Annual Report at 31 Decembe

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Annual Report at December 31, 2018 GEDI Gruppo Editoriale

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GEDI Gruppo Editoriale Società per Azioni

Annual Report at 31 December 2018

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Index

Financial Highlights 9

Report of the Board of Directors at 31 December 2018 Operating performance and consolidated results of the GEDI Group at 31 December 2018 13 Market Review 14 GEDI Group operating performance for 2018 14 Results by area 16 Subsequent events and outlook 20 Operating performance and consolidated results at 31 December 2018 21 Results of the Parent Company GEDI Gruppo Editoriale SpA at 31 December 2018 30 Reconciliation between the Parent Company’s financial statements and consolidated financial statements 33 Main risks and uncertainties to which the GEDI Gruppo Editoriale SpA and the GEDI Gruppo are exposed 33 Certification pursuant toArticle 37 of Consob Resolution No. 16191/07 (Market Regulations) 37 Other information 37 Proposal for allocation of the 2018 profit 39

Disclosure pursuant to Consob Regulation No. 11971 43

Report on corporate governance and the ownership structure 55

Consolidated financial statements of the GEDI Group at 31 December 2018 Consolidated Statement of Financial Position 99 Consolidated Income Statement and Consolidated Statement of Comprehensive Income 100 Consolidated Statement of Cash Flow 101 Consolidated Statement of Changes in Equity 102 Notes to the Consolidated Financial Statements of the GEDI Group 105 Annexes 177 Certification of the consolidated financial statements pursuant toArticle 154- bis of Italian Legislative Decree No. 58 of 24 February 1998 185 Independent Auditors’ Report of the Consolidated Financial Statements 189

Financial statements of GEDI Gruppo Editoriale SpA at 31 December 2018 Statement of Financial Position 199 Separate Income Statement and Statement of comprehensive income 200 Statement of Cash Flow 201 Consolidated Statement of Changes in Equity 202 Notes to the annual Financial Statements of GEDI Gruppo Editoriale SpA 205 Certification of the financial statements pursuant toArticle 154- bis of Italian Legislative Decree No. 58 of 24 February 1998 261 Board of Statutory Auditors Report 265 Independent Auditors’ Report of the Separate Financial Statements 277

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Company Name GEDI Gruppo Editoriale Società per Azioni

Share capital Euro 76,303,571.85

Tax ID and Business Registry of Rome registration number no. 00488680588

VAT No. 00906801006

Registered office Via Cristoforo Colombo 90, Rome, Italy

The Board of Directors: Honorary Chairman Carlo De Benedetti

Chairman Marco De Benedetti

Deputy Chairpersons John Elkann Monica Mondardini

CEO and Laura Cioli Managing Director

Directors Agar Brugiavini Giacaranda Maria Caracciolo di Melito Falck Elena Ciallié Alberto Clò Rodolfo De Benedetti Francesco Dini Silvia Merlo Elisabetta Oliveri Luca Paravicini Crespi Carlo Perrone Michael Zaoui

The Board of Statutory Auditors: Chairman Gaetano Rebecchini

Statutory Auditors Maurizio Lauri Marina Scandurra

Independent Auditors KPMG SpA

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Financial Highlights

Consolidated operating data (€ million) Year 2017 Year 2018 Revenues 615.8 648.7 Adjusted gross operating profit 57.4 51.7 Gross operating profit 52.8 33.1 Adjusted operating profit 41.1 33.1 Operating profit 28.2 (11.1) Profit (loss) before taxes 19.1 (33.2) Net profit (123.3) (32.2)

Consolidated financial data

(€ million) 31-Dec-17 31-Dec-18 Net invested capital 672.7 626.6 Shareholders’ Equity (incl. minority interests) 557.6 523.4 Group Shareholders’ Equity 557.1 522.8 Minority interests 0.5 0.6 Net financial position (115.1) (103.2) Dividends distributed - -

Personnel Year 2017 Year 2018 Employees at year-end 2,445 2,359 Average employees 2,214 2,422

Main ratios Year 2017 Year 2018 ROS (Adjusted operating profit/Revenues) 6.7% 5.1% ROS (Operating profit/Revenues) 4.6% -1.7% ROCE (Operating profit/Net capital employed) 4.2% -1.8% ROE (Net profit/Shareholders’ Equity) -22.1% -6.1%

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Report of the Board of Directors

Report of the Board of Directors | GEDI Gruppo Editoriale | 13

Report of the Board of Directors at 31 December 2018

Operating performance and consolidated On 1 January 2018, the Group adopted the results of the Gedi Group at 31 December following new accounting standards: 2018

Below are the main economic and financial • IFRS 15 - Revenue from Contracts with indicators as at 31 December 2018. Customers, the application mainly resulted in: Consolidated results Year Year - the recording of circulation revenues (?mn) 2017 2018 based on the cover price or the price ef- Revenues, of which: 615.8 648.7 fectively paid by the end purchaser, gross • circulation 262.7 284.6 of all the fees paid, including the portion • advertising 303.1 318.0 paid to newsagents. Consequently, and • add-on products and sundries 50.0 46.2 this is where the difference from the pre- Adjusted gross operating profit 57.4 51.7 vious accounting treatment lies, this com- Gross operating profit 52.8 33.1 mission is also recognised as a distribution Adjusted operating profit 41.1 33.1 cost and is not deducted from the revenue Operating profit 28.7 (11.1) figure as was previously the case; Profit (loss) before taxes 19.1 (33.2) - the statement of consolidated advertis- Net profit (loss) of assets destined ing revenues net of publisher fees arising to continue (131.4) (32.1) from the advertising income on behalf of Profit (loss) from discontinued third party publishers, previously recog- operations and assets held for sale(1) 8.2 - nised under costs for services. Net profit (123.3) (32.2) The Group has applied the international accounting standard IFRS 15 as from 31 December 31 December 1 January 2018, using the “retrospective (?mn) 2017 2018 method”. Comparative information in Net financial position (115.1) (103.2) the Report of the Board of Directors has Shareholders’ Equity therefore been restated. It is noted that (incl. minority interests) 557.6 523.4 the application of the new standard has • Group Shareholders’ Equity 557.1 522.8 had no impact on the operating profit, • Minority interests 0.5 0.6 profit for the period or the Group’s share- Employees 2,445 2,359 holders’ equity, with differing accounting treatment only in certain items. The de- (1) The “Profit (loss) from discontinued operations and assets held for sale” tails regarding the effects of applying IFRS at 31 December 2017 includes the effects of the deferred portion of con- 15 are explained under paragraph 5 of the sideration linked to the sale on 30 January 2015 of All Music, the Group company that produced the mainstream national television channel Dee- Notes to the Financial Statements. Jay TV, to the new producer Discovery Italia. Regarding the comparability of the figures, it should be remembered that on 27 June 2017, the merger of the ITEDI Group into GEDI was completed. • IFRS 9 - Financial Instruments, the applica- Therefore, the consolidated income statement for 2017 includes the ITEDI tion mainly resulted in: Group net profit from 1 July 2017 onwards. - the introduction of new criteria for the The “Adjusted gross operating profit” and the “Adjusted operating profit” classification and measurement of financial were determined excluding reorganisation costs, write-downs for impair- assets and liabilities, replacing the various ment tests and other non-recurrent components of the result. rules given in IAS 39; 14 | GEDI Gruppo Editoriale | Report of the Board of Directors

- an estimate of the losses on certain assets As for newspaper circulation in 2018, accord- calculated using the expected losses model ing to ADS (Accertamento Diffusione Stam- (a method that involves early recognition of pa) figures, there was a decline in sales on impairment compared to the previous terms the news stands and in subscription of 7.4% of IAS 39) using supporting information (-8.3% for national papers and -6.8% for lo- that includes historical, current and pro- cal papers). Including digital copies, overall jected data. The standard requires that this circulation dropped by around -5.7%. impairment model is applied to all the financial instruments, i.e. the financial assets measured at amortised cost, to those meas- GEDI Group operating performance for ured at fair value through other compre- 2018 hensive income, to receivables from rental contracts and to trade receivables. It should be remembered that, on 27 June The effects of the first application of the in- 2017, the merger was completed into GEDI ternational IFRS 9 accounting standard are of the ITEDI Group, publisher of the news- recognised under the opening shareholders’ papers La Stampa and il Secolo XIX. As a equity at the date of first application (1 Janu- result of this deal, GEDI acquired control of ary 2018), in accordance with the standard’s the ITEDI Group, which entered the scope of provisions. The comparative information rec- consolidation on 30 June 2017. Thus, the in- ognised in this Board of Directors Report was come statement of the GEDI Group for the therefore not restated. In order to provide a year 2017 includes the ITEDI Group as from better comparison however, certain data was 1 July 2017 onwards. reclassified for negligible amounts. The details For the main economic indicators illustrated regarding the effects of applying IFRS 9 are below, the change from 2017 is also given on explained under paragraph 5 of the Notes to a like-for-like basis. the Financial Statements. Consolidated revenues, totalling €648.7 mn, rose by 5.3% compared to 2017 (-5.9% on a Performance of the market like-for-like basis). The revenues from all the digital activities accounted for 12.2% of con- In 2018, the advertising market was essen- solidated revenue and the digital products of tially stable (-0.2%) compared to the previ- the various Group publications at the end of ous financial year (Nielsen Media Research 2018 exceeded 113,000 subscribers. figures). Circulation revenues came to €284.6 mn and All the main media, except for the printed were up by 8.3% on those of the previous press, showed a positive performance: radio year, but were down by 8.1% on a like-for- reported advertising orders up by 5.5%, con- like basis in a market that, as stated above, firming the trend in progress since 2015, the has continued to report a significant decline internet, excluding search engines and social in newspaper circulation. media, reported a rise of 4.5% and television a rise of 0.6%. In contrast, orders for the Advertising revenues, totalling €318.0 mn, printed media again posted a loss of 7.0%, rose by 4.9% compared to 2017, but were with newspapers reporting -6.2% (-4.9% or- down by 2.9% on a like-for-like basis. ders for the national papers and -7.4% for the local papers) and magazines -8.2%. Report of the Board of Directors | GEDI Gruppo Editoriale | 15

