berlusconi Pier Silvio (4) Director 01.01.2000 - 04.05.2000 10,000 Deputy Chairman (1) 04.05.2000 - 31.12.2000 20,000 5,545 567,823

Adreani Giuliano (4) Managing director for "advertising" (1) 01.01.2000 - 20.04.2000 10,000 Director 20.04.2000 - 04.05.2000

Managing director (1) 04.05.2000 - 31.12.2000 333,333 12,830 650,000 1,272,421

Amigoni Franco Director 01.01.2000 - 31.12.2000 30,000

Ben Ammar Tarak Director 01.01.2000 - 31.12.2000 30,000

Berlusconi Marina Director 01.01.2000 - 31.12.2000 30,000

Butcher David Trevor Director 01.01.2000 - 08.02.2000 2,500

Cannatelli Pasquale (4) Director 01.01.2000 - 31.12.2000 30,000

Carlotti Maurizio (4) Managing Director for"Media and content" (1) 01.01.2000 - 20.04.2000 75,000 6,619 829,138

Concina Enzo (5) Director 15.02.2000 - 31.12.2000 25,000

Costa Maurizio Director 01.01.2000 - 31.12.2000 30,000

Crippa Mauro Director 01.01.2000 - 31.12.2000 30,000 70,000 429,044

Doni Gilberto (4) Director (1) 01.01.2000 - 20.04.2000 30,000 7,904 809,221 Director 20.04.2000 - 31.12.2000

Galliani Adriano (4) (5) Director 01.01.2000 - 31.12.2000 66,666

Messina Alfredo Director 01.01.2000 - 31.12.2000 30,000

Mojto Jan Director 01.01.2000 - 31.12.2000 30,000

Nieri Gina (4) Director (1) 01.01.2000 - 31.12.2000 30,000 5,981 100,000 512,307

Preda Michele (4) Director (1) 01.01.2000 - 20.04.2000 15,000 13,802 87,142 341,773 Director 20.04.2000 - 30.06.2000

Ruozi Roberto Director 01.01.2000 - 31.12.2000 30,000

Seragnoli Giorgio Director 01.01.2000 - 20.04.2000 10,000

Sposito Claudio Director (1) 01.01.2000 - 31.12.2000 30,000

Thoulouze Michel Director 01.01.2000 - 31.12.2000 30,000

Frattini Achille (4) Chairman of the Board of Statutory Auditors 01.01.2000 - 31.12.2000 180,000 34,483

Giampaolo Francesco Antonio (4) Statutory Auditor 01.01.2000 - 31.12.2000 120,000 42,133

Perotta Riccardo Statutory Auditor 01.01.2000 - 31.12.2000 120,000

(1) Member of the executive committee (2) Includes emoluments for other offices held at subsidiaries and remuneration for work in full-time emloyments and/or consulting activities. (3) The fees stated refer solely to the period during which the position was held (4) Altre cariche ricoperte in Società Controllate come da prospetto successivo (5) Waived fees for the position held

197 Table 1- Bis

Responsibilities held by directors and statutory auditors of Mediaset S.p.A. inin subsidiarysubsidiary companiescompanies

Full name Company Position

Position held Term of appointment

Adreani Giuliano Publitalia '80 S.p.A. Chairman and M.D. 01.01.2000 - 31.12.2000 R.T.I. S.p.A. (1) Director 18.04.2000 - 31.12.2000 Mediadigit S.r.l. (1) Director 05.07.2000 - 31.12.2000 Berlusconi Pier Silvio (1) Mediatrade S.p.A. Deputy Chairman 01.01.2000 - 17.04.2000 Mediatrade S.p.A. Director 17.04.2000 - 20.07.2000 Mediatrade S.p.A. Deputy Chairman 20.07.2000 - 31.12.2000 Mediadigit S.r.l. Director 05.07.2000 - 31.12.2000 Publitalia '80 S.p.A. Director 18.05.2000 - 31.12.2000 R.T.I. S.p.A. Deputy Chairman 01.01.2000 - 18.04.2000 R.T.I. S.p.A. Chairman 18.04.2000 - 06.07.2000 R.T.I. S.p.A. Chairman and M.D. 06.07.2000 - 31.12.2000 Cannatelli Pasquale (1) R.T.I. S.p.A. Director 01.01.2000 - 31.12.2000 Video Time S.p.A. Director 01.01.2000 - 17.04.2000 Elettronica Industriale S.p.A. Director 01.01.2000 - 17.04.2000 Mediadigit S.r.l. Director 18.04.2000 - 31.12.2000 Mediatrade S.p.A. Director 01.01.2000 - 31.12.2000 Publitalia '80 S.p.A. Director 01.01.2000 - 31.12.2000 R.T.I. Music S.r.l. Director 01.01.2000 - 17.04.2000 Carlotti Maurizio (1) R.T.I. S.p.A. Chairman and M.D. 01.01.2000 - 18.04.2000 Confalonieri Fedele (1) Mediadigit S.r.l. Chairman 05.07.2000 - 31.12.2000 Crippa Mauro (1) R.T.I. S.p.A. Director 01.01.2000 - 31.12.2000 Doni Gilberto (1) R.T.I. S.p.A. Director 01.01.2000 - 31.12.2000 Video Time S.p.A. Director 01.01.2000 - 17.04.2000 Elettronica Industriale S.p.A. Director 01.01.2000 - 17.04.2000 Mediatrade S.p.A. Director 01.01.2000 -31.12.2000 Galliani Adriano Elettronica Industriale S.p.A. Chairman 01.01.2000 - 17.04.2000 Nieri Gina (1) R.T.I. S.p.A. Director 01.01.2000 - 31.12.2000 Preda Michele (1) R.T.I. Music S.r.l. Chairman and M.D. 01.01.2000 - 17.04.2000 R.T.I. S.p.A. Director 01.01.2000 - 18.04.2000 Mediadigit S.r.l. Sole Director 01.01.2000 - 18.04.2000 Mediadigit S.r.l. Chairman and M.D. 18.04.2000 - 30.06.2000 Frattini Achille MediatradeChairman S.p.A. of the Board of Statutory Auditors 01.01.2000 - 31.12.2000 R.T.I. S.p.A. Statutory Auditor 01.01.2000 - 31.12.2000 Mediadigit S.r.l. Statutory Auditor 14.01.2000 - 31.12.2000 Promoservice Italia S.r.l. Statutory Auditor 14.04.2000 - 31.12.2000 Elettronica Industriale S.p.A. Statutory Auditor 01.01.2000 - 31.12.2000 Giampaolo Francesco Antonio Mediatrade S.p.A. Statutory Auditor 01.01.2000 - 31.12.2000 Promoservice Italia S.r.l. Statutory Auditor 01.01.2000 - 31.12.2000 MediadigitChairman S.r.l. of the Board of Statutory Auditors 14.01.2000 - 31.12.2000 R.T.I. S.p.A. Statutory Auditor 01.01.2000 - 31.12.2000 Video Time S.p.A. Statutory Auditor 01.01.2000 - 31.12.2000

(1) Waived fees for the positions held

198

Table 2

Stock options allocated to directors and general managers (employee stock plan)

(values in ITL)

Assignment of shares or Assignment rights or options allocated during the year options exercised during the year Full name Bonus issue Purchase or subscription options Bonus issue Purchase or subscription of shares of options Number of shares Date of Number of shares Share price for Exercise Number of shares Number of shares Exercise to assign assignment that may be bought exercising period assigned purchased or price or subscribed of options subscribed 199

Confalonieri Fedele 40,000 33,223 Jan 2003-Jun 2004 238,100 23,800 34,431

Adreani Giuliano 26,000 33,223 Jan 2003-Jun 2004 84,900 10,600 34,431

Cannatelli Pasquale 11,000 33,223 Jan 2003-Jun 2004 14,500 4,800 34,431

Crippa Mauro 11,000 33,223 Jan 2003-Jun 2004 22,100 5,500 34,431

Doni Gilberto 11,000 33,223 Jan 2003-Jun 2004 36,100 7,200 34,431

Nieri Gina 11,000 33,223 Jan 2003-Jun 2004 28,900 7,200 34,431

Preda Michele 28,900 7,200 34,431

Sposito Claudio 50,500 7,200 34,431

COMMENTS ON THE MAIN ASSETASSET ITEMSITEMS

(amounts in ITL million)

Fixed assets Tables included in the attachments have been prepared for the three categories of fixed assets (intangible assets, tangible assets and financial assets). For each item, these tables show historical cost, previous amortisation/depreciation, write-ups and write-downs, movements during the year and closing balances along with the total of revalued assets still on the books at the end of the year.

IntangibleIntangible fixedfixed assetsassets Start- up and expansion costs include the capitalised portion of costs incurred in having Mediaset stock listed on the Italian Electronic Stock Exchange system and placing the shares on the international market in 1996, as well as stamp duties and notary fees. Costs included here are amortised over five years. The total amortisation charge for 2000 was equal to ITL 16,088 million. Pursuant to article 2426 of the Civil Code, until these costs have been fully amortised, dividends may only be distributed if there are sufficient free reserves to cover the balance of the capitalised costs still to be amortised. Patents and intellectual property rights amounted to ITL 582 million (ITL 1,104 million at December 31, 1999). This item regards costs capitalised following the introduction of the new SAP accounting system. The balance of Concessions, licences, trademarks and similar rights, shown net of accumulated amortisation and write-downs, include the following:

31/12/2000 31/12/1999

Concessions 172 225 Licences 684 1,903 Trademarks 40 49 Television rights Television co-productions - 198 Free TV rights 1,137,452 1,579,563 Pay TV rights 1,248 1,626 Home video rights 5,551 6,876 Dubbing 51,593 72,984 Ancillary expenses 4,999 6,965

Total 1,201,739 1,670,389

The balance at December 31, 2000 is shown net of write-downs for ITL 29,592 million (including utilisations totalling ITL 257 million). It includes rights that will take effect after December 31, 2000 for an amount of ITL 194,515 million (ITL 328,044 million at December 31, 1999), and which will begin to be amortised when they take effect. The rights portfolio includes around ITL 21,516 million deriving from the transfer of the business of Reteitalia S.p.A. and ITL 483,758 million, with a residual value at