With reference to the Group’s media, radio downs of printing plants (€8.3 mn in 2017) revenues grew by 5.5%, confirming the pos- and €24.2 mn of write-downs on goodwill for itive development recorded in the previous publications performed following impairment financial year. test verification. Net of these components, the Revenue from the internet showed growth of adjusted operating profit totalled €33.1 mn, 11.0% (+3.1% on a like-for-like basis). comparable to the €41.1 mn of 2017. Lastly, revenue from the printed press rose by 3.2% (-8.1% on a like-for-like basis). Financial expenses increased from €8.7 mn in 2017 to the current €10.8 mn, as a result Costs were 7.1% higher than in 2017 but of the increase in financing sources after the fell by 4.5% on a like-for-like basis. More Company stipulated new loan agreements in specifically, industrial fixed costs were lower 2018 with a view to reimbursing the bond is- (-6.0%) thanks to the ongoing reorganisation sue due in April 2019. of the Group’s production structure, and operational and administrative costs were also Write-downs for €12.0 mn were also made in down (-4.4%) thanks to the measures adopt- 2018 on the shareholdings held in Persidera ed to reduce labour costs, overheads and edit- and Editoriale La Libertà based on the results ing costs (-1.9%) thanks to the first effects of of the impairment test. the actions taken to reduce journalism costs and charges for editorial partnerships. In 2017, profit (loss) from discontinued operations and assets held for sale included The gross operating profit was €33.1 mn €8.2 mn deriving from the sale in January (€52.8 mn in 2017), including restructuring 2015 of All Music to Discovery. This recog- expenses and other non-ordinary items total- nition, implemented pursuant to the relevant ling €18.7 mn (€4.6 mn in the previous year). accounting standards followed satisfaction of These charges derive, for €17.6 mn, from the the contractual conditions envisaged for rec- trade union agreements signed at the end of ognition of the earn out fee in January 2018. 2018 in the scope of the editorial reorganisation of the publications La Repubblica and The consolidated net profit showed a loss L’Espresso, which will significantly affect of €32.2 mn, including, as specified above, journalism costs in 2019. Of these fees, about write-downs of goodwill on publications 50% refers to single agreements already final- and shareholdings performed following im- ised at the start of 2019, while the remaining pairment test verification for a total of €36.3 50% refers to the estimate for disbursements mn and expenses for restructuring and other related to future exits, once again within the non-ordinary components affecting the net scope of the aforementioned collective bar- result for €12.6 mn. The net profit in 2017 gaining agreements signed at the end of 2018. had been negative by €123.3 mn (-€125.1 mn Net of such effects, the adjusted gross operat- on a like-for-like basis) as a result of an ex- ing profit totalled €51.7 mn, comparable to traordinary tax charge of €143.2 mn from the the €57.4 mn of 2017. settlement of a dispute, pending in the Court of Cassation, relating to tax-avoidance issues The consolidated operating profit showed a regarding the tax benefits resulting from the negative balance of €11.1 mn compared to corporate reorganisation of Gruppo Editori- the €28.2 mn of 2017 (€27.6 mn on a like-for- ale L’Espresso in 1991. like basis) and includes, as well as the restructuring expenses as above, €1.3 mn of write- 16 | GEDI Gruppo Editoriale | Report of the Board of Directors

Net debt totalled €103.2 mn at 31 Decem- With the launch of the new Audiweb 2.0 ber 2018, an improvement compared to the survey, which provides the most comprehen- €115.1 mn at the end of 2017. On 2 July sive findings by integrating the traffic on app 2018, the Company made a payment of €35.1 browsing, instant article and AMP, Repubbli- mn as the final instalment of the above men- ca.it confirms its ranking as leader among the tioned settlement of its tax dispute. Italian information sites, with an average of 2.9 million readers, creating a 24% gap from The Group employees numbered 2,359 at the its main competitor. The new survey also end of 2018, including fixed-term employees, confirms the significant results achieved by and the average number of employees for the Repubblica.it in the video segment with 657 period on a like-for like basis was 2.5% lower daily streamings. than in 2017. During 2018, the GEDI Group’s brands were consolidated on the social networks: more Results by business area specifically,la Repubblica remains the leading Italian newspaper in terms of the number of fans on Facebook (over 3.7 million), Twitter National Press (2.8 million) and now also on Instagram (536 thousand) and is among the top at international level regarding the involvement rate of Operations readers. The National Press division includes the production, development and marketing of pub- The weighting of Rep: strengthened further lishing and digital products relating to the during the year: the product by subscription newspaper la Repubblica (national newspa- only available digitally on the la Repubblica per, 9 local editions and weekly supplements brand, offering readers comments, in-depth Affari&Finanza, Il Venerdì and D) and the news and investigations, together with cover- periodicals L’Espresso, National Geographic, age of the news in real time from Repubbli- Limes, Micromega and Guide de L’Espresso. ca.it. Alongside the reformulation of content taken from the daily newspapers, the produc- On the basis of the ADS (2018) figures, la tion of content exclusively for digital was also Repubblica recorded total circulation of introduced during 2018. At the end of 2018, 212,371 average daily copies, and on the there were around 35 thousand subscribers to basis of the latest Audipress figures (Survey Rep:, in addition to the more than 35 thou- 2018/III), there are 1.9 million daily readers. sand subscribed to the digital copy of the newspaper Rep+. Based again on the latest Audipress figures, L’Espresso confirmed itself in first place The newspapers and periodicals market among news magazines in terms of the num- In 2018, sales of newspapers at news stands ber of readers (1.2 million). and through subscription dropped by 7.4%; in particular, national newspapers reported a During 2018, Repubblica.it maintained its decrease of 8.3% (internal calculation based lead position in the Italian on-line informa- on ADS figures). Once again based on ADS tion segment, reaching a record peak in traffic figures, circulation of weekly publications on 5 March 2018 with the national political dropped by 10.7% and monthly publications elections. dropped by 6.7%. Report of the Board of Directors | GEDI Gruppo Editoriale | 17

Advertising revenues from daily newspapers ments related to future exits, once again fell 6.2%: national advertising dropped by within the scope of the aforementioned -4.5% for national newspapers and 5.0% for collective bargaining agreements signed. local and 3.4% for other types (FCP). Adver- • write-downs for printing plants were re- tising investments for periodicals were even corded for €1.3 mn; more negative, recording a drop of 8.2%. • write-downs of goodwill on publications performed following impairment test veri- Consolidated operating data for the division fication recorded for €10.2 mn;

Year Year D% The adjusted operating profit showed a sig- (?mn) 2017 2018 2018/2017 nificant loss of €13.0 million (-€1,1 million in Sales 276.4 253.8 -8.2% 2017), resulting from the €22.6 mn drop in Impact of digital sales 12.4% 14.0% sales (-8.2%), which was only partly offset by Operating and personnel costs (275.2) (279.7) +1.6% lower costs for €10.7 mn (-3.8%). Adjusted gross operating profit 3.6 (6.9) n.s. Gross operating profit 1.2 (25.9) n.s. Taking into consideration the restructuring Depreciation, amortisation expenses and write-downs referred to above, and write-downs (4.7) (17.6) n.s. the operating profit is negative for €43.6 mn Adjusted operating profit (1.1) (13.0) n.s. (-€3.4 mn in the previous year). Operating profit (3.4) (43.6) n.s.

News Network Total revenues for the Division amounted to €253.8 million, down 8.2% with respect to Operations the €276.4 million in 2017, reflecting the neg- Following the merger with the ITEDI Group, ative market trends as outlined above. Digital the News Network Division currently in- activities amount to 14.0% of total sales for cludes 15 publications (La Stampa, il Seco- the Division, up on the 12.4% in the corre- lo XIX, Gazzetta di Mantova, Gazzetta di sponding period of the previous year (over Modena, Gazzetta di Reggio, Il Mattino di 15% for the newspaper La Repubblica). Padova, Il Piccolo, Messaggero Veneto, Cor- riere delle Alpi, La Nuova Ferrara, La Nuova The following impacted on the Division’s re- Venezia, La Provincia Pavese, La Sentinella sults for 2018: del Canavese, La Tribuna di Treviso and Il Tirreno) which recorded total circulation of • restructuring expenses were recorded for 389,593 average copies daily (ADS 2018) and €19.1 mn (€2.4 mn in 2017). As men- reached 3.3 million readers on a daily basis tioned previously, these charges derive for (Audipress 2018/III). €17.6 mn from the trade union agreements signed at the end of 2018 within the scope In December, the respective internet sites of the editorial reorganisation of the pub- reached an audience of 1.3 million single dai- lications La Repubblica and L’Espresso, ly users (source Audiweb 2.0). which will significantly affect journalism costs in 2019. Of these fees, about 50% re- With regard to Local Newspapers, 2018 saw fers to single agreements already finalised the extension of the pilot membership project at the start of 2019, while the remaining introduced in June 2017 on the Messagge- 50% refers to the estimate for disburse- ro Veneto website to all other publications, 18 | GEDI Gruppo Editoriale | Report of the Board of Directors