200 December 31, 2000 of ITL 249,037 million, in rights acquired in previous years from Fininvest Group companies (not including Mediaset Group companies) or their affiliated companies. Purchases in 2000 totalled ITL 112,564 million. Purchases from subsidiary company Medusa Film S.p.A. amounted to ITL 100,720 million. Purchases also include contracts that were recorded as intangibleintangible assetsassets underunder formationformation andand advancesadvances in previous years for an amount of ITL 55,422 million, that were finalised in 2000. It should be noted that, as already mentioned in the valuationvaluation ccriteria section of these notes, in order not to lose certain tax benefits, rights have been amortised as permitted by Italian tax laws rather than following the standard accounting policy under which rights would be amortised over the period of the contract up to a maximum of 120 months. Had amortisation in 2000 and previous years been calculated in this way, the net book value of the rights would have been higher by ITL 91,350 million. This item also includes television rights acquired under finance lease agreements in previous years, equal to ITL 6,308 million, which are now due to expire. Had finance lease methodology been used for the preparation of the financial statements, net profit for the year would have been ITL 351 million lower. Effects on shareholders’ equity and profit for the year are shown in the comments on shareholders’ equity. Goodwill had a nil balance in 1999. It regarded the value resulting from the transfer of the business of Reteitalia S.p.A. Amortisation had been calculated over 5 years up until December 31, 1997, in order to gain the tax benefits offered by tax laws at the time. As from 1998, amortisation has been calculated over 10 years as provided by Law 449 of December 27, 1997 which modified article 68 of the Tax Code and required amortisation of goodwill over 10 years. If goodwill had been amortised over 10 years between 1994 and December 31, 1997, a period more representative of the actual future utility of the asset, as described in the valuation criteria section, the net book value of goodwill would have been ITL 24,072 million higher. The effects on shareholders’ equity and profit for the year are explained in the note on shareholders’ equity. IntangibleIntangible assetsassets underunder formationformation andand advancesadvances includes the following amounts:

31/12/2000 31/12/1999

Unexecuted contracts 25,840 81,507 Advances on dubbing 60 375 Options on productions 4,227 34,852 Production starts 4,270 14,872 Dubbings in progress 110 624

Total 34,507 132,230

201 The balance at December 31, 2000 is net of accumulated write-downs of ITL 37,162 million, including the provision for the year equal to ITL 9,417 million and utilisation equal to ITL 184 million.

Unexecuted contracts showed a sharp decrease since advances paid in previous years to the related company Medusa Film S.p.A. decreased by ITL 55,934 million as a result of the finalisation of unexecuted contracts at December 31, 1999 which were then reclassified to rights. Such advances totalled ITL 23,700 million at December 31, 2000 (ITL 79,634 million at December 31, 1999). The advances were paid on the basis of the contract signed with Medusa Film S.p.A. in previous years and amendments made to that contract in 1996 and 1997, which guarantee Mediaset S.p.A. a right of pre- emption on films produced and distributed by the company. The cost of these rights is determined contractually on the basis of parameters linked to box office takings of the single films. Options on productions consist primarily of an option contract with related company Medusa Film S.p.A. amounting to ITL 4,227 million in respect of the purchase of an extension to the duration of rights regarding the 1998/1999 cinema season – this right must be exercised by November 27, 2002. During last year, the option amounting to ITL 30,000 million for the purchase of rights from the Cecchi Gori Group expired without ever being exercised. The relevant amount was received in the second half of the year.

Other intangible fixed assets, amount to ITL 148 million (ITL 195 million at December 31, 1999) and entirely consist of leasehold improvements.

Tangible fixedixed assetsassets Tangible fixed assets may be analysed as follows:

31/12/2000 31/12/1999

Plant and machinery 484 530 Other tangible assets Equipment 133 154 Furniture and office equipment 600 652 Office machinery and IT equipment 2,329 3,233 Motor vehicles 45 674 Tangible assets under construction 13 -

Total 3,604 5,243

Financial fixed assets

InvestInvestments InvestmentsInvestments inin subsidiarysubsidiary companiescompanies are set out below; they are all valued at cost:

202 31/12/2000 31/12/1999

R.T.I. Reti Televisive Italiane S.p.A. 176,027 176,027 International Media Services Ltd. 102 102 Mediaset Investment S.a.r.l. 1,300,000 1,200,000 Publitalia '80 S.p.A. 99,010 99,010 Mediaset Ireland Ltd. 0.1 0.1

Total 1,575,139 1,475,139

203 The following change took place during the year: n subscription and payment of the share capital increase from ITL 120,090 million to ITL 130,090 million, and the related share premium, equal to ITL 90,000 million of Mediaset Investment S.a.r.l. as approved on December 4, 2000, for an overall amount of ITL 100,000 million. InvestmentsInvestments inin affiliatedaffiliated companiescompanies are shown below:

31/12/2000 31/12/1999

Consorzio Aeromobili Fininvest 250 250 Gestevision Telecinco S.A. 140,387 140,387 Publiespana S.A. 46,796 46,796 Veleno S.p.A. 2,323 -

Total 189,756 187,433

The following change took place during the year: n on November 3, 2000 a share capital increase for EUR 1,200,000, equal to ITL 2,324 million, were subscribed in company Veleno S.p.A., pertaining to a 24% stake owned by the Company. The information required for each subsidiary and affiliated company under article 2427, clause 5, of the Civil Code. The difference between the book value and the corresponding portion of net equity of the affiliated companies Gestevision Telecinco S.A. and Publiespana S.A. is explained by the valuation of goodwill from the companies. The consolidated financial statements of the Mediaset Group report what the effect would have been if investments in subsidiary and affiliated companies had been valued using the equity method, taking account of their results net of unrealised profits from intercompany transactions. InvestmentsInvestments inin otherother companiescompanies are listed below:

% held at 31/12/2000 31/12/1999

Albacom S.p.A. 19.5% 176,140 135,653 Consorzio Servizi Vigilanza 1.0% 10 10 Fivefactor S.p.A. 10.0% - 2,072 Auditel S.r.l. 6.5% 4 4

Total 176,154 137,739

The following changes took place during the year: n on March 8, 2000, a 10% stake of Fivefactor S.p.A. was sold to company Mediofactoring S.p.A. for an amount of ITL 2,856 million; following this operation, the shareholding in Fivefactor S.p.A. was written-off; n on July 26, 2000 the General Meeting of Albacom S.p.A. decided, in line with article 2446 of the Civil Code, that losses accumulated until March 31, 2000, be offset by a share capital reduction equal to ITL 280,540 million, net of the use of the legal

204 reserve for an amount of ITL 174 million and subsequent reestablishment for ITL 280,540 million. Subsequently, on December 21, 2000 the General Meeting of Albacom S.p.A. decided, in line with article 2446 of the Civil Code, that losses accumulated until October 31, 2000, be offset by a share capital reduction equal to ITL 230,132 million and subsequent reestablishment for an equal amount. Therefore, Mediaset S.p.A. paid, in line with its own share, ITL 54,708 million on August 10, 2000, and ITL 44,876 million on December 19, 2000, reducing and reestablishing the share capital after deducting the amount of the previously recorded write-down for ITL 40,487 million.

Receivables

Receivables from other companies

Balance as at 31/12/2000 Due (years) Total Within 1 From 1 to 5 After 5

Other financial receivables 1,105 1,105 - -

Total 1,105 1,105 - -

The amount of ITL 1,105 million, (ITL 1,268 million at December 31, 1999) primarily consists of advance tax payments on the employee termination indemnity equal to ITL 787 million.

Other securities This item, which went down to nil during 2000, included bonds totalling ITL 100 million relating to the residue of the 1995-2000 Mediolanum Factor S.p.A. T.V. subordinated loan, whose bonds were convertible into shares of Fivefactor S.p.A.

Current assets

Receivables

Trade receivables This item reflects trade receivables generated by the sale or rental of rights, mainly to Italian and foreign broadcasters and distributors. They are recorded for ITL 32,622 million (ITL 43,043 million at December 31, 1999), equal to their face value of ITL 37,258 million and a write-down of ITL 4,636 million.

Gross ADA Net amount

Due within 1 year 36,963 (4,341) 32,622 Due from 1 to 5 years 295 (295) -

Total 37,258 (4,636) 32,622

205 The allowance for doubtful accounts amounts to ITL 4,636 million (unchanged over December 31, 1999) and represents a reasonable estimate of losses on receivables due from third parties.

206 Here follows the analysis of the allowance for doubtful accounts from a tax viewpoint:

Tax free Taxed Total

Balance at 1/1 2,092 2,544 4,636 Utilisation - -

Total 2,092 2,544 4,636

Receivables due from subsidiary companies, affiliated companies, related companies and the parent company This item includes short-term receivables and can be broken down as follows:

31/12/2000 31/12/1999

Due from subsidiary companies Trade receivables 243,191 340,903 Other receivables 24,474 12,390 (Allowance for doubtful accounts) (10,161) (10,161) Total due from subsidiary companies 257,504 343,132

Due from affiliated companies Trade receivables 514 435 Other receivables - 7,550 Total due from affiliated companies 514 7,985

Due from related companies - Trade receivables 9,673 4,128 - Other receivables 346 331 Total due from related companies 10,019 4,459

Due from parent company - Trade receivables 96 91 - Other receivables 516 - Total due from parent company 612 91

Total 268,649 355,667

The above receivables do not include any amounts due after more than one year. Trade receivables due from subsidiary companies mainly relate to Mediatrade S.p.A., for an amount of ITL 241,404 million and almost entirely regard the contract for the rights library. Other receivables for ITL 21,410 million, relate to the management of VAT on a Group basis. Trade receivables due from related companies include receivables from Beta Film GmbH equal to ITL 9,336 million, generated by the sale of television rights. Trade receivables due from the parent company Fininvest S.p.A. consist of amounts charged for services provided. The breakdown of receivables for all the Group companies is shown in a table included in the Report on Operations. The allowance for doubtful accounts, equal to ITL 10,161 million, (unchanged over December 31, 1999) represents accumulated amounts accrued over the years in order

20 7 to obtain the tax benefits available under Article 71 of Presidential Decree 917/86. The effects on shareholders’ equity and profit for the year are described in the note on shareholders’ equity. Here follows the analysis of the allowance for doubtful accounts with Group companies from a tax viewpoint:

Tax free Taxed Total

Balance at 1/1 10,161 - 10,161

Total 10,161 - 10,161

Other receivables This item may be analysed as follows:

31/12/2000 31/12/1999

Due from taxation authorities 112,095 112,562 Due from employees 70 79 Advances to suppliers 2,442 6,798 Advances to consultants and freelance staff 152 - Other receivables 16,461 1,805

Total 131,220 121,244

Amounts due from taxation authorities mainly comprise tax credits on dividends equal to ITL 300,979 million, tax paid on account including ITL 16,560 million this year and ITL 28,874 million for previous years, net of Corporate Tax and Regional Tax provisions that, after deducting the advances, total ITL 235,239 million. In compliance with Accounting Standard no. 25 regarding income taxes, deferred tax assets and liabilities have been accounted for. The application of the new accounting standard means that profit for the year is ITL 16,342 million higher and shareholders’ equity is ITL 45,434 million higher.

208 The above amount represents the balance regarding deferred tax assets recognised in respect of the timing differences arising on the amounts recorded in the statutory financial statements and those recorded for tax purposes over the years as follows:

31.12.2000 31.12.1999

Deferred tax liabilities Gains on disposals of fixed assets 218 -

Total liabilities 218 -

Deferred tax assets Entertainment costs 142 54 maintenance 147 219 Reserve for penalties and disputes 3,408 3,425 Reserve for the depreciation of advance payments to distribution 1,679 1,796 Reserve for the depreciation of tax assets 12,124 8,540 Reserve for the depreciation of productions in progress 702 720 Reserve for the depreciation of rights paid with undefined times 3,296 3,377 Provision for copyright risks 201 312 Provision for the depreciation of finished screening rights 8,414 8,623 Reserve for the depreciation of agreements to stipulate 453 465 Directors' fees as yet unpaid 170 261 Allowance for doubtful accounts 916 941 Provision for other risks 13,606 - Contributions to associations 20 - Contributions to supplementary pension funds 156 141

Total assets 45,434 28,874

Deferred tax assets have been calculated using the tax rates in force at the balance sheet date. This is felt to represent the tax rate that will be in force when the timing differences reverse. Deferred tax assets regarding 2000 were adjusted based on current tax rates, as determined by Law no. 388 of December 23, 2000.

Financial assets which are not fixed assets

Own shares This item includes shares in Mediaset S.p.A. acquired pursuant to the resolutions of the General Meeting held on January 12, 1998 and April 30, 1999. At December 31, 2000, the value of own shares amounted to ITL 69,609 million; this value is shown net of a write-down of ITL 7,335 million carried out in order to adjust the book value to the market valuation represented by the average share prices recorded in December. During the year, in order to stabilise the course of the share, as is described in the Report on Operations, 6,268,500 shares were purchased for an amount of ITL 206,662 million and 3,618,500 shares were sold, for ITL 129,719 million. These transactions produced a net gain of ITL 2,772 million.

209 IntercompanyIntercompany financialfinancial receivablesreceivables These relate to current account transactions with Group companies and are analysed as follows:

31/12/2000 31/12/1999

Mediatrade S.p.A. 985,983 457,418 Promoservice Italia S.r.l. - 1,751 Videotime S.p.A. - 4,708

985,983 463,877 Total

The current account transactions with subsidiary companies are regulated by a contract agreed on December 18, 1995. It states that interest shall be calculated in relation to the Euribor rate (average Euribor 1 month rate for interest income and average Euribor 1 mese rate + 1.5% for interest charges).

Liquid funds The balance of ITL 237,033 million (ITL 39,380 million at December 31, 1999) includes current accounts held at major Italian banks equal to ITL 193,665 million, term deposits for short-term cash investments equal to ITL 43,282 million plus cash and duty stamps totalling ITL 86 million.

Net financial position The net financial position of Mediaset S.p.A. at December 31, 2000, compared to that of the previous year, is as follows:

31/12/2000 31/12/1999

Liquid funds 237,033 39,380 Financial income and securities (which are not fixed assets) 69,609 - Net receivables from subsidiary companies 527,498 -

Total financial assets 834,140 39,380

Due to banks (646,023) (304,082) Due to subsidiary companies, net - (200,357)

Total financial liabilities (646,023) (504,439)

Net financial position 188,117 (465,059)

The increase in the net financial position, equal to ITL 653,176 million, relates primarily to dividends received from subsidiary and affiliated companies totalling ITL 625,936 million and from the cash flow generated by operations. As to financial liabilities, it is worth noting the outlays for capital injections to Mediaset Investment S.a.r.l. and Albacom S.p.A., equal to ITL 199,584 million, the purchase of net intangible fixed assets totalling ITL 57,763 million and the payment of dividends of ITL 418,606

210 million. These movements are explained in greater detail in the attached table of changes in financial position.

Financial liabilities are included above only for the purposes of reporting the net financial position of Mediaset S.p.A. at December 31, 2000.

Prepayments and accrued income This item includes:

31/12/2000 31/12/1999

Accrued income Unrealised exchange gains 36,050 6,921 Other 80 4 Total accrued income 36,130 6,925

Prepayments Film proceeds 245 245 Insurance 75 - Leases 11 - Other 96 120 Total prepayments 427 365

Total prepayments and accrued income 36,557 7,290

Accrued income mainly consists of accruals relating to exchange rate hedging transactions not yet settled at December 31, 2000. The above balance includes ITL 10,378 million in relation to third party financial brokers.

211 COMMENTS ON THE MAIN SHAREHOLDERS’SHAREHOLDERS’ EQUITEQUITY AND LIABILITIES ITEMS

(values in ITL million)

Shareholders’ equity Movements in shareholders’ equity items are analysed in an attached table. Comments on the main items and movements therein are set out below.

Share capital At December 31, 2000 share capital amounted to ITL 1,181,228 million (ITL 1,180,321 million at December 31, 1999), wholly subscribed and paid-up. It was made up of 1,181,227,564 ordinary shares with a par value of ITL 1.000 each. The increase is the result of the following: n the Ordinary and Extraordinary General Meeting of April 30, 2000 gave the Board of Directors powers, under articles 2443 and 2349 of the Civil Code, to increase share capital up to a maximum of ITL 1,200 million. On May 15, 2000, the Board of Directors acted under these powers to increase share capital by a total of ITL 907 million as described in the Report on Operations. At December 31, 2000 the share capital was subscribed for ITL 907 million, including ITL 755 million in the form of a bonus issue.

Share premium reserve At December 31, 2000 the share premium reserve totalled ITL 1,432,344 million (ITL 1,427,272 million at December 31, 1999). The ITL 5,071 million increase entirely related to the share capital increase described in the previous section.

Legal reserve At December 31, 2000 this reserve amounted to ITL 87,494 million (ITL 74,877 million at December 31, 1999). The increase over December 31, 1999, equal to ITL 12,617 million, represents the 5% of the net profit for 1999 allocated to the legal reserve in accordance with the resolution passed at the General Meeting of April 20, 2000.

Reserve for own shares At December 31, 2000 the reserve for own shares was equal to the value of company’s shares owned, accounted for in the suitable item of financialfinancial assetsassets whichwhich areare notnot fixedfixed assets, in line with article 2357 of the Civil Code. This reserve, at December 31, 2000, amounted to ITL 69,609 million, equal to 2,650,000 shares. During the year 6,268,500 and 3,618,500 own shares were purchased and sold, respectively.

212 Other reserves These reserves amounted to ITL 148,702 million (ITL 396,891 million at December 31, 1999); the decrease over the previous year, equal to ITL 248,189 million, is the result of the following: n utilisation of the extraordinary reserve for an amount of ITL 178,580 million as per resolution taken by the General Meeting of April 20, 2000; n transfer from the extraordinary reserve of ITL 69,609 million to a special reserve for the purchase of own shares. As mentioned earlier in the notes to the single items, the financial statements for this and previous years contain adjustments in value and provisions made exclusively for tax purposes, as permitted by current law. This accounting practice has reduced shareholders’ equity by ITL 74,212 million and increased net profit for the year by ITL 4,558 million. The tax effect taken into consideration for the determination of these effects was calculated based on the current theoretical tax rate.

Description Shareholders' equity Profit at 31.12.1999 for the year higher (lower)

Amortisation of rights in effect (91,350) 7,758 Amortisation of goodwill on conferrals (24,072) - Provision to allowance for doubtful accounts (10,161) -

Total effect of value adjustments (125,583) 7,758

Theoretical tax effect 51,371 (3,200)

Net effect on shareholders' equity and profit for the year (74,212) 4,558

Retained earnings Retained earnings amount to ITL 445 million (ITL 1,491 million at December 31, 1999) and have been subject to the following movements: n the allocation of ITL 1,200 million of net profit for 1999 as per resolution passed at the General Meeting of April 20, 2000; n utilisation of ITL 1,491 million to pay dividends as per resolution passed at the General Meeting of April 20, 2000; n utilisation of ITL 755 million of the free increase in share capital as per Board of Directors’ resolution of May 15, 2000, in relation to the Employee Stock Option Plan.

Net profit for the year Net profit for the year amounted to ITL 618,847 million (ITL 252,352 million at December 31, 1999).

213 Provisions for risks and charges These provisions and their movements may be analysed as follows:

1/1/2000 Provisions Utilised 31/12/2000

1. Provision for pension benefits and similar obligations 376 57 - 433

Total 376 57 - 433

3. Other provisions:

Provision for future risks (penalties and disputes) 8,303 165 - 8,468 Provision for other charges - 77,279 - 77,279

Total 8,303 77,444 - 85,747

Total 8,679 77,501 - 86,180

The provision for other charges includes charges from the valuation of financial operations on securities already described in the Report on Operations.

Employee termination indemnity Changes in this provision during the year were as follows:

Balance at 1/1/2000 9,918

Amount accrued and charged to income statement 1,442 Reserve transferred from subsidiary, affiliated and related companies 1,188 Advances paid during the year (2,100) Provision transferred to subsidiary, affiliated and related companies (4,348)

Balance at 31/12/2000 6,100

The provision for employee termination indemnity transferred relates almost entirely to the transfer of personnel to subsidiary company R.T.I. S.p.A., which was carried out to complete the organisational process of the Broadcasting and Contents Area in the Commercial Television sector.

214 Payables Our notes on the make-up of payables and changes during the year are set out below:

Due to banks Amounts due to banks may be analysed as follows:

"Balance at 31/12/"

Due (years) Balance at Total Within 1 From 1 to 5 After 5 31/12/1999

Overdraft 23 23 - - 9,082 Lines of credit 646,000 646,000 - - 295,000

Total 646,023 646,023 - - 304,082

During the year the Company arranged lines of credit with leading banks for an overall amount of ITL 646,000 million.

Advance payments received This item includes advance payments received from customers on future contracts and amounts to ITL 7 million (ITL 66 million at December 31, 1999).

Trade accounts This item may be analysed as follows:

31/12/2000 31/12/1999

Trade accounts 26,167 70,607 Professionals 1,806 2,743 Contractual liabilities for purchase of rights 46,578 144,583

Total 74,551 217,933

Compared to December 31, 1999 the balance has fallen by ITL 143,382 million. This is attributable to the gradual termination of the television rights purchase operations. Contractual liabilities include ITL 33,500 million being the residual balance for the purchase of a television rights package from Cecchi Gori Communication S.p.A., due for payment by July 1, 2001. Total payables include ITL 5,261 million due after more than 1 year.