which by year-end had reached approximate- Consolidated operating data for the division ly 300,000 registered users. The process will be completed at the beginning of 2019 with Year Year D% the makeover of the il Secolo XIX and Il Tir- (?mn) 2017 2018 2018/2017 reno sites. The objective of the membership Sales 204.0 254.1 +24.6% project is to build a community in the region Impact of digital sales 5.0% 6.0% around the local publication, which will be Operating and personnel costs (181.7) (224.0) +23.3% done through the articles, in-depth news and Adjusted gross operating profit 23.6 25.3 +7.3% investigations, as well as events organised by Gross operating profit 22.2 30.1 +35.5% the publishers to open up dialogue directly Depreciation, amortisation with their readers. This new membership offer and write-downs (3.2) (16.7) n.s. will go hand in hand with a graphic restyling Adjusted operating profit 20.4 22.7 +11.3% aimed at enhancing content for subscribers Operating profit 19.1 13.5 -29.4% and registered users, ensuring enjoyable read- ing on any device, and content reorganisation. Total revenues for the Division amounted to €254.1 million, up 24.6% with respect Concurrently, with the launch of the new to 2017: on a like-for-like basis revenue was graphics for La Stampa, “TopNews” was in- down by 7.4%. Digital activities impacted for troduced in May, as the new weekly subscrip- 6.0% on total sales for the Division, up by tion only available digitally, providing a daily 5.0% on the previous year. selection of international, national and local The following impacted on the Division’s re- articles and news under the La Stampa name. sults for 2018: The offering includes content drawn from the traditional edition, as well as those produced • €5.3 mn in income was recorded from solely for the digital version. the sale of real estate and adjustment to the early retirement incentives provisions With the start of the process to integrate the made in previous years; Group’s platforms, all videos produced by La • new restructuring costs were recorded for Stampa and Il Secolo XIX are now provided €0.4 mn (€1.3 mn in the previous year); via the Group’s video platform. • write-downs of goodwill on publications performed following impairment test veri- The local newspapers market fication recorded €14.1 mn. During 2018, local newspapers reported a drop in news stand and subscription sales of The adjusted operating profit amounted to 6.8% on last year (internal processing based €22.7 mn, up 11.3% therefore on the €20.4 on ADS figures), which was more contained mn in 2017. Profitability at 8.9% was essen- than the drop in national newspapers (-8.3%). tially in line with the comparative period.

Advertising revenues from the local daily Taking into account the income components, newspapers market fell 8.7%, while a similar the restructuring expenses and write-downs reduction was seen in advertising in national referred to above, operating profit was at and local newspapers and other types of ad- €13.5 mn, compared with the €19.1 mn in vertising (FCP). 2017 (€18.1 mn on a like-for-like basis). Report of the Board of Directors | GEDI Gruppo Editoriale | 19

Radio collaboration on sales with Radio Italia continued during 2018, allowing the Group to Operations consolidate its position in the radio segment, The Radio Division includes the Group’s which has seen advertising revenue increase three national radio stations, Radio Deejay, in recent years, contrary to the performance Radio Capital and m2o, and the relative dig- in traditional media channels. ital versions. The radio market Based on the RadioTer report for 2018, the According to the RadioTer report for 2018, three radio stations continue to record good Italian radio broadcasters had 34.7 million listenership results. daily listeners over 14 years of age, which was slightly down (-2.1%) on the 35.5 million in Radio Deejay confirmed its position among the previous survey (2017). the leaders in the radio market, with 5.0 mil- Advertising investments on radio in 2018 in- lion listeners on an average day, with the best creased significantly by +5.5%, confirming performance recorded in the average quarter radio as one of the best performing media. of an hour (AQH) among the primary national radio stations (+6.3% compared to 2017).

Radio Capital reached a daily average of 1.6 Consolidated operating data for the division million listeners, up by 3.1% in the AQH. 2018 was a year of major change for the ra- Year Year D% dio station, starting in September with new (?mn) 2017 2018 2018/2017 editorial content under the management of Sales 59.0 62.0 +5.2% Massimo Giannini, a well-known name in Operating and personnel costs (41.1) (43.6) +5.9% Italian journalism, aimed at enhancing the Adjusted gross operating profit 18.1 19.1 +5.9% music content and, more specifically, extend- Gross operating profit 17.9 18.5 +3.3% ing the information offering. Depreciation, amortisation and write-downs (2.5) (2.7) +6.5% m2o recorded a daily average of 1.6 million Adjusted operating profit 15.5 16.4 +5.8% listeners. From December 2018, the station’s Operating profit 15.3 15.8 +2.8% artistic direction was entrusted to Albertino, one of the most famous personalities in the radio industry, with the objective of increas- Sales for the Group’s radio stations at €62.0 ing the station’s standing and prestige. The million, grew by 5.2% on the previous peri- new m2o will be launched in spring 2019. od: the increase in advertising sales (+6.0%) was only partially offset by the lower income Lastly, it should be remembered that on 11 from the sale of television programmes to October 2017, the GEDI Gruppo Editoriale third parties. purchased 10% of Radio Italia from Mario Volanti, the Company’s majority shareholder. Costs rose by 5.9% compared to 2017, main- Radio Italia is one of the top 5 Italian radio ly as a result of improved radio programming. stations, with a daily average of over 5.2 million listeners, characterised by an editorial Adjusted operating profit stood at €16.4 mil- position and a public profile that are excep- lion, up by 5.8% compared to the €15.5 mil- tionally complimentary to those of GEDI. The lion the previous year and a margin of 26.5%. 20 | GEDI Gruppo Editoriale | Report of the Board of Directors

Operating profit was at €15.8 mn (€15.3 mn in 2017) and includes restructuring expenses for €0.7 mn (€0.2 mn the previous year).

Subsequent events and outlook

No significant events have taken place since the close of the year.

With regard to developments in the first few months of 2019, the information currently available does not suggest any significant changes in market trends to those that characterised 2018.

In this context, the Group will continue to en- gage in developing its products, to implement the rationalisation measures to preserve profitability in a structurally difficult market, to achieve further advantages deriving from the merger with the Itedi Group and strengthen its leadership in digital activities.

Subsequent to the close of the year, the Par- ent Company received (indirectly through the other shareholder TIM SpA) a non-binding offer to acquire shares in Persidera SpA, in which it holds a 30% stake. The bidder was granted an exclusivity period, during which to conduct the necessary assessments with a view to formalising a subsequent binding offer. This exclusivity period was still valid at the date to approve GEDI Gruppo Editoriale S.p.A. draft financial statements.

Based on the above, there are currently no indications even in the absence of a binding offer, which would make the sale of the shareholding seem at all likely over the short term. Report of the Board of Directors | GEDI Gruppo Editoriale | 21

Operating performance and consolidated results at 31 December 2018

On 27 June 2017, the merger operation was completed of the companies Italiana Editrice SpA, Publikompass SpA and Nexta Srl (“ITEDI Group”) into GEDI. The operation was carried out through a reserved share capital increase subscribed to Fiat Chrysler Automobiles N.V. (“FCA”) and to Ital Press Holding SpA (“IPH”), which was released by the latter with a contribution in kind of the shares, aggregately representing the entire share capital of Italiana Editrice SpA.

As a result of this deal, GEDI acquired control of the ITEDI Group, which entered the scope of consolidation on 30 June 2017. Thus, the income statement of the GEDI Group for the year 2017 includes the ITEDI Group as from 1 July 2017 onwards.

Finally, the item “Profit (loss) of assets destined for sale" at 31 December 2017 includes the effects of the deferred fee related to the sale on 30 January 2015 of All Music, a company of the Italian general television station Deejay TV, to the publisher Discovery Italia. These effects have been recognised in the financial statements at 31 December 2017 in accordance with reference international accounting standards. 22 | GEDI Gruppo Editoriale | Report of the Board of Directors

Income Statement

The Group’s Consolidated Income Statement for 2018 is presented below, on a comparative basis with the previous year. Year Year (?mn) 2017 2018 Revenues 615.8 648.7 Change in inventories 0.0 0.1 Other operating income 10.8 15.5 Purchases (54.3) (59.8) Costs for services (293.8) (308.3) Other operating charges (14.5) (13.3) Personnel costs (211.3) (249.9) Depreciation, amortisation and write-downs (24.6) (44.2) Operating profit 28.2 (11.1) Net financial income (expense) (8.7) (22.8) Valuation of investments at equity (0.4) 0.7 Profit (loss) before taxes 19.1 (33.2) Taxes (150.5) 1.1 Net profit (loss) of assets destined to continue (131.4) (32.1) Profit (loss) from discontinued operations and assets held for sale 8.2 - Net profit (123.3) (32.1) Minority interests (0.1) (0.1) GROUP PROFIT (LOSS) (123.3) (32.2)

Revenues and operating results were discussed in detail in the first part of this Report, to which reference is made for a more detailed analysis. Report of the Board of Directors | GEDI Gruppo Editoriale | 23

Statement of Financial Position

The Consolidated Statement of Financial Position is presented below.