Due to subsidiary, affiliated, related companies and the parent company This item may be analysed as follows:

215 Due to subsidiary companies 31/12/2000 31/12/1999

Trade payables 3,076 10,373 Other payables 22,400 22,492

Total 25,476 32,865

Trade payables due to subsidiary companies mainly relate to leases payable for property charged from the subsidiary company R.T.I. S.p.A. Other payables due to subsidiary companies mainly comprise VAT payables and VAT payments on account for December paid by the subsidiary companies to Mediaset S.p.A. as part of the groupwide VAT management, as well as advances received as premium for the sale of options carried out on behalf of subsidiary companies to hedge foreign exchange rate risks.

Due to affiliated companies 31/12/2000 31/12/1999

Trade payables 22,056 18,712 Other payables 1 11

Total 22,057 18,723

Trade payables have increase by ITL 3,334 million. They largely refer to the residual balance owed for the purchase of television rights from Beta Film GmbH (ITL 15,449 million) and Medusa Film S.p.A. (ITL 6,061 million).

Due to parent company 31/12/2000 31/12/1999

Trade payables 423 342

Total 423 342

Due to taxation authorities This item may be analysed as follows:

31/12/2000 31/12/1999

Due to taxation authorities for: Withholding tax on employees' wages and salaries 1,053 1,660 Withholding tax on freelance staff fees 100 54 VAT for the month of December 3,929 12,537 Withholding tax on dividends - 1 Substitute tax on release of reserves - 457 Other 172 223

Total 5,254 14,932

Income tax for the year has a nil balance as the payments on account, corporate tax (IRPEG) retained and tax credits on dividends exceed the liability for the year. Total payables include ITL 129 million due after more than 1 year.

216 Due to social security institutions This item consists of amounts payable to social security institutions for employee and employer contributions on December wages and salaries. At December 31, 2000 it amounted to ITL 950 million (ITL 1,234 million at December 31, 1999).

217 The balance may be analysed as follows:

31/12/2000 31/12/1999

Inps 110 174 Enpals 423 608 Inpdai/Inpgi 332 362 Fasi/Fasdac 3 - Previndai/Fpdac 73 83 Casagit 9 7

Total 950 1,234

Other sums payable This item may be analysed as follows:

31/12/2000 31/12/1999

Due to employees for wages and salaries, accrued holiday pay and expenses 1,294 2,383 Due to insurance companies 54 - Due to directors 447 704 Due to statutory auditors 430 522 Advances on forex options 8,431 1,416 Due to shareholders for dividends 103 194 Other 694 540

Total 11,453 5,759

IntercompanyIntercompany financialfinancial payablespayables This item refers to current account transactions with subsidiary companies. It is analysed as follows:

31/12/2000 31/12/1999

Elettronica Industriale S.p.A. 28,957 18,959 Promoservice Italia S.r.l. 7,015 - Mediadigit S.r.l. 11,643 - R.T.I. S.p.A. 41,138 255,749 Publitalia '80 S.p.A. 364,505 388,301 RTI Music S.r.l. 3,146 1,225 Videotime S.p.A. 2,081 -

458,485 664,234 Total

These payables are subject to the interest rates already described in the section intercompany financial receivables.

218 Accruals and deferred income

31/12/2000 31/12/1999

Accruals 14th monthly salary and social contributions thereon 763 1,017 Forex 40,128 6,615 Other 4,376 1,652 Total accruals 45,267 9,284

Deferred income Long-term rentals 23,214 35,728 Total deferred income 23,214 35,728

Total accruals and deferred income 68,481 45,012

Accruals on forex transactions relate to the valuation using December 31, 2000 exchange rates of hedging contracts. These are mainly with R.T.I. S.p.A. (ITL 8,615 million) and third parties (ITL 29,718 million). The most significant deferred income item relates to long-terms. These decreased by ITL 15,937 million for the portion pertaining to the year 2000 in relation to contracts outstanding in 1999 and increased by ITL 3,423 million for the portion pertaining to future year income under contracts agreed in 2000.

219 COMMENTS TO THE MEMORANDUM ACCOUNTS

(values in ITL million)

Guarantees, endorsements and sureties

Guarantees given These include guarantees totalling ITL 406,681 million (ITL 28,396 million at December 31, 1999) given in favour of subsidiary companies and third parties. The most significant items in favour of subsidiary companies are guarantees given to Banca Commerciale Italiana for lines of credit granted to the subsidiary company R.T.I. S.p.A., equal to ITL 10,200 million and to Fivefactor S.p.A., in respect of advances on television rights contracts paid to the subsidiary company Mediatrade S.p.A., equal to ITL 3,500 million. As to guarantees given in favour of third parties, there should be noted the guarantee given to B.N.L. for the participation in the bid for the allocation of UMTS licences of the company BLU S.p.A., equal to ITL 360,000 million.

Commitments

Potential liabilitiesliabilities countercounter-guaranteed by the parent company Fininvest S.p.A. In connection with the public offering for the sale and subscription of shares in Mediaset S.p.A., Fininvest S.p.A. issued an irrevocable guarantee for an unlimited amount, covering a period corresponding to that applying to the prescription of tax liabilities, whereby it agrees to hold harmless and indemnify Mediaset S.p.A. and its subsidiary companies as at June 30, 1996 against any damage, cost, liability, out-of- period liability (resulting from a primary debt or fine), substantiated capital loss, reversal of assets or detrimental effect, including legal expenses (the “losses”) which may arise to any of these companies in relation to a breach of contractual obligations or obligations regarding civil, criminal, administrative and tax proceedings, breach of law and breach of conditions set forth in television broadcasting licences, which occurred prior to the listing date. On the basis of this guarantee, Fininvest S.p.A. will pay any applicable damages, at the time the loss actually occurs, net of any provisions existing at the time in respect of such risks and net of out-of-period extraordinary items solely due to agency refunds that are subject to a 10 year prescription and were recorded in the liabilities of Publitalia ’80 S.p.A. in its 1995 financial statements. No compensation is due for any losses in respect of which Fininvest S.p.A. has already compensated Mediaset S.p.A. With respect to the above, Fininvest S.p.A. has agreed, for the entire duration of the guarantee, to comply with the following parameters: (i) the absolute difference between (a) liquid funds (cash, deposits, government bonds and similar securities, securities traded in regulated markets including the securities of subsidiary

220 companies) and (b) payables due to third parties (financial payables, payables due to taxation authorities, excluding trade accounts) must not be less than ITL 3,000 billion and (ii) the ratio of liquid funds to payables due to third parties, as defined above, must not be less than 3:1. In the event of a breach of these conditions, Fininvest S.p.A. will be required to provide a first call bank guarantee to Mediaset S.p.A., for an amount equal to that required to restore the level of the parameters described above. Based on the financial statements for the year ended December 31, 1999 and the balance sheet and income statement at June 30, 2000, Fininvest S.p.A. is in compliance with the covenants indicated in the text of the aforementioned guarantee. The following events were covered by the guarantee in 2000: n with regard to expenses that have already been verified and recorded in the 2000 financial statements, Mediaset S.p.A have requested Fininvest S.p.A. to receive compensation totalling ITL 3,524 million, and received the payment of ITL 3,018 million. ITL 506 million must still be received. Not yet defined litigation amounts to ITL 650 million. It should also be noted that Fininvest S.p.A. has given Mediaset S.p.A. a guarantee for an unlimited amount to cover any overstated assets and/or capital losses resulting from mistakes or problems regarding the ownership of television rights of the Mediaset Group, as reported in the consolidated financial statements as of December 31, 1995 or in the accounting records as at March 31, 1996; in the years after 1996 there have been no material circumstances involving the application of this guarantee.

Contingencies This item amounts to ITL 4,871,389 million and may be analysed as follows:

Commitment for the purchase of rights These are commitments entered into with related company Medusa Film S.p.A. for the purchase of television rights for an amount of ITL 47,300 million (ITL 102,181 million at December 31, 1999) net of advances paid.

Other commitments At December 31, 2000 there were outstanding commitments totalling ITL 4,824,089 million regarding operations on foreign currencies for the hedging of exchange rate risks and financial operations on securities. Mediaset S.p.A. works directly with institutional counterparts to hedge its own exchange rate risk and that of its subsidiary companies.

221 COMMENTS ON THE MAIN INCOMEINCOME STATEMENTSTATEMENT ITITEMS

(values in ITL million)

Value of production

Revenues from sales and services These amount to ITL 811,691 million (ITL 973,646 million in 1999) and include revenues from the sale of goods, rights and services. In 2000, Mediaset S.p.A. agreed a one-year contract with its subsidiary company Mediatrade S.p.A. for the rental of its library. Under this agreement, Mediatrade has paid an initial lump sum of ITL 750,000 million, and will pay another amount – to be defined at year end – if there are any changes in the number of television rights made available. Such amount was equal to ITL 40,000 million. Revenues are analysed in greater detail in the following table:

2000 1999

Revenues from parent company 7 99 Revenues from subsidiary companies 794,785 953,074 Revenues from affiliated companies 8,603 3,686 Revenues from third parties 8,296 16,787

Total revenues from sales and services 811,691 973,646

The breakdown of revenues for each individual company belonging to the Group is provided in the tables included in the Report on Operations.

The main types of revenues are as follows:

2000 1999

Revenues from television activities 806,220 967,004 Fees, commissions and royalties 3,286 3,265 Other revenues 2,185 3,377

Total revenues 811,691 973,646

222 Other revenues and income This item may be analysed as follows:

2000 1999

Other revenues: Seconded personnel 291 612 Costs recovered 1,541 851

Other income: Gains on disposal of fixed assets 701 809 Out-of-period income 211 387 Cancellations of rights 365 2,267 Use of allowance for doubtful accounts - 565 Utilisation of accrued holiday pay provision and related s.s. contributions - 29 Utilisation of provision for risks 257 1,980 Utilisation of provision for the renewal of labour contract 412 Other 4,125 5,829

Total 7,491 13,741

Cost of production

Services This item may be analysed as follows:

2000 1999

Maintenance costs 145 1,615 Utilities and logistics 1,306 1,522 Advertising, public relations and hospitality 4,090 5,760 Transport and storage 539 642 Consultants' fees and external staff 13,302 12,696 Directors' emoluments 1,828 1,605 Statutory auditors' emoluments 428 545 Personnel expenses 901 1,191 Commissions on guarantees 20 42 Bank charges and commissions 775 797 Insurance costs 587 731 Sales commissions 180 1,628 Travel and expense accounts 1,240 1,671 Operations of Board of Directors and Statutory Auditors 3,296 3,429 Other services 2,626 5,753

Total 31,263 39,627

223 Leasing and rental This item is made up as follows:

2000 1999

Other rentals and leases 9,792 10,668 Royalties 9,064 9,000

Total 18,856 19,668

Personnel expenses The following table compares the number of employees at the end of 1999 and 2000:

Employees at Employees at Year 31/12/1999 31/12/2000 average

Managers 38 26 27 Middle managers 63 41 41 Office staff 170 121 122 Journalists 2 3 3

Total 273 191 193

Personnel expenses include wages and salaries, social security contributions and provisions for employee termination indemnity. These totalled ITL 35,929 million in 2000 (ITL 42,334 million at December 31, 1999) and are analysed in detail in the income statement. The reduction in the workforce, and in personnel expenses, is largely due to the continuation of the reorganisation within the Group, with the gradual strengthening of the Commercial Television sector.