ASSETS 31-dec 31-dec (?mn) 2017 2018 Intangible assets with an indefinite useful life 577.0 556.7 Other intangible assets 9.0 10.1 Intangible assets 586.0 566.7 Property, plant and equipment 90.6 80.2 Investments valued at equity 124.3 109.4 Other investments 10.3 10.2 Other non-current receivables 1.4 1.2 Deferred tax assets 36.7 39.2 NON-CURRENT ASSETS 849.3 806.9 Inventories 12.9 14.9 Trade receivables 208.3 187.2 Receivables and other financial assets 0.2 0.8 Tax receivables 18.8 6.6 Other receivables 30.6 22.2 Cash and cash equivalents 63.5 77.3 CURRENT ASSETS 334.3 309.0 TOTAL ASSETS 1,183.6 1,115.9

LIABILITIES AND EQUITY 31-Dec 31-Dec (?mn) 2017 2018 Share capital 76.3 76.3 Reserves 236.3 227.3 Retained earnings (losses) 367.8 251.4 Net profit (loss) (123.3) (32.2) Group Shareholders’ Equity 557.1 522.8 Minority interests 0.5 0.6 SHAREHOLDERS’ EQUITY 557.6 523.4 Financial debt 95.7 3.5 Provisions for risks and charges 29.2 24.5 Employee termination indemnity and other retirement benefits 59.2 54.8 Deferred tax liabilities 113.5 114.9 NON-CURRENT LIABILITIES 297.5 197.8 Financial debt 83.2 177.8 Provisions for risks and charges 27.5 34.8 Trade payables 113.2 111.2 Tax payables 45.9 11.6 Other payables 58.8 59.5 CURRENT LIABILITIES 328.5 394.8 TOTAL LIABILITIES 626.0 592.5 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,183.6 1,115.9

24 | GEDI Gruppo Editoriale | Report of the Board of Directors

Statement of Financial Position

Intangible assets, amounting to €566.7 million, came down by €19.3 million compared to 31 December 2017 (€586.0 million), due to the write-downs carried out on the basis of the impairment test for €24.2 million and the amortisations for the period for €4.5 million. New investments during the year came to €9.4 million, referring primarily to the acquisition of radio frequencies and improvements to network infrastructure.

Property, plant and equipment was €80.2 million, down by €10.4 million compared to the end of 2017 (€90.6 million), resulting from depreciations coming down for €14.1 million, write- downs for €1.3 million relating to printing equipment and increased net capital expenditure during the period for €5.0 million.

Investments totalled €119.6 million, down by €15.0 million compared to 31 December 2017, due to the write-downs for €12.0 million carried out on the basis of the impairment test on the book value of investments held in Persidera and Editoriale Libertà. Additionally, as a reminder, the portion pertaining to the Group’s investment in Persidera S.p.A. includes the amortisation of the digital terrestrial frequencies implicitly recognised in the value of the investment at the time of acquisition, equalling €4.3 million for the period.

Other non-current receivables amounted to €1.2 million and remained more or less unchanged with respect to 31 December 2017 (€1.4 million).

Deferred tax assets totalled €39.2 million (€36.7 million at 31 December 2017) and include timing differences between amounts recorded in the statement of financial position and those recognised for tax purposes. At 31 December 2018, the item also includes €14.0 million for prior tax losses (€9.4 at 31 December 2017).

Inventories, amounting to €14.9 million, refer to the inventories of paper, printing materials and publications. The increase of €2.0 million with respect to 31 December 2017 is due to the greater quantities of paper in stock.

Trade receivables amounted to €187.2 million, down by €21.1 million compared to 31 De- cember 2017, mainly due to the changes in advertising revenues. As from 1 January 2018, the adoption of the new IFRS 9 standard resulted in a negative impact on trade receivables for €1.1 million due to the application of the expected losses model and consequently the prior recognition of expected losses on the residual life of assets.

Receivables and other financial assets amounted to €0.8 million, which refer to the upfront fees paid to banks to establish the credit line for €100 million that had not yet been utilised at the reporting date. The comparative figure at 31 December 2017 does not include the portion of the deferred price for the portfolio sold to the vehicle Diamante SPV Srl in the scope of the receivables securitisation for advertising revenues, reclassified under current “Financial debt” for €17.3 mn. Report of the Board of Directors | GEDI Gruppo Editoriale | 25

Tax receivables came to €6.6 million, down by €12.2 million compared to the €18.8 million at 31 December 2017, mainly due to the tax receivables relating to the application submitted in 2013 pursuant to Art. 2 of Italian Legislative Decree 201/2011 for €13.6 million.

Other receivables were at €22.2 million (€30.6 million at 31 December 2017) and include advances to suppliers, agents and freelance associates, prepaid rent and prepaid distribution rights for add-on products sold optionally with publications and radio programmes to be launched during the first few months of 2019. During the year, €7.0 million was received from the portion of the fee related to the sale of All Music to Discovery Italia. Moreover, the item includes €8.6 million related to a tax bill referring to the 1993 and 1994 financial years in relation to which the Group has an outstanding appeal.

Cash and cash equivalents amounted to €77.3 million, recording a €13.8 million increase on 31 December 2017 (€63.5 million): the self-financing for €22.8 million combined with receipt of €7.0 million from the portion of the fee related to the sale of All Music to Discovery Italia, €4.1 million from the sale of proprietary real estate and €13.6 million from the tax receivables referring to the application submitted in 2013 pursuant to Art. 2 of Italian Legislative Decree 201/2011, which were only partially absorbed by investments for €16.4 million, and the payment of €35.1 million representing the last instalment to settle the tax dispute.

Shareholders’ equity at 31 December 2018 amounted to €523.4 million (€557.6 million at 31 December 2017), of which €522.8 million belonging to the Group (€557.1 million at the end of 2017), and €0.6 million to minority interests (€0.5 million at 31 December 2017). Own shares held by the Parent Company at 31 December 2018, whose value is subtracted from the shareholders’ equity, numbered 21,968,231 and represented 4.319% of the share capital. The adoption of the new IFRS 9 accounting standard as from 1 January 2018 caused a negative impact on shareholders’ equity for €1.0 million (€1.3 million when assets were reduced directly and €0.3 million for the relevant tax effect).

Current and non-current financial debttotalled €181.3 million (€178.8 million at 31 December 2017). This item also includes the value of the equity-linked Bond issue for €100 million placed in April 2014, maturing on 9 April 2019 and with an interim coupon at a fixed rate of 2.625% per annum. At 31 December 2018, the debt component of the bond issue was €98.9 million. The item also includes the debts relating to freeing up the receivables of the concessionaire A. Manzoni & Co. for €78.3 million and the debts referring to the loan contracts with a pool of banks signed by companies in the ITEDI Group during 2014 for €4.7 million: the spread up until 31 December 2017 is fixed at 0.75%, and then increases each subsequent year, ranging between 1.75% and 2.50%; the amortisation began during the 2016 financial period and will be completed in the 2022 financial year. The comparative figure at 31 December 2017 includes the portion of the deferred price for the portfolio sold to the vehicle Diamante SPV Srl in the scope of the receivables securitisation for advertising revenues, previously classified under “Re- ceivables and other financial assets” for €17.3 mn.

Current and non-current provisions for risks and charges totalled €59.3 million, an increase of €2.7 million when compared with 31 December 2017, essentially as a result of the uses and new provisions made during the period in relation to corporate reorganisation plans underway. 26 | GEDI Gruppo Editoriale | Report of the Board of Directors

Provisions for Employee Termination Indemnity and other retirement benefits totalled €54.8 million (€59.2 million at 31 December 2017). The €4.4 million decline compared to the end of 2017 is due to the employee termination indemnities and fixed indemnities paid out in the period (€4.5 million), offset only in part by the financial effect of the valuation of provisions (interest cost) and the discounted-back value of accruals (service cost), totalling €0.1 million.

Deferred tax liabilities were €114.9 million, up by €1.4 million compared with the €113.5 million at the end of 2017.

Trade payables amounted to €111.2 million, involving a decrease of €2.0 million compared to the €113.2 million of 31 December 2017 resulting from the decrease in payables for investments (-€0.8 million) and lower costs incurred during the fourth quarter of 2018 when compared with those in the last three months of 2017.

Tax payables, equalling €11.6 million, were €34.3 million lower than at 31 December 2017 as a result of the €35.1 million payment made for the last instalment in settling the tax dispute.

Other payables amounted to €59.5 million, an increase of €0.7 million on the €58.8 million at 31 December 2017, also due to the debt accrued in respect of staff within the sphere of the business reorganisation plans underway, which was only partly offset by the settlement of social security contributions. Report of the Board of Directors | GEDI Gruppo Editoriale | 27

Changes in the Consolidated Net Financial Position

Year Year (?mn) 2017 2018 SOURCES OF FINANCE Net profit (loss) for the period, including minority interests (123.3) (32.1) Loss (profit) from discontinued operations (8.2) - Depreciation, amortisation and write-downs 24.6 44.2 Actuarial assessment stock option plans 0.7 0.8 Net change in provisions for personnel costs (2.6) (4.4) Net change in provisions for risks and charges (29.2) 2.7 Losses (gains) on disposal of fixed assets (0.6) (3.3) Losses (gains) on disposal of investments (0.2) (0.1) Write-downs (revaluations) of investments (0.0) 12.0 Adjustments for investments valued at equity 4.7 2.9 Self-financing (134.0) 22.8 Decrease (Increase) in non-current receivables 0.8 0.2 Increase in payables/Decrease in deferred tax assets (5.5) (1.1) Increase in tax payables/Decrease in tax receivables 31.2 (22.1) Decrease (Increase) in inventories 1.7 (2.0) Decrease (Increase) in trade and other receivables (13.3) 22.4 Increase (Decrease) in trade and other payables (5.7) (0.5) Change in working capital 9.2 (3.1) CASH FLOW FROM CURRENT OPERATIONS (124.7) 19.7 Net disposals of investments 4.3 0.1 Cash flow generated by sale of assets 2.0 7.0 TOTAL SOURCES (118.5) 26.8 USES Net capital expenditure in fixed assets (12.0) (12.0) Net capital expenditure in investments (6.5) - Acquisition of ITEDI Group’s net financial position (7.8) - Purchase of own shares (0.0) 0.1 Other changes (1.9) (3.0) TOTAL USES (28.3) (14.8) Financial surplus (deficit) (146.8) 11.9 OPENING NET FINANCIAL POSITION 31.7 (115.1) CLOSING NET FINANCIAL POSITION (115.1) (103.2) 28 | GEDI Gruppo Editoriale | Report of the Board of Directors

Statement of Cash Flows and Net Debt

The comparison between cash flows from 1 January 2018 and 31 December 2018 and those for the corresponding period in 2017 are reported in the table that follows.