Amortisation, depreciation and write- downs This item includes the amortisation of intangible assets, the depreciation of tangible assets and the write-downs of intangible assets and trade receivables. Amortisation and depreciation came to ITL 589,606 million, including ITL 588,031 million on intangible assets, with a decrease of ITL 178,941 million from the previous year. In addition to the amortisation of television rights, this amount includes the amortisation of start-up and expansion costs incurred in joining the Italian Stock Exchange for ITL 16,088 million. Depreciation of tangible assets amounted to ITL 1,575 million. The item other write-downs of fixed assets amounted to ITL 9,417 million and almost entirely refer to provision on rights for the adjustment of assets values.

224 Provisions for risks This item, equal to ITL 165 million, refers to the provision for disputes with employees and litigation under way.

225 Sundry operating costs This item may be analysed as follows:

2000 1999

Capital losses and out-of-period expenses: Loss on disposal of tangible assets 325 175 Loss on cancellation of rights 128 1,585 Out-of-period expenses 359 1,162

Total 812 2,922

Other charges: Bad debts 50 816 Taxes other than on income 145 206 Co-producer fees 660 76 Appraisals and certifications - 2,072 Membership fees 701 635 Donations 208 286 Productions not made 250 2,349 Other operating costs 2,831 5,439

Total 4,845 11,879

Financial income and charges

IncomeIncome fromfrom investmentsinvestments inin subsidiarysubsidiary andand affiliatedaffiliated companiescompanies This item comprises dividends received from subsidiary and affiliated companies totalling ITL 625,936 million and related tax credits of ITL 300,979 million, as described in the following table.

2000 1999

Dividends from subsidiary companies: R.T.I. S.p.A. 392,479 38,191 Mediatrade S.p.A. - 40,000 Publitalia 80 S.p..A 120,000 70,000 Mediaset Investment S.A.R.L. 80,000 - Rete 10 S.r.l. - 5,970 Tax credits on dividends 300,979 90,539

Total 893,458 244,700

Dividends from affiliated companies: Gestevision Telecinco S.A. 26,184 18,910 Publiespana S.A. 7,273 -

Total 33,457 18,910

Total 926,915 263,610

226 Other financial income This item may be analysed as follows:

2000 1999

Income included in fixed assets Other receivables 28 37

Total 28 37

Interest income from banks 4,268 2,583 Income on share trading 3,463 2,632 Income on call and put options 8,711 1,692 Interest income on financial receivables not included in fixed assets due from: Subsidiary companies 48,131 15,843 Associated companies - 35 Other income - 4

Total 64,573 22,789

64,601 22,826 Total

An analysis of financial income for each individual company is provided in the tables included in the Report on Operations.

InterestInterest andand financialfinancial chargescharges This item may be analysed as follows:

2000 1999

Bank overdraft interest - 56 Short-term loan interest 18,026 5,713 Interest payable to subsidiary companies 26,670 18,743 Loss on the valuation of own shares 7,335 - Other financial charges 84,071 817

Total 136,102 25,329

Other financial charges primarily include losses from operations on securities amounting to ITL 3,048 million and charges from the valuation of current financial operations for ITL 80,840 million.

Foreign exchange gains and losses The loss of ITL 1,990 million, (a gain of ITL 6,228 million in 1999), consisting of exchange gains for ITL 95,120 million (including ITL 58,743 million realised gains) and exchange losses for ITL 97,110 million (including ITL 55,295 million realised losses), is essentially the result of exchange rate hedging transactions.

227 Write- downs The loss on the valuation of shareholdings, equal to ITL 59,097 million, reflects the adjustment of the value of the stake held in Albacom S.p.A. recorded in the assets, considering year losses already described in the notes on the investments.

Extraordinary income and charges This item amounts to minus ITL 611 million. It includes extraordinary charges regarding deferred tax assets arising in previous years equal to ITL 134 million, out- of-period expenses for ITL 1,229 million and extraordinary income for out-of-period income for ITL 752 million.

IncomeIncome taxestaxes forfor thethe yearyear These amount to ITL 302,579 million (ITL 124,535 million at December 31, 1999), and include national corporate income tax (IRPEG) for ITL 311,428 million, and regional income tax (IRAP) for ITL 7,493 million. The total has been adjusted in respect of deferred tax assets arising during the year totalling ITL 16,342 million, net of utilisation of ITL 532 million.

for the Board of Directors the Chairman

228 ATTACHMENTS

These attachments supplement the notes to the financial statements of which they form an integral part. They include the following information: n analysis of changes in shareholders’ equity for the years ended December 31, 2000 and 1999; n analysis of changes in intangible assets for the year ended December 31, 2000; n analysis of changes in tangible assets for the year ended December 31, 2000; n analysis of changes in financial assets for the year ended December 31, 2000; n cash flow statement for the years ended December 31, 2000 and December 31, 1999; n list of investments in subsidiary and affiliated companies as of December 31, 2000 (art. 2427 (5) of the Italian Civil Code); n Balance Sheet and Income Statement for the years ended December 31, 2000 and 1999, restated in Euro.

229 Analysis of changes in shareholders’ equity for the years ended December 31, 2000 and 1999

(ITL millions)

Share Reserve for Retained Profit Total

Share premium Revaluation Legal for company's Statutory Other earnings (loss) shareholders'

capital reserve reserves reserve own shares reserves reserves(accumulated losses) for the year equity

Balance at 1.1.1999 1,178,474 1,423,671 - 51,324 - - 274,683 844 471,054 3,400,050

Rights issue as per resolution of Board of Directors' meeting of 24/06/1999 237 3,601 ------3,838 Bonus issue as per resolution of Board of Directors' meeting of 24/06/1999 1,352 ------(1,352) - - Increase following merger with share exchange with Rete 10 S.r.l. 258 - - - - - 236 - - 494 Allocation of 1998 net profit as per GM resolution of 30/04/1999 - - - 23,553 - - 121,971 2,000 (471,054) (323,530) Net profit for the year ------252,352 252,352 230

Balance at 31.12.1999 1,180,321 1,427,272 - 74,877 - - 396,890 1,492 252,352 3,333,204

Rights issue as per resolution of Board of Directors' meeting of 15/05/2000 152 5,071 ------5,223 Bonus issue as per resolution of Board of Directors' meeting of 15/05/2000 755 ------(755) - - Allocation of 1999 net profit as per GM resolution of 20/04/2000 - - - 12,618 - - - 1,200 (252,352) (238,534) Allocation of dividends as per GM resolution of 22/12/1997 ------(178,579) (1,492) - (180,071) Other changes: Utilization of extraordinary reserve to purchase own shares - - - - 69,609 - (69,609) - - - Net profit for the year ------618,847 618,847

Balance at 31.12.2000 1,181,228 1,432,343 - 87,495 69,609 - 148,702 445 618,847 3,538,669

Analysis of changes in intangible assets for the year ended December 31, 2000

(ITL millions)

Intangible assets Opening balance Changes during the year Closing balance

Original (Write-downs) Accumulated Balance at Nel Net (Write-downs) Original (Write-downs) Accumulated Balance at Revaluation Acquisitions Amortisation Revaluation Revaluation cost Write-backs amortisation 1/1/2000 reclassifications disposals Write-backs cost Write-backs amortisation 31/12/2000 (*) (**) (*) (***) (*) (*)

Start-up and expansion costs 95,688 - - (79,528) 16,160 19 - - (16,088) - - 95,707 - - (95,616) 91

Patents and intellectual property rights 1,656 - - (552) 1,104 45 - - (567) - - 1,701 - - (1,119) 582

similar rights 4,033,057 - (29,848) (2,332,819) 1,670,390 57,337 55,422 (10,380) (571,287) 257 - 4,134,946 - (29,591) (2,903,616) 1,201,739

Goodwill 80,240 - - (80,240) ------80,240 - - (80,240) -

Intangible assets in progress and advances 160,160 - (27,930) - 132,230 320 (55,422) (33,388) - (9,233) - 71,670 - (37,163) - 34,507

Other intangible assets 2,610 - - (2,415) 195 43 - - (90) - - 2,554 - - (2,406) 148

Total 4,373,411 - (57,778) (2,495,554) 1,820,079 57,764 - (43,768) (588,032) (8,976) - 4,386,818 - (66,754) (3,082,997) 1,237,067

(*) Of which accelerated - - - - 231

(**) Of which:

Cost 55,422

Amortisation - 55,422

(***) Of which:

Cost 44,357

Revaluations - Write-downs -

Ordinary amortisation (589)

Accelerated amortisation - 43,768

Analysis of changes in tangible assets for the year ended December 31, 2000

(ITL millions)

Tangible assets Opening balance Changes during the year Closing balance

Original (Write-downs) Accumulated Balance at Net Net (Write-downs) Original (Write-downs) Accumulated Balance at Revaluations Acquisitions Depreciation Revaluations Revaluations cost write-backs depreciation 1/1/2000 reclassification disposals Write-backs cost Write-backs depreciation 31/12/2000 (*) (**) (*) (***) (*) (*)

Plant and machinery 1,018 - - (488) 530 125 - (1) (170) - - 1,136 - - (652) 484

Other tangible assets 9,302 - - (4,590) 4,712 407 - (607) (1,404) - - 8,405 - - (5,297) 3,108 Assets under construction/payments on account - - - - - 12 - - - - - 12 - - - 12

Total 10,320 - - (5,078) 5,242 544 - (608) (1,574) - - 9,553 - - (5,949) 3,604

(*) Of which ordinary 36 - 23 59

(**) Of which:

Cost - Depreciation -

232 -

(***) Of which:

Cost 1,311

Revaluations -

Write-downs - Ordinary depreciation (703)

Accelerated depreciation -

608

Analysis of changes in financial assets for the year ended December 31, 2000

(ITL millions)