Year Year (?mn) 2017 2018 OPERATING ACTIVITIES Profit (loss) on assets destined to continue, own and minority interests (123.3) (32.1) Adjustments: - Depreciation, amortisation and write-downs 24.6 44.2 - Actuarial assessment stock option plans 0.7 0.8 - Net change in provisions for personnel costs (2.6) (4.4) - Net change in provisions for risks and charges (29.2) 2.7 - Losses (gains) on disposal of fixed assets (0.6) (3.3) - Losses (gains) on disposal of investments and securities (0.2) (0.1) - Adjustments to the value of financial assets (0.0) 12.0 - Adjustments for investments valued at equity 4.7 2.9 - Loss (profit) from discontinued operations (8.2) - Self-financing (134.0) 22.8 Changes in current assets and other flows 14.0 (1.3) CASH FLOW FROM OPERATING ACTIVITIES (119.9) 21.5 of which: Interest received (paid) (3.0) (3.1) Income taxes received (paid) (6.2) (1.7) INVESTING ACTIVITIES Outlay for purchase of fixed assets (13.1) (16.4) Outlay for purchase of investments (6.5) (0.0) Collections from sales 5.3 4.5 Cash flow generated by purchase of ITEDI 9.0 - Cash flow generated by sale of assets 2.0 7.0 CASH FLOW FROM INVESTING ACTIVITIES (3.3) (4.9) FINANCING ACTIVITIES (Purchase) sale of own shares (0.0) 0.1 Issue (repayment) of financial debt 40.2 (3.5) Other changes (1.9) 0.5 CASH FLOW FROM FINANCING ACTIVITIES 38.3 (2.9) Increase (decrease) in cash and cash equivalents (85.0) 13.7 Cash and cash equivalents at beginning of the period 148.5 63.5 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 63.5 77.2

The cash flow from operating activities in 2018 amounted to €21.5 million, reflecting €22.8 million from self-financing, which was only partly offset by the negative downturn in working capital for €1.3 million. On the one hand, this was affected by the €35.1 million payment Report of the Board of Directors | GEDI Gruppo Editoriale | 29

made for the last instalment to settle the tax dispute, and on the other, benefited from the tax receivables relating to the application submitted in 2013 pursuant to Art. 2 of Italian Legislative Decree 201/2011 for €13.6 million; net of these effects, the cash flow from operating activities stood at €43.0 million. Cash flow for 2017 was negative for -€119.9 mn, impacted by the payment of €140.2 mn to settle the tax dispute; net of this effect, the operating flow was positive for €20.3 mn.

The cash flow from investing activities, negative for €4.9 million, referring primarily to payments for net capital expenditure in fixed assets (€16.4 million) was only partially offset by revenue from real estate and investment disposals for €11.5 million.

With regard to capital expenditure during 2018, investments were made in rotary presses and other printing equipment of the Group’s daily newspapers (€1.1 million); offices and editorial offices were renovated (€2.1 million); information and editorial systems were updated and network infrastructures upgraded (€6.4 million), radio frequencies were acquired (€3.9 million) and low and high-frequency radio broadcasting equipment was upgraded (€1.7 million).

During the year, a portion of payables on capital investments outstanding at 31 December 2017 was settled for €0.8 million.

In so far as collections from sales are concerned, the amount of €4.5 million referred primarily to the sale of a property used as an editorial office in Trieste, whereas €7.0 million referred to the portion of the deferred fee related to the sale of All Music to Discovery Italia.

Cash flow from financing activities was negative for €2.9 million primarily due to the repayment of a portion on some existing financing.

The net financial position of the Group is shown below.

31-Dec 31-Dec (?mn) 2017 2018 Financial receivables from Group companies 0.2 0.2 Financial debt to Group companies - - Cash and deposits 63.3 77.1 Bank overdrafts (0.1) (0.1) Cash and cash equivalents 63.5 77.2 Marketable securities and other financial assets 0.2 0.8 Bond issue (93.7) (98.9) Other bank debt (8.8) (6.3) Other financial debt (76.2) (76.0) Other financial assets (liabilities) (178.6) (180.4) NET FINANCIAL POSITION (115.1) (103.2) 30 | GEDI Gruppo Editoriale | Report of the Board of Directors

Results of the Parent Company GEDI Gruppo Editoriale SpA at 31 December 2018

Income Statement

Year Year (?mn) 2017 2018 Revenues 279.6 255.7 Change in inventories 0.0 0.1 Other operating income 6.6 3.9 Purchases (26.6) (26.3) Costs for services (168.1) (155.1) Other operating charges (6.8) (3.8) Personnel costs (85.7) (102.5) Depreciation, amortisation and write-downs (4.0) (7.6) Operating profit (5.0) (35.5) Financial income (expense) 0.6 (33.5) Dividends 28.8 26.7 Profit (loss) before taxes 24.4 (42.3) Taxes (141.0) 10.1 NET PROFIT (116.6) (32.2) Report of the Board of Directors | GEDI Gruppo Editoriale | 31

Statement of Financial Position

ASSETS 31-dec 31-dec (?mn) 2017 2018 Intangible assets with an indefinite useful life 220.7 219.8 Other intangible assets 4.7 6.1 Intangible assets 225.4 225.9 Property, plant and equipment 10.8 8.0 Other investments 446.1 421.4 Other non-current receivables 0.9 0.7 Deferred tax assets 16.4 21.9 NON-CURRENT ASSETS 699.5 677.8 Inventories 6.3 7.4 Trade receivables 74.9 61.0 Receivables and other financial assets - 0.8 Tax receivables 15.5 8.2 Other receivables 19.9 12.4 Cash and cash equivalents 44.2 60.0 CURRENT ASSETS 160.9 149.7 TOTAL ASSETS 860.4 827.5

LIABILITIES AND EQUITY

31-Dec 31-Dec (?mn) 2017 2018 Share capital 76.3 76.3 Reserves 153.5 152.7 Retained earnings (losses) 367.8 251.4 Net profit (loss) (116.6) (32.2) SHAREHOLDERS’ EQUITY 481.0 448.3 Financial debt 87.9 - Provisions for risks and charges 18.0 17.7 Employee termination indemnity and other retirement benefits 19.7 18.5 Deferred tax liabilities 61.6 61.8 NON-CURRENT LIABILITIES 187.2 98.1 Financial debt 65.8 185.2 Provisions for risks and charges 11.1 23.9 Trade payables 54.7 46.0 Tax payables 40.3 5.8 Other payables 20.3 20.2 CURRENT LIABILITIES 192.2 281.2 TOTAL LIABILITIES 379.4 379.3 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 860.4 827.5 32 | GEDI Gruppo Editoriale | Report of the Board of Directors

Statement of Cash Flows and Net Debt

The comparison between cash flows from 1 January 2018 and 31 December 2018 and those for the corresponding period in 2017 are reported in the table that follows.

Year Year (?mn) 2017 2018 OPERATING ACTIVITIES Profit (loss) for the period (116.6) (32.2) Adjustments: - Depreciation, amortisation and write-downs 4.0 7.6 - Actuarial assessment stock option plans 0.7 0.8 - Net change in provisions for personnel costs (0.7) (1.1) - Net change in provisions for risks and charges (19.8) 12.6 - Losses (gains) on disposal of fixed assets (0.0) (0.0) - Losses (gains) on disposal of investments and securities (8.2). - - Adjustments to the value of financial assets - 24.6 - Dividends (received) (28.8) (26.7) Self-financing (169.3) (14.5) Changes in current assets and other flows 26.6 (22.5) CASH FLOW FROM OPERATING ACTIVITIES (142.7) (37.0) of which: Interest received (paid) (2.3) (3.1) Income taxes received (paid) 5.8 2.7 INVESTING ACTIVITIES Outlay for purchase of fixed assets (5.4) (6.7) Outlay for purchase of investments (9.2) - Collections from sales 4.9 0.2 (Purchase) sale of marketable securities and available-for-sale assets - (0.8) Dividends received 28.8 26.7 Cash flow generated by sale of assets 2.0 7.0 CASH FLOW FROM INVESTING ACTIVITIES 21.1 26.4 FINANCING ACTIVITIES (Purchase) sale of own shares (0.6) 0.1 Other changes - 0.1 CASH FLOW FROM FINANCING ACTIVITIES (0.6) 0.2 Increase (decrease) in cash and cash equivalents (122.2) (10.4) Cash and cash equivalents at beginning of the period 106.3 (15.8) CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (15.8) (26.2) Report of the Board of Directors | GEDI Gruppo Editoriale | 33

For an analysis of the operating profit, please see the comments on the individual divisions; the results pertaining to financial operations are analysed hereunder.

Outlays for capital expenditure incurred by the Parent Company during 2018 amounted to €6.7 million and mainly refers to the maintenance works at the administrative and editorial offices in Rome and other offices in Italy, as well as strengthening network infrastructure and management and editorial systems. At 31 December 2018, the Parent Company’s net financial position was €124.4 million compared to €109.5 million at 31 December 2017. The negative performance is primarily attributable to the outlay of €35.1 million to settle the tax dispute.