Opening balance Changes during the year Closing balance

Original (Write-downs) Balance at (Write-downs) Valuation under Balance at of which: Revaluations Increases Reclassifications Decreases Revaluations cost Write-backs 1/1/2000 Write-backs equity method 31/12/2000 revaluations

Investments in Subsidiary companies 1,475,140 - - 1,475,140 100,000 - - - - - 1,575,140 -

Affiliated companies 187,432 - - 187,432 2,324 - - - - - 189,756 -

Other companies 178,225 - (40,487) 137,738 - - 2,072 - 40,487 - 176,153 -

Total 1,840,797 - (40,487) 1,800,310 102,324 - 2,072 - 40,487 - 1,941,049 -

Receivables from other companies 1,268 - - 1,268 - - 163 - - - 1,105 - 233

Total 1,268 - - 1,268 - - 163 - - - 1,105 -

Other securities 100 - - 100 - - 100 - - - - -

Cash flow statement for the years ended December 31, 2000 and December 31, 1999

(ITL millions)

31/12/2000 31/12/1999

Net profit for the year 618,847 252,352

Amortisation, depreciation and write-downs 589,606 768,546 Provisions, net 45,991 11,981

Cash flow from operations 1,254,444 1,032,879 Change in receivables 87,461 245,750 Change in prepayments and accrued income (29,267) (2,674)

Change in payables (142,131) (323,772) Change in accruals and deferred income 23,469 2,139 Change in tax payables (9,678) (6,931)

Change in employee termination indemnity (3,818) (1,824) Change in working capital and other assets/liabilities (73,964) (87,312)

Cash generated by operations 1,180,480 945,567

Revenues from the sale of intangible assets 43,768 22,703 Revenues from the sale of tangible assets 608 373 Revenues from the sale of financial assets 2,335 213,751

Total revenues from disposals 46,711 236,827

Total cash generated during the year 1,227,191 1,182,394

Investments in intangible assets (57,763) (191,466)

Investments in tangible assets (545) (1,346) Investments in financial assets (102,324) (831,111) Total cash (invested) during the year (160,632) (1,023,923)

Dividends paid (418,606) (323,530)

Other changes in shareholders' equity 5,223 4,332 Changes in shareholders' equity (413,383) (319,198)

Change in net financial position 653,176 (160,727)

Liquid funds 39,380 130,833

Financial receivables from subsidiary companies 463,877 74,334 Financial payables to banks /other financial institutions (304,082) (54,254)

Financial payables to subsidiary companies (664,234) (455,245) Opening net financial position (465,059) (304,332)

Liquid funds 237,033 39,380 Financial receivables from subsidiary companies 985,983 463,877 Short-term securities 69,609 -

Financial payables to banks /other financial institutions (646,023) (304,082) Financial payables to subsidiary companies (458,485) (664,234) Closing net financial position 188,117 (465,059)

Change in net financial position 653,176 (160,727)

234 List of investments in subsidiary and affiliated companies as of DecemberDecember 31,31, 20002000 (art.(art. 24272427 (5)(5) ofof thethe ItalianItalian CivilCivil Code)Code)

(ITL milions)

Shareholders' equity Result for the year Difference

Share Total Pro-quota Total Pro-quota Book Value as per Name Head office B-A B-C capital amount amount % held valueart. 2426 (4) civil code

(A) (B) (C)

Subsidiary companies

Publitalia '80 S.p.A. Milan Lire 100,000 309,689 309,689 144,248 144,248 100.000% 99,010 - (210,679) -

R.T.I. S.p.A. Rome Lire 109,022 907,478 907,478 444,597 444,597 100.000% 176,027 - (731,451) -

International Media Services Ltd. Malta Lire 100 36,828 36,827 (192) (192) 99.998% 102 - (36,725) -

Mediaset Investment S.a.r.l. Luxembourg Lire 130,090 1,321,694 1,321,694 27,113 27,113 100.000% 1,300,000 - (21,694) - 235

Mediaset Ireland Ltd. Dublin Lire 0.1 - - - - 100.000% 0.1 - 0 -

Affiliated companies

Consorzio Aeromobili Fininvest Milan Lire 1,000 1,000 250 - - 25.000% 250 - - -

Veleno S.p.A. (*) Milan Euro 5 8,891 2,134 (790) (190) 24.000% 2,323 - 189 -

Publiespana S.A. (*) Madrid P.tas 100 97,704 24,426 64,410 16,103 25.000% 46,796 - 22,370 -

Gestevision Telecinco S.A. (*) Madrid P.tas 15,394 568,863 142,216 232,436 58,109 25.000% 140,387 - (1,829) -

(*) The figures regarding shareholders’ equity and result for the year have been converted to ITL in order to compare them with their book value.

MEDIASET S.p.A. Balance sheet as of December 31, 2000 (values in EUR)

ASSETS 31/12/2000 31/12/1999

A) RECEIVABLES FROM SHAREHOLDERS - -

B) FIXED ASSETS

I Intangible fixed assets 1 start-up and expansion costs 47,030 8,346,170

3 industrial patents and intellectual - - property rights 300,413 570,182

4 concessions, licences, trademarks and similar rights 620,646,207 862,683,944

6 intangible assets under formation and advances 17,821,571 68,291,212 7 other 76,294 100,575

Total 638,891,516 939,992,084

II Tangible fixed assets

2 plant and machinery 249,863 273,854

4 other tangible fixed assets 1,604,956 2,433,746 5 fixed assets under construction and payments on account 6,456 -

Total 1,861,275 2,707,600

III Financial fixed assets 1 investments in:

a) subsidiary companies 813,491,655 761,845,965

b) affiliated companies 98,000,745 96,800,745 d) other companies 90,975,623 71,135,798

Total 1,002,468,023 929,782,508

2 receivables: d) other companies 570,680 655,053

3 other securities - 51,646 Total 1,003,038,703 930,489,207

TOTAL FIXED ASSETS (B) 1,643,791,494 1,873,188,891

C) CURRENT ASSETS

I Inventory Total - -

II Receivables 1 trade receivables 16,848,015 22,229,786

2 due from subsidiary companies 132,989,975 177,213,070

3 due from affiliated companies 265,610 4,123,816 4 due from parent company 316,200 47,124

4bis due from associated companies 5,174,636 2,302,923

5 other receivables - due within 1 year 44,417,240 47,704,910 - due after 1 year 23,352,113 14,912,362

Total 67,769,353 62,617,272 Total 223,363,789 268,533,991

III Financial assets (which are not fixed assets)

5 own shares 35,949,900 - 7 receivables due from subsidiary and affiliated companies 509,217,866 239,572,523 Total 545,167,766 239,572,523

236 MEDIASET S.p.A.

Balance sheet as of December 31, 2000 (values in EUR)

ASSETS 31/12/2000 31/12/1999

IV Liquid funds

1 bank and postal deposits 122,373,053 20,264,284

3 cash in hand and cash equivalents 44,191 73,808 Total 122,417,244 20,338,092

TOTAL CURRENT ASSETS (C) 890,948,799 528,444,607

D) PREPAYMENTS AND ACCRUED INCOME

1 accrued income 18,659,272 3,576,656 2 prepayments 220,841 188,154

TOTAL PREPAYMENTS AND ACCRUED INCOME (D) 18,880,113 3,764,810

TOTAL ASSETS 2,553,620,405 2,405,398,307

237 MEDIASET S.p.A.

Balance sheet as of December 31, 2000 (values in EUR)

238 SHAREHOLDERS' EQUITY AND LIABILITIES 31/12/2000 31/12/1999

A) SHAREHOLDERS' EQUITY

I Share capital 610,053,125 609,584,905

II Share premium reserve 739,743,791 737,124,589

III Revaluation reserve - -

IV Legal reserve 45,187,099 38,670,642

V Reserve for own shares 35,949,900 -

VI Statutory reserves - -

VII Other reserves - -

merger reserve 130,140 130,140

extraordinary reserve 72,724,598 200,903,322 reserve for dividends approved not paid 3,943,449 3,943,449

Totale altre riserve 76,798,188 204,976,912

VIII Retained earnings (losses) 229,875 770,037

IX Profit (loss) for the year 319,607,753 130,329,142

TOTAL SHAREHOLDERS' EQUITY (A) 1,827,569,732 1,721,456,227

B) PROVISIONS FOR RISKS AND CHARGES 1 for pension benefits and similar obligations 223,520 194,416

3 Other reserves 44,284,716 4,287,925

TOTAL PROVISIONS FOR RISKS AND CHARGES (B) 44,508,236 4,482,342

C) EMPLOYEE TERMINATION INDEMNITY 3,150,231 5,122,441

D) PAYABLES

3 due to banks 333,643,048 157,045,023 5 advance payments received 3,767 33,906

6 trade accounts - due within 1 year 35,785,492 87,298,715 - due after 1 year 2,716,842 25,254,103

Total 38,502,334 112,552,818

8 due to subsidiary companies 13,157,236 16,973,558 9 due to affiliated companies 201,316 267,263

9bis due to associated companies 11,391,705 9,669,550 10 due to the parent company 218,379 176,799

11 due to taxation authorities - due within 1 year 2,646,806 7,622,782 - due after 1 year 66,712 88,950

Total 2,713,519 7,711,732

12 due to social security institutions 490,690 637,433 13 other sums payable 5,914,976 2,974,102

14 sums due to subsidiary companies 236,787,823 343,048,123

TOTAL PAYABLES (D) 643,024,792 651,090,308

E) ACCRUALS AND DEFERRED INCOME 1 accruals 23,378,383 4,794,962

2 deferred income 11,989,032 18,452,027

TOTAL ACCRUALS AND DEFERRED INCOME (E) 35,367,415 23,246,989

TOTAL LIABILITIES 726,050,674 683,942,080

TOTAL NET SHAREHOLDERS' EQUITY AND LIABILITIES 2,553,620,405 2,405,398,307 MEDIASET S.p.A.

Balance sheet as of December 31, 2000 (values in EUR)

239 OFF-BALANCE SHEET ITEMS 31/12/2000 31/12/1999

Guarantees, sureties, andorsements

Unsecured guarantees given 210,033,323 14,665,116

Commitments and risks

Potential liabilitires guaranteed by parent company 335,697 232,508

Contractual commitments 2,515,862,499 579,886,494 Total 2,516,198,196 580,119,002

Other - -

TOTAL OFF-BALANCE SHEET ITEMS 2,726,231,518 594,784,118

240 MEDIASET S.p.A. Income statement as of December 31, 2000 (values in EUR)

31/12/2000 31/12/1999

A) VALUE OF PRODUCTION

1 revenues from sales and services 419,203,361 502,846,034

5 other revenues and income - sundry 3,868,628 7,096,767

TOTAL VALUE OF PRODUCTION (A) 423,071,989 509,942,800

B) COST OF PRODUCTION

6 raw materials, consumables and supplies 298,838 548,363 7 services 16,145,929 20,465,721

8 leasing and rental 9,738,148 10,157,858

9 personnel expenses: a) wages and salaries 10,976,235 14,195,319

b) social security contributions 3,062,721 3,698,224

c) employee termination indemnity 744,437 1,070,310 d) pension benefits and similar obligations 29,104 38,693

e) other expenses 3,743,199 2,861,198

Total personnel expenses 18,555,696 21,863,744 10 amortisation, depreciation and write-downs

a) amortisation of intangible fixed assets 303,692,797 396,011,103 b) depreciation of tangible fixed assets 813,165 910,209

c) write-downs of fixed assets 4,863,657 7,385,961

d) write-downs of receivables included in current assets and liquid funds - 913,163

Total amortisation, depreciation and write-downs 309,369,619 405,220,436

12 provisions for risks 85,215 - 14 sundry operating costs

a) losses on disposals and out-of-period expenses 419,178 1,508,943

b) other costs 2,502,489 6,135,109 Total 2,921,667 7,644,052

TOTAL COST OF PRODUCTION (B) 357,115,112 465,900,174

DIFFERENCE BETWEEN VALUE AND COST OF PRODUCTION (A-B) 65,956,877 44,042,626

C) FINANCIAL INCOME AND (CHARGES)

15 income from investments

a) subsidiary companies 461,432,669 126,376,795 b) affiliated companies 17,279,098 9,766,447

Total income from investments 478,711,767 136,143,242 16 other financial income

a) from receivables included in fixed assets

- other 14,549 19,232 d) other income

- subsidiary companies 24,857,605 8,182,248

- associated companies - 18,022 - other 8,491,673 3,569,084

Totale 33,349,278 11,769,354

e) foreign exchange gains 49,125,451 29,362,242 Total other financial income 82,489,277 41,150,828 Total financial income 561,201,044 177,294,070

241 MEDIASET S.p.A.

IncomeIncome statementstatement asas ofof DecemberDecember 31,31, 20002000 (values in EUR)

31/12/2000 31/12/1999

17 interest and financial charges

a) interest and financial charges

- subsidiary companies (13,773,728) (9,679,901) - other companies (56,517,336) (3,401,529)

Totale (70,291,063) (13,081,430)

b) foreign exchange losses (50,153,436) (26,145,571) Total interest and other financial charges (120,444,499) (39,227,001)

TOTAL FINANCIAL INCOME AND (CHARGES) (C) 440,756,546 138,067,069

D) ADJUSTMENTS TO THE VALUE OF FINANCIAL INVESTMENTS

19 write-downs a) investments (30,521,066) -

TOTAL ADJUSTMENTS TO THE VALUE OF FINANCIAL INVESTMENTS (D) (30,521,066) -

E) EXTRAORDINARY INCOME AND (CHARGES)

20 income - other 388,496 13,700,359

21 charges

- prior years' taxes (69,398) - - other (634,509) (1,163,876)

Total extraordinary charges (703,907) (1,163,876)

TOTAL EXTRAORDINARY INCOME AND (CHARGES) (E) (315,412) 12,536,483

PROFIT BEFORE TAXATION 475,876,945 194,646,178

22 income taxes for the year a) current taxation 164,708,942 66,882,919

b) deferred taxation (8,439,750) (2,565,883)

Total income taxes for the year 156,269,192 64,317,036

26 PROFIT (LOSS) FOR THE YEAR 319,607,753 130,329,142

242 MEDIASET S.p.A. List of significant investments in subsidiary and affiliates companies according to article 120, clause 3 of Low Decree no. 58/1998

(as at 31.12.2000)

Name Share capital Currency Shareholder % held Head office Tax code Date of (ISO code) establishment

Albacom S.p.A. 543,423,000,000 ITL Mediaset S.p.A. 19.50% Rome - via Mario Bianchini 15 04952121004 17/08/1995 Auditel S.r.l. 60,000,000 ITL R.T.I. S.p.A. 23.55% Milan - Largo Toscanini 1 07483650151 03/07/1984 Mediaset S.p.A. 6.45% Beigua S.r.l. 99,000,000 ITL Elettronica Industriale 24.50% Milan - via Soperga 16 04092220153 16/05/1978 Elettronica Industriale S.p.A. 10,000,000,000 ITL R.T.I S.p.A. 100.00% Lissone - via Turati 7 00809530157 01/03/1973 Mediadigit S.r.l. 11,000,000,000 ITL Mediaset Investment S.a.r.l. 100.00% Milan - via Paleocapa 3 12673290156 23/12/1998 Mediatrade S.p.A. 50,000,000,000 ITL R.T.I. S.p.A. 100.00% Milan - via Paleocapa 3 09341230150 24/06/1988 Promoservice Italia S.r.l. 4,000,000,000 ITL Publitalia '80 S.p.A. 100.00% Milan - via Paleocapa 3 07608230152 23/10/1984 Publitalia '80 S.p.A. 100,000,000,000 ITL Mediaset S.p.A. 100.00% Milan - via Paleocapa 3 04529390157 13/09/1979

243 R.T.I. S.p.A. 109,022,000,000 ITL Mediaset S.p.A. 100.00% Rome - Largo del Nazareno 8 06921720154 14/01/1983 RTI Music S.r.l. 500,000,000 ITL R.T.I. S.p.A. 100.00% Milan - via Paleocapa 3 04602730154 12/11/1979

Videotime SpA 100,018,360,000 ITL R.T.I. S.p.A. 97.69% Milan - via Paleocapa 3 06303760158 18/11/1981 Gestevision Telecinco S.A. 15,394,000,000 ESP Mediaset S.p.A. 25.00% Spain - Madrid 10/03/1989 Mediaset Investment S.a.r.l. 15.00% Carretera De Irun Km 11.700 Publiespana S.A. 100,000,000 ESP Mediaset S.p.A. 25.00% Spain - Madrid - Torre Picasso Plta 14 03/11/1988 Mediaset Investment S.a.r.l. 15.00% Plaza Pablo Ruiz Picasso ABS Finance Fund Sicav 5,406,000 EUR Mediaset Investment S.a.r.l. 28.94% Luxembourg - 19 - 21 03/02/1999 Boulevard Prince Henri Epsilon TV Production S.r.l. 10,000 EUR Mediaset Investment S.a.r.l. 100.00% Milan - via Paleocapa 3 13303870151 20/12/2000 Società Consortile Fonografici per Azioni 500,000 EUR RTI Music S.r.l. 12.50% Milan - Piazza San Carlo, 1 12925820156 07/10/1999 TV Breizh S.A. 15,000,000 EUR Mediaset Investment S.a.r.l. 13.00% France - Quai du Pèristyle 737 28/04/2000 Lorient Cedex Veleno S.p.A. 5,000,000 EUR Mediaset S.p.A. 24.00% Milan - via Paleocapa 3 13203780153 27/07/2000 Mediaset Ireland Ltd. 100,000 ITL Mediaset S.p.A. 100.00% Northern Ireland - Dublin 2 19/02/1998 29 Earlsfort Terrace Euroset S.a.r.l. 100,000,000,000 ITL Mediaset Investment S.a.r.l. 50.00% Luxembourg 11/03/1999 33 Rue Notre Dame L- 2240 International Media Services Ltd. in liquidaz. 100,000,000 ITL Mediaset S.p.A. 99.99% Malta - La Valletta - 85 St. John Street 29/12/1994 Mediaset Investment S.a.r.l. 130,090,000,000 ITL Mediaset S.p.A. 100.00% Luxembourg 19962411986 13/12/1996 33 Rue Notre Dame L- 2240 Euromedia Luxembourg Two S.A. 42,500,000 USD Mediaset Investment S.a.r.l. 11.76% Luxembourg 13/03/2000 Boulevard de la Petrusse 140

MEDIASET S.p.A.

2000 Financial Statements Reports of the statutory Auditors and external Auditors

MEDIASET S.p.A Milan - Via Paleocapa, 3 Share capital: Lit.1,181,227,564,000.= wholly paid-up ************************* REPORT OF THE STATUTORY AUDITORS TO THE GENERAL MEETING OF MEDIASET S.p.A. CALLED TO APPROVE THE FI- NANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2000 (Article 153 of Law Decree no 58/98) Dear Shareholders, During the year we have performed the duties required by law, taking into account the code of conduct recommended by the National Councils of Professional Accountants and Bookkeepers. In particular: we attended the Board of Directors’ meetings and the directors provided information about the activities undertaken and the transactions with the greatest impact on the income statement, balance sheet and financial position of the Company. We made sure that all the actions approved and implemented were in compliance with the law and the corporate articles of association, and that they did not involve any potential conflicts of interest and were not in contrast to the resolutions passed by General Meetings; we obtained knowledge of the Company’s organisational structure and confirmed that proper management procedures had been followed. This involved direct observation, information gathering and discussions with the external auditors Deloitte & Touche S.p.A. in order to exchange data and information; we assessed and monitored the adequacy of the internal control and accounting system, and ensured that this system was reliable in that it prop- erly reflected operations. This involved gathering information, reviewing company documents and analysing the results of the work performed by the external auditors. We also held regular meetings with the head of the inter-

nal control department and obtained information about reviews performed at subsidiary companies; we checked that the statutory and consolidated financial statements as at December 2000 and the Report on Operations were prepared and structured in accordance with the law. This was based on direct checks and on information provided by the external auditors; we examined the adequacy of the instructions issued to subsidiary companies. These instructions enabled them to promptly provide the parent company with information enabling it to meet its legal obligations regarding communication. During our review work we did not come across any significant matters worth of reproach or any omissions that would require to be reported to external supervisory bodies or mentioned at this point. Moreover, in accordance with the recommendations issued by CONSOB, the Board of Statutory Auditors states the following: the information provided by the Board of Directors, including disclosure of relations with other Group companies and related parties, are considered complete; operations undertaken with other Group companies and related parties during the year are to be considered as connected to and regarding the fulfil- ment of corporate objectives. We have not identified any conflicts of interest or any unusual or atypical transactions which could have a significant effect on the income statement, balance sheet or financial position of the Company; during the year we held regular meetings with the external auditors Deloitte & Touche S.p.A.. Though we have not yet seen their audit report, we have every reason to believe that it will be express a clean opinion on the financial statements; during 2000 the Board of Directors met 9 times, the Executive Committee met 5 times and the Board of Statutory met 14 times;

during 2000 the Company did not appoint Deloitte & Touche S.p.A. to any professional engagement, besides auditing the statutory financial statements, the consolidated financial statements and the interim report; we agree with the amount of dividend that the Board of Directors propose to pay, bearing in mind the level of available reserves. In conclusion, we inform you that we have received no accusations under article 2408 of the Civil Code and express our approval of the financial statements as at December 31, 2000, which report a net profit of ITL 618,846,904,218.=. Milan, March 21, 2001

THE BOARD OF STATUTORY AUDITORS

(Achille Frattini, Chairman)

(Francesco Antonio Giampaolo)

(Riccardo Perotta)

AF/lp

Auditor’s Report in accordance with article 156 of Legislative Decree of February 24, 1998, N. 58

To the Shareholders of Mediaset S.p.A

We have audited the financial statements of the Mediaset S.p.A. as of December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the Auditing Standards recommended by Consob, the Italian Stock Exchange Commission. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. The December 31, 2000 accounts of one affiliated company with a March 31 financial year end, were examined by another audit firm which has issued a report on the limited review performed. Our opinion, as expressed in this report, with regard to the aforementioned affiliated company which represents 8.6% of equity investments and 3.4% of total assets has been based on the limited review conducted by another audit firm. We believe that our audit provides a reasonable basis for our opinion.