At the end of December 2018, the workforce including fixed-term contracts numbered 727 individuals, down by 13 with respect to the 740 employees at 31 December 2017.

Reconciliation between the Parent Company’s financial statements and consolidated financial statements

Result Shareholders’ Equity at (?mn) 2017 2018 31/12/17 31/12/18 Parent Company’s financial statements (116,572) (32,158) 481,030 448,265 Netting of intragroup dividends (24,830) (23,484) - - Shareholders’ Equity and net profit of subsidiaries 24,097 29,510 427,616 432,167 Netting of carrying value of consolidated subsidiaries - 32,125 (551,252) (519,127) Goodwill of publications, trademarks and frequencies (1,382) (35,394) 75,516 52,148 Effect of valuation on equity of affiliated companies/write-down of investments (4,726) (2,928) 124,325 109,371 Valuation of Put/Call Option new acquisitions - - (680) (680) Other consolidation adjustments 77 176 499 680 GROUP CONSOLIDATED FINANCIAL STATEMENTS (123,336) (32,153) 557,054 522,824

Main risks and uncertainties to which the GEDI Gruppo Editoriale SpA and the GEDI Group are exposed

The main risk factors to which the Group is exposed as a consequence of the segment in which it operates are classified in the following categories: - risks connected with the general performance of the economy and publishing sector; - risks relating to operations; - financial risks. With regard specifically to risks of a tax-related nature, on 29 September 2017 the Board of Directors of GEDI Gruppo Editoriale SpA resolved to make use of the option provided under Art. 11 of Italian Legislative Decree No. 50/2017, converted by Italian Law No. 96/2017, to settle the fiscal litigation referred to under judgement no. 64/9/2012 by the Rome Regional Tax Commission, whilst reiterating its belief regarding the statutory-tax-related legitimacy of the transactions subject to censure by the Tax Authorities. 34 | GEDI Gruppo Editoriale | Report of the Board of Directors

The litigation currently pending in the Court of Cassation referred to concerns relating to the tax benefits resulting from restructuring of the Gruppo Editoriale L’Espresso company due to the merger via incorporation of Editoriale La Repubblica S.p.A. in Cartiera di Ascoli S.p.A. in 1991. The compliance gives rise to a payment of €175.3 mn by the Company, of which €70.1 mn was paid on 2 October 2017, €70.1 mn paid on 30 November 2017 and €35.1 mn was paid on 2 July 2018. For more details on this aspect, reference should be made to the comments in the “Notes to the Consolidated Financial Statements of the GEDI Group”.

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With regard to the internal audit and risk management system, the Board of Directors is assigned the task of “defining the nature and the level of risk compatible with the strategic objectives of the issuer”. Specifically, the Board of Directors, having consulted the Audit and Risk Committee, is required to establish the degree of compatibility of the risks identified with the management of the company consistent with the strategic objectives identified and to assess, at least once a year, the adequacy of the internal audit and risk management system with respect to the characteristics of the company and management profile of the risk undertaken. In order to ensure the internal bodies have the information necessary so as to be able to express an overall evaluation on the risk compatible with the corporate objectives, steps were taken consistently with what had been done in previous periods, to update the mapping process, analyse and assess the overall risks, by identifying any new risk factors associated with business processes. These activities were incorporated within a structured Risk Management system, which involves the entire GEDI Group, and which is subject to checking, updating and validation on an annual basis.

Risks connected with the general performance of the economy and publishing sector For the publishing sector, 2018 was once again critical, with an additional drop in advertising collections on print and circulation figures that confirm the erosion seen in recent years. The general Italian economic context has further recorded recessionary figures, with a con- traction in GDP over the last two quarters of 2018 (-0.1% and -0.2% respectively in the third and fourth quarters). This strategic context is one of the main risks that the GEDI Group is exposed to, given the high concentration in the printing services’ sector. The current uncertain outlook for the short and medium term, which is resulting in a negative performance for advertising and circulation revenues for the print segment, has therefore made it difficult to estimate future performance and cash flow projections. These uncertainties reflect, inter alia, on cash flow projections, which are used in the determination of the value in use of Cash Generating Units to assess the retrievability of the book value of intangible assets with an indefinite useful life and that of investments (with reference to the financial statements). The ongoing difficulties in the advertising market and specifically, the printing services’ sector, has meant that it was necessary for the Group to commit to additional and constant cuts in costs, transversal to all the business areas, and thus also for the purpose of more fully ensuring the continuity and development of its mediums. Report of the Board of Directors | GEDI Gruppo Editoriale | 35

If the macroeconomic and financial context should change contrary to estimates and the assumptions made by management when preparing the 2019 Budget and 2019-2021 Three-year Plan, or if the Group’s companies’ ability to generate cash flows should worsen in respect of the provisions that the impairment test was based on, it could become necessary to make additional adjustments to the book value of the intangible assets recognised in the consolidated financial statements, with the consequent recording of the write-downs on these assets in the Income Statement.

Risks relating to operations Risk of fluctuations in paper prices As it is active in the publishing sector, the Group acquires large quantities of paper and is therefore particularly exposed to fluctuations in the price of paper. To achieve a more efficient management of paper purchases and to strengthen its bargaining position with counterparts, the management of negotiation and procurement for paper purchases for all companies in the Group has been centralised.

Credit risk The credit risk exposure of the Group relates to trade and financial receivables. Due to the sectors in which it operates, the Group is not subject to significant credit risk on trade receivables. Though there are no significant concentrations of exposures, the Group however adopts operating procedures that bar the sale of publications, advertising space and other services to customers that do not possess an adequate risk profile or provide collateral guarantees. Despite these procedures, it is not possible to rule out that in the current market conditions a number of customers may fall behind with payments or not honour them altogether. The Group has therefore accrued a congruous provision for write-down of receivables. This situation is confirmed on the one hand, by the persistent difficulties in the distribution sector, which increase the risk associated with a higher number of insolvency cases due to bankruptcy or increased resistance to providing upfront sureties, and on the other, by the difficulties experienced in the advertising sector. With regard to financial receivables, investments in short-term financial instruments and trading in derivatives are carried out only with banks that possess a high credit standing.

Legal risks, risk of compliance with and changes in regulations for the sector It cannot be ruled out that the Group may be required to face liabilities resulting from various legal and tax proceedings. The Group has consistently accrued adequate amounts to provisions for risks and charges recorded in the financial statements (see the related section in the notes). On 21 March 2018, GEDI Gruppo Editoriale SpA was informed that criminal proceedings had been brought for the alleged aggravated complicity in the crime pursuant to Art. 640, paragraph 2, no. 1 in respect of the pro-tempore CEO, Central Human Resources Manager and General Manager National Press, and the crime under Art. 24 of Italian Legislative Decree 231/2001 (subsequent to an offence committed by natural persons in the interest of the entity) against the Company and some of its subsidiaries. The investigation conducted by the Public Prosecutor in Rome refers to presumed fraud against INPS regarding the alleged irregular access by certain employees over the period between 2012 and 2015 to the extraordinary redundancy fund (CIGS) aimed at early retirement in terms of Italian Law 416/81. 36 | GEDI Gruppo Editoriale | Report of the Board of Directors

Knowing that it has always complied with current legislation, which is also corroborated by internal audits focusing on checking compliance with the procedures required by relevant legislation and based on an authoritative labour law opinion, the Company notes that, for objective reasons, it is not currently in a position to be able to assess the specific conduct that would allegedly be applicable in terms of the crime, nor the number of former employees that unlawfully had access to early retirement, and consequently neither the possible tax that would need to be refunded. No legal deeds and/or supplementary or amendment notices have been received in respect of those already received on 21 March 2018. This situation therefore makes it impossible to assess the level of risk and consequently quantify the amount, as required by IAS 37. In the case of a conviction for the administrative crimes pursuant to Art. 24 of Italian Leg- islative Decree 231/2001, the administrative pecuniary sanctions applicable would be those stipulated under the combined provisions under articles 10, 11 and 24 of the Decree. It is noted that currently no deeds have been formalised in respect of the companies or current directors and employees of the latter.

The Group has adopted a set of rules constituting a Code of Conduct which are transmitted to all personnel on an ongoing basis, the consistent application of which is continuously monitored. With reference to Legislative Decree No. 231/2001 on the administrative responsibilities of entities other than individuals, it is acknowledged that all Group companies have adopted an Organisational, Management and Control Model that is continuously updated in compliance with the most recent applicable norms.

Finally, the Group is subject to potential risks arising from changes in the reference regulatory framework. The Group actively monitors these changes and holds constructive dialogue with the competent authorities to ensure the timely application of new norms issued.

Financial risks The management of financial risk is regulated by a set of rules which outline the objectives, strategies, guidelines and operating procedures. In the management of financial resources and treasury, the Group adopts a procedure which implies the application of prudence and limited risk criteria in the choice of financial and investment policies, prohibiting all speculative operations except for those adequately motivated and approved by the Board of Directors of the Parent Company. The Parent Company manages and coordinates a centralised intragroup current account, in which all subsidiaries take part, aiming at obtaining economic advantages in relationships with financial counterparts and stronger operating efficiency. Centralisation in fact allows for more efficient planning and control of cash flows, ensures higher consistency in financing and investment choices, optimises the overall risk profile of the Group and, above all, strengthens its contractual power with the banking system. The Group secured available resources through the placement of a convertible bond issue as well as the definition of two factoring agreements aimed at financially exploiting the trade receivables of the subsidiary A. Manzoni & C.; furthermore, a securitisation agreement was signed again with regard to the receivables of A. Manzoni & C. Finally, on 16 April 2018 the Parent Company GEDI Gruppo Editoriale S.p.A. signed a loan contract for €100 million, on a four-year term with four primary banks. The contract envisages Report of the Board of Directors | GEDI Gruppo Editoriale | 37

compliance with a financial covenant based on the ratio between Net Financial Debt and EBIT- DA. This served to already refinance the Company in view of the repayment of the convertible bond loan issued in 2014 for €100 million and due in April 2019. Further information on risks deriving from financial instruments are provided, as required under IFRS, in the related section of the notes.

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GEDI Gruppo Editoriale SpA, the Parent Company, is exposed to the same risks to which the Group as a whole is exposed, as described above.

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Based on results and the cash flow generated in past financial years and the financial position at 31 December 2018, the Company does not believe that there exist uncertainties such as to raise doubts with regard to the ability of the Group to continue its activity as an ongoing concern.

Certification pursuant to Article 37 of Consob Resolution No.16191/07 (Market Regulations) In relation to the requirements set out in Article 2.6.2, paragraph 11, of the Italian Stock Market Regulations, taking into account the provisions of Article 37 of Consob Regulation 16191/2007, it is hereby certified that there are no conditions such as to inhibit the listing of GEDI Gruppo Editoriale SpA shares on the Screen-based Trading Circuit organised and managed by Borsa Italiana SpA. With regard to the direction and coordination of its Parent Company CIR SpA (CIR), GEDI Gruppo Editoriale SpA complied with the disclosure requirements established by Article 2497-bis of the Italian Civil Code, has full autonomy in dealing with its customers and suppliers, and does not share a centralised treasury management service with CIR. Furthermore, the company’s Board of Directors is made up of a majority of independent directors, while the Audit and Risks Committee and the Appointments and Remuneration Committee are made up of just independent directors.

Other information At 31 December 2018, own shares held by the Parent Company were 21,968,231 (nominal value €0.15), representing 4.319% of the share capital.

****

The GEDI Gruppo Editoriale S.p.A. internal processes incorporate the measures envisaged by the Italian Data Protection Authority and act in compliance with the provisions under EU Reg- ulation No. 679 of 27 April 2016 (“GDPR”), with Italian Legislative Decree No. 196 dated 30 June 2003 (“Privacy Code”), as amended by Italian Legislative Decree No. 101 of 10 August 2018 and the additional regulations applicable on the protection of personal data. Moreover, The Group is committed to adopting technical and organisational measures aimed at protecting information relating to employees, professionals and third parties, acquired in the context of its operations and to avoiding any improper use of the same. 38 | GEDI Gruppo Editoriale | Report of the Board of Directors

To such end, GEDI Gruppo Editoriale SpA declares that the processing of personal information by the Company’s divisions is carried out in observance of the rights and fundamental freedoms, as well as the dignity of the persons involved and it is committed to adopting all necessary technical, organisational and security measures aimed at averting the risk of destruc- tion, loss of data, unauthorised access or inappropriate use of data contained in all data banks of personal data.

****

The Group makes reference to the Risk Assessment Document provided for by the law on workplace safety, which mandates an analysis of risks present in the company and the subsequent devising of measures and time scales for the implementation of the same to minimise risks and maintain an adequate level of security. The assessments made, updated periodically and in relation to changes and variations, did not reveal, with regard to work-related stress, any risk situations specifically attributable to the methods for organising work activities, confirming the low risk levels, without particular criticalities. During the year, training and information on emergency management is planned and currently being implemented, on video terminals and other residual risks, with the involvement of the persons in charge within the Company, in addition to the training of workers’ safety representatives. Health monitoring activities provided for in current protocols were also planned and implemented. With regard to environmental protection, the customary assessment and management measures were carried out in compliance with regulations as a whole, and more specifically, with regard to waste management so as to prepare and send the Single Environmental Declaration [“Modello unico di dichiarazione ambientale” - MUD].

Process for legislative simplification adopted by means of CONSOB resolution No. 18079 dated 20 January 2012 The Company complied with the opt-out regime envisaged by Articles 70, paragraph 8, and 71, paragraph 1-bis, of Consob Regulation No. 11971/99 (and subsequent amendments and additions), therefore availing itself of the faculty to depart from the obligations to publish the disclosure documents envisaged by Enclosure 3B to the aforementioned Consob Regulation at the time of significant transactions involving mergers, spin-off, share capital increases by means of conferral of assets in kind, take-overs and disposals.

Transactions with subsidiaries and related party transactions Transactions with related parties, including intragroup transactions, cannot be classified as atypical or unusual, as they are part of the Group companies’ normal business operations. These transactions are settled on an arm’s-length basis, taking account of the characteristics of the goods and services provided. Information on transactions with related parties, including that required by Consob Commu- nication of 28 July 2006, is set forth in Note 14.4 of the consolidated financial statements and Note 11.4 of the annual statutory financial statements. Report of the Board of Directors | GEDI Gruppo Editoriale | 39

A list of companies included in the scope of consolidation is reported in Annex 1 of the “Notes to the Consolidated Financial Statements of the GEDI Group”.

Proposal for allocation of the 2018 result Dear shareholders, The financial statements of GEDI Gruppo Editoriale SpA, which we submit for your approval, close with a net loss of €32,158,364.81. Given the presence of available reserves in the financial statements for a total of €344,443,160.84, full coverage of the loss for the year is proposed to the Shareholders’ Meeting, by using these available reserves recorded in the financial statements as at 31 December 2018.

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Disclosure pursuant to Consob Regulation No. 11971

Disclosure pursuant to Consob Regulation No. 11971 | GEDI Gruppo Editoriale | 43

Disclosure on incentive plans based on financial instruments

Information on the plans adopted

The Group recognises additional benefits to certain executives of the Parent Company and Group companies through plans based on financial instruments.

In particular, plans adopted by the Group provide for the awarding of stock options and stock grants.

In the past, the Group also adopted plans providing for the attribution of extraordinary bonuses contingent on the achievement of a certain stock market price by the shares of the Company (phantom stock options), but, as a consequence of recent changes in the tax treatment of employee share-based compensation, the shareholders’ meeting of GEDI Gruppo Editoriale SpA on 22 April 2009, resolved on the cancellation of the existing 2007 and 2008 Phantom Stock Option Plans and their replacement with an Extraordinary Stock Option Plan (i) reserved exclusively for the beneficiaries of the cancelled Phantom Stock Option plans and still employed by the GEDI Group, and (ii) regulated, mutatis mutandis, by the same terms and conditions as those applicable to the Phantom Plans.

All stock option plans adopted by the Group assign beneficiaries the right to exercise, at a pre-determined price and for a set term, an option for the underwriting of new shares of the Company to be issued pursuant to specific resolutions. The related rules regulate, among other terms and conditions, also the case in which the assignee of said options ceases for whatever reason to be employed by the company.

The 2011, 2012, 2013, 2014, 2015, 2016, 2017 and 2018 Stock Grant Plans, resolved by the shareholders’ meeting of GEDI Gruppo Editoriale SpA held on 20 April 2011, 23 April 2012, 18 April 2013, 16 April 2014, 23 April 2015, 21 April 2016, 27 April 2017 and 26 April 2018 respectively, provide for allocating the beneficiaries a specific number of contingent rights (Units) to receive ordinary shares already in the company’s portfolio (own shares), at a specific price and within a pre-established period of time. Stock options and stock grants alike, the rules regulate, among other terms and conditions, also the case in which the assignee of said Units ceases for whatever reason to be employed by the company.

Employee stock option plans

The following stock option plans are currently outstanding:

Extraordinary 2009 Stock option plan The Board of Directors Meeting held on 22 April 2009, availing itself of the authority granted by the shareholders’ meeting held on 26 April 2006, resolved a share capital increase pursuant to Article 2441, last paragraph of the Italian Civil Code, for a maximum total of 6,790,000 shares, with an equal value of €0.15 to be reserved for underwriting by the employees of the 44 | GEDI Gruppo Editoriale | Disclosure pursuant to Consob Regulation No. 11971

Parent Company and its subsidiaries, holding stock options issued pursuant to the “2009 Extraordinary stock option plan regulations” which provides for the options to be assigned in four tranches at an exercise price established on a consistent basis with the reference parameters envisaged by the aforementioned phantom plans: in detail, for the First Tranche 1,520,000 options were assigned at a price of €3.84, for the Second Tranche 1,520,000 options were assigned at a price of €3.60, for the Third Tranche 1,790,000 options were assigned at a price of €2.22, for the Fourth Tranche 1,840,000 options were assigned at a price of €1.37.

Pursuant to the Regulations, the options have been allocated for all purposes as of the date of the Board of Directors’ resolution. The Options thus allocated accrue, becoming exercisable, by the same deadlines already established in the regulations for the Phantom Plans and thus:

2nd Tranche • with regard to 42% of the Second Tranche, as from 30 June 2009; • up to a maximum of 6% of the Second Tranche Options, as from the end of each of the nine quarters after 30 June 2009; • the remaining 4% of the Second Tranche Options, as from 30 December 2011. During the year, 927,500 options became void.

3rd Tranche • with regard to 30% of the Third Tranche Options, as from 30 June 2009; • up to a maximum of 6% of the Third Tranche Options, as from the end of each of the eleven quarters after 30 June 2009; • the remaining 4% of the Third Tranche Options, as from 30 June 2012. During the year, 1,062,500 options became void.