For the opinion on the financial statements of the prior year, presented for comparison in accordance with legal requirements, reference should be made to the auditor’s report issued by us on April 5, 2000.

In our opinion, the financial statements present fairly the financial position of Mediaset S.p.A. as of December 31, 2000, and the results of its operations for the year then ended, and comply with the principles which regulate the preparation of financial statements in Italy.

As mentioned in the notes to the financial statements, the Company has made certain entries solely in order to obtain tax benefits which would not otherwise be available. In the notes to the financial statements, the effects of these entries on shareholders’ equity and net profit income for the year is adequately explained in the note on “Shareholders’ equity”.

This report has been translated into the English language solely for the convenience of international readers.

DELOITTE & TOUCHE S.p.A.

Patrizia Arienti Partner

Milan, 23 March 2001

SUMMARY OF THE RESOLUTIONS TAKEN BY THE GENERAL MEETINGMEETING

The General Meeting was held on first call on April 9, 2001. n With respect to the appointment of Directors, the General meeting resolved to confirm Mr. Bruno Ermolli and Mr. Marco Giordani as Directors. They will hold their positions until the ordinary conclusion of the mandate of the Board of Directors, which will be at the time of the approval of the financial statements at December, 31, 2002. n With reference to the balance sheet and consolidated financial statements at December 31, 2000, the Meeting, after taking notice of the Reports of the Statutory Auditors and of the external auditors, decided the following: a) to approve the balance sheet, income statement and notes to the financial statements as at December, 31 2000, which closed with a profit for the year of ITL 618,846,904,218, and the relevant Report on Operations;

b) to allocate the net profit for the year, amounting to ITL 618,846,904,218, as follows: - ITL 30,942,345,211, equal to 5% of the net profit above, to the legal reserve; - ITL 465 per share to the shareholders, gross of legal withholding taxes, with the exclusion of own shares held at May 18, 2001, by using part of the net profit for the year 2000, and allocate the remainder to the extraordinary reserve; c) to pay the dividend as from May 24, 2001; the payment will be made by means of the authorised organisations where shares are registered in the sistema monte titoli; as from May 21, 2001 shares will be negotiated in the relevant market ex dividend. The payment of the dividend will give shareholders an ordinary tax credit amounting to 58.73%, since it can be included in the items mentioned at art. 105, first clause, paragraph a), of the T.U.I.R. (Single Act on Income Tax). n With reference to the purchase of own shares, the General meeting decided the following:

a) to revoke the resolution taken by the General Meeting on April 20, 2000, item 5) on the agenda; b) to grant the Board of Directors the possibility to purchase, also by means of negotiation of options and derivatives on Mediaset shares, up to a maximum of 30,000,000 ordinary own shares with a current par value of ITL 1,000 each (equal to 2.54% of the current share capital), one or more times, until the approval of the financial statements as at December 31, 2001, and however for not more than 18 months from the date of the General Meeting resolution. The amount above is covered by the available reserves, as is stated in the latest financial statements, appropriately approved.

253 Purchases, to be made at the Stock Exchange where the shares are listed, shall be carried out at a price not higher than 20% and not lower than 20% of the reference price of the share in the Stock Exchange session previous to any single operation. These parameters are considered to be appropriate to find the value range within which the purchase is of interest to the company. The purchase operation shall not be made by means of public offering, but will be carried out on the market under the rules given by Borsa Italiana S.p.A. and pursuant to article 132 of Law Decree 58/98. The authorisation above is added to the authorisation to the purchase of own shares approved by the General Meeting held on April 20, 2000 with respect to the operations connected to the 1997/1999 Employee Stock Plan. Purchased shares shall not be used for share capital decrease operations; c) to authorise the Board to sell purchased shares. Sales shall be carried out at the Stock Exchange where shares are listed and/or out of the Stock Exchange, at a price not lower than 90% of the reference price of the share in the Stock Exchange session previous to any single operation. This authorisation is given without time limits; d) to give authorisation to the Board of Directors, in accordance with article 2357- ter of the Civil Code, so that it can sell own shares purchased on the basis of this resolution or however already held by the Company to Company’s employees, or employees of subsidiary companies or of the parent company with respect to their exercise of purchase options of the shares that are granted to them, in line with the measures approved by the General Meeting of April 20, 2000 regarding the setting up of a Stock Option Plan for the year 2000 and following. This authorisation is given without time limits. n With reference to the conversion of the share capital into Euro, the General Meeting resolved the following: e) to establish that the par value of every of the 1,181,227,564 ordinary shares equal to ITL 1,000 each, is equal to EUR 0.52;

f)f) as a consequence, the share capital of the company amounts to EUR 614,238,333.28; g) as a consequence of the resolution above, the share capital is increased for an amount of ITL 8,103,693,580 by using part of the extraordinary reserve for the corresponding amount, and the reserve will be reduced by the same amount; h) the first clause of article 6) of the Company articles of associations is modified and the current wording is replaced by the following new wording: “the share capital amounts to EUR 614,238,333.28, divided into 1,181,227,564 shares with a par value of EUR 0.52 each”; i)i) to give the Chairman of the Board of Directors the powers to carry out all formalities and requirements, also of administrative nature, to carry out the conversion of the share capital into Euro.

254 n With reference to the modification of article 13 of the Company articles of associations, the General Meeting decided the following:

j)j) to approve the introduction in article 13 of the Company articles of association of a further clause regarding the provision, in line the recommendations of the “Code of self-discipline of companies listed at the Stock Exchange”, that the company may provide itself with its own regulations for General Meetings;

k) as a consequence, to modify article 13 of the Company articles of associations as follows: “The procedure for calling the meeting, whether ordinary or extraordinary and at first, second or third call, as well as passing resolutions are to comply with provisions enforced by law. The Chairman of the Meeting has full powers: - to verify the existence of the quorum and the calling of the meeting by law; - to direct the discussion, regulate the orderly development of the Meeting’s activities and summarise in the minutes declarations as requested by the shareholders; - to declare the outcome of votes. The company can provide itself with a relevant Regulation, approved by means of a resolution of the ordinary general meeting, regarding the meeting’s operations.” n With reference to the proposal of adoption of the Regulation for the General Meeting of Mediaset S.p.A. shareholders, the General Meeting approved the following:

MEETINGING REGULATIONREGULATION

255 may be called by the staff in charge to resolve any dispute regarding the legitimacy of a person's right of speech. The verification of the legitimisation to the right of speech shall take place adequately in advance of the meeting's beginning, unless otherwise specified in the notice of meeting. 2.2. The employees of the Company and of the Group’s companies can take part in the meeting, as well as other subjects whose presence is deemed to be useful by the Chairman in relation to the issues to be broached or for the execution of the meeting. 2.3 Experts, financial analysis and authorised journalists may observe the meeting, under the Chairman’s consent. A speech by representatives of the external auditors does not need any formalities. 2.4 Unless otherwise decided by the Chairman for needs in line with the regular course of the meeting and for the taking down of the minutes, no video, communication or similar equipment, including any sort of recording device, shall be used at the premises of the meeting.

Article 3 - discussidiscussion 3.1 In the description of the issues on the agenda and in the preparation of answers to comments and remarks, the Chairman may be supported by the Directors or the Statutory Auditors or those authorised to take part in the meeting under article 2.2 above, and he can ask them to describe the issues on the agenda and the proposals submitted to the meeting’s approval. The order of the issues, as results from the notice of meeting, can be changed and different issues on the agenda can be examined jointly, unless there is a different request by the meeting. 3.2 The Chairman establishes the ways to deal with the agenda, directs and chairs the discussion by giving the floor to shareholders who have requested this possibility in compliance with this article, to directors and statutory auditors, and ensures the mutual respect of the rights of all shareholders present, and the Company’s interest. To this end, the Chairman establishes the ways to request the floor and the order of the remarks, and guarantees the possibility to briefly answer to those who requested the floor. The Chairman ensures that the discussion is correct and takes any decision appropriate to prevent anything detrimental to the course of the meeting. 3.3 All shareholders with a right to vote have the right to take the floor on the issues on the agenda to request clarifications and express their opinions. The remarks of the shareholders who requested the floor shall exclusively deal with the issues on the agenda. 3.4 The Chairman can define, at the opening of the discussion, in the light of the issues on the agenda, a maximum duration for the remarks and answers, in order to encourage the widest participation of shareholders’ in the discussion.

256 The Chairman shall ask for remarks and answers that exceed maximum duration or are not relevant to the issues discussed to be concluded and, after the invitation to conclude, remove the right of speech from the non compliant shareholder. The Chairman can also require shareholders to leave the meeting room who, during the discussion and in spite of calls to order, disturb the regular course of the meeting. During the meeting the Chairman, if it is the case, can suspend the meeting for short periods, providing the appropriate reasons. 3.5 The Chairman or, upon invitation, Directors, Statutory Auditors and Company employees present can join in the discussion and reply to shareholders according to the ways established by the Chairman. 3.6 At the end of all comments, replies and subsequent remarks, the Chairman closes the discussion.

Article 4 - votesvotes 4.1 Before beginning voting operations, the Chairman calls back to the meeting those who have been asked to leave the room under article 3.4 of this regulation. 4.2 Meeting votes take place by means of open ballot. Before beginning voting operations, the Chairman defines the modes of expression, detection and calculation of the votes and the devices to the used and can establish a maximum deadline for casting the vote. 4.3 At the end of the procedure, votes are counted, at the end of which the Chairman, with the support of the secretary or the notary public, declares the outcome of the votes to the meeting.

257

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