4th Tranche • with regard to 18% of the Fourth Tranche Options, as from 30 June 2009; • up to a maximum of 6% of the Fourth Tranche Options, as from the end of each of the thirteen quarters after 30 June 2009; • the remaining 4% of the total of the Fourth Tranche Options, as from 31 December 2012. All the Fourth Tranche Options can be exercised up until the Final Deadline of 31 March 2019.

To-date, 717,750 options have been exercised; however, in accordance with the regulations, 5,100 are void, therefore 598,100 remain.

Ordinary 2009 Stock option plan The Board of Directors Meeting held on 22 April 2009, availing itself of the authority granted by the shareholders’ meeting held on 26 April 2006, resolved a share capital increase pursuant to Article 2441, last paragraph of the Italian Civil Code, for a maximum total of 5,000,000 shares, with an equal value of €0.15 to be reserved for underwriting by the CEO and the General Manager of the Company and the employees of the Parent Company and its subsidiaries, holding stock options issued pursuant to the “Ordinary 2009 Stock option plan regulations” which provides for the options to be assigned in two tranches. Disclosure pursuant to Consob Regulation No. 11971 | GEDI Gruppo Editoriale | 45

The exercise price for the two tranches is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company shares in the month that precedes the assignment of the options.

1st Tranche On 14 May 2009, the first tranche of 2,500,000 options was assigned at a price of €1.00, options which accrue thus becoming exercisable: a) at 30 September 2009, with regard to 12% of the options assigned; b) at the end of each of the fourteen quarters subsequent to 30 September 2009, with regard to an additional 6% of the options allocated for each quarter; c) at the end of the fifteenth quarter subsequent to 30 September 2009, with regard to the residual 4% of the options allocated, until the final date of 30 September 2019.

To date, 1,760,350 options have been exercised; and in accordance with the regulations, 338,850 remain.

2nd Tranche On 14 October 2009, the second tranche of 2,500,000 options was assigned at a price of €1.86, options which accrue thus becoming exercisable: a) at 31 March 2010, with regard to 12% of the options assigned; b) at the end of each of the fourteen quarters subsequent to 31 March 2010, with regard to an additional 6% of the options allocated for each quarter; c) at the end of the fifteenth quarter subsequent to 31 March 2010, with regard to the residual 4% of the options allocated, until the final date of 31 March 2020.

To-date, 6,300 options have been exercised; however, in accordance with the regulations, 22,500 are void, therefore 1,608,500 remain.

2010 Stock option plan The Board of Directors Meeting held on 21 April 2010, availing itself of the authority granted by the shareholders’ meeting held on 26 April 2006, resolved a share capital increase pursuant to Article 2441, last paragraph of the Italian Civil Code, for a maximum total of 6,000,000 shares, with an equal value of €0.15 to be reserved for underwriting by the CEO and the General Manager of the Company and the employees of the Parent Company and its subsidiaries, holding stock options issued pursuant to the “2010 Stock option plan regulations” that provides for the options to be assigned in two tranches.

1st Tranche On 12 May 2010, the first tranche of 2,795,000 options was assigned at a price of €2.25, options which accrue thus becoming exercisable: a) at 30 September 2010, with regard to 12% of the options assigned; b) at the end of each of the fourteen quarters subsequent to 30 September 2010, with regard to an additional 6% of the options allocated for each quarter; c) at the end of the fifteenth quarter subsequent to 30 September 2010, with regard to the residual 4% of the options allocated, until the final date of 30 September 2020.

To-date, no options have been exercised; however, in accordance with the regulations, 25,000 are void, therefore 1,752,500 remain.

2nd Tranche On 13 October 2010, the second tranche of 2,795,000 options was assigned at a price of €1.58, options which accrue thus becoming exercisable: a) at 31 March 2011, with regard to 12% of the options assigned; b) at the end of each of the fourteen quarters subsequent to 31 March 2011, with regard to an additional 6% of the options allocated for each quarter; c) at the end of the fifteenth quarter subsequent to 31 March 2011, with regard to the residual 4% of the options allocated, until the final date of 31 March 2021.

To-date, 323,100 options have been exercised; however, in accordance with the regulations, 25,000 are void, therefore 1,586,900 remain.

****

On the basis of the above, at 31 December 2018, stock options for company shares still valid, but not exercised, amount to 5,884,850, equalling 1.157% of the total shares currently making up the share capital.

Current stock grant plans

2011 Stock Grant Plan The Board of Directors Meeting held on 20 April 2011, availing itself of the authority granted by the shareholders’ meeting held on the same date, resolved the approval of the 2011 stock grant plan, as per the proposal of the Remuneration committee to be reserved for the CEO and the General Manager of the Company and the employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options.

On 20 April 2011, a total of 1,410,000 Units were assigned, divided up between Time-based Units (705,000) and Performance Units (705,000) at a price of €1.81. The Time-based Units have accrued with the corresponding right of the Beneficiaries to receive the related shares, Disclosure pursuant to Consob Regulation No. 11971 | GEDI Gruppo Editoriale | 47

free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 21 April 2013. The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets were achieved, were never accrued.

At 31 December 2018 as per the regulations, 146,723 Time-based Units were in circulation.

2012 Stock Grant Plan The Board of Directors Meeting held on 23 April 2012, availing itself of the authority granted by the shareholders’ meeting held on the same date, resolved the approval of the 2012 stock grant plan, as per the proposal of the Remuneration committee to be reserved for the CEO and the General Manager of the Company and the employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options.

On 23 April 2012, a total of 1,897,500 Units were assigned, divided up between Time-based Units (948,750) and Performance Units (948,750) at a price of €0.9814. The Time-based Units have accrued with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 24 April 2014. The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets were achieved, had accrued in part, and not accrued for the remaining part.

At 31 December 2018 as per the regulations, 340,781 Time-based Units were in circulation along with 138,927 Performance Units.

2013 Stock Grant Plan The Board of Directors Meeting held on 27 June 2013, availing itself of the authority granted by the shareholders’ meeting held on 18 April 2013, resolved the approval of the 2013 stock grant plan, as per the proposal of the Appointments and Remuneration committee, to be reserved for employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options.

On 27 June 2013, a total of 1,395,000 Units were assigned, divided up between Time-based Units (697,500) and Performance Units (697,500) at a price of €0.83. The Time-based Units have accrued with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 28 June 2015. The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets were achieved, had accrued in part, and not accrued for the remaining part. 48 | GEDI Gruppo Editoriale | Disclosure pursuant to Consob Regulation No. 11971

At 31 December 2018 as per the regulations, 262,819 Time-based Units were in circulation along with 176,903 Performance Units.

2014 Stock Grant Plan The Board of Directors Meeting held on 16 April 2014, availing itself of the authority granted by the shareholders’ meeting held on 16 April 2014, resolved the approval of the 2014 stock grant plan, as per the proposal of the Appointments and Remuneration committee, to be reserved for employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options.

On 16 April 2014, a total of 1,450,000 Units were assigned, divided up between Time-based Units (725,000) and Performance Units (725,000) at a price of €1.70. The Time-based Units have accrued with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 16 April 2016. The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets were achieved, had accrued in part, and not accrued for the remaining part.

At 31 December 2018 as per the regulations, 312,808 Time-based Units were in circulation along with 51,252 Performance Units; 490,000 Performance Units expired during the period.

2015 Stock Grant Plan The Board of Directors Meeting held on 23 April 2015, availing itself of the authority granted by the shareholders’ meeting held on 23 April 2015, resolved the approval of the 2015 stock grant plan, as per the proposal of the Appointments and Remuneration committee, to be reserved for employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options.

On 23 April 2015, a total of 1,420,000 Units were assigned, divided up between Time-based Units (710,000) and Performance Units (710,000) at a price of €1.24. The Time-based Units accrued and will accrue, with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 23 April 2017.

The Performance Units not yet accrued at the reporting date, will accrue at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets are achieved. At 31 December 2018 as per the regulations, 397,302 Time-based Units were in circulation along with 525,000 Performance Units; 72,380 Time-based Units have been exercised. Disclosure pursuant to Consob Regulation No. 11971 | GEDI Gruppo Editoriale | 49

2016 Stock Grant Plan The Board of Directors Meeting held on 21 April 2016, availing itself of the authority granted by the shareholders’ meeting held on 21 April 2016, resolved the approval of the 2016 stock grant plan, as per the proposal of the Appointments and Remuneration committee, to be reserved for employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options.

On 21 April 2016, a total of 1,315,000 Units were assigned, divided up between Time-based Units (657,500) and Performance Units (657,500) at a price of €0.9531. The Time-based Units accrued and will accrue, with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 21 April 2018.

The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets are achieved, will not accrue as the conditions stipulated in the Plan were not achieved.

At 31 December 2018 as per the regulations, 507,186 Time-based Units were in circulation and 47,814 Time-based Units have been exercised.

2017 Stock Grant Plan The Board of Directors Meeting held on 26 July 2017, availing itself of the authority granted by the shareholders’ meeting held on 27 April 2017, resolved the approval of the 2017 stock grant plan, as per the proposal of the Appointments and Remuneration committee, to be reserved for employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options.

The Performance Units will accrue at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets are achieved.

At 31 December 2018 as per the regulations, 707,500 Time-based Units were in circulation along with 707,500 Performance Units. 50 | GEDI Gruppo Editoriale | Disclosure pursuant to Consob Regulation No. 11971

2018 Stock Grant Plan The Board of Directors Meeting held on 26 April 2018, availing itself of the authority granted by the shareholders’ meeting held on 26 April 2018, resolved the approval of the 2018 stock grant plan, as per the proposal of the Appointments and Remuneration committee, to be reserved for the CEO and the General Manager of the Company and the employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options.

On 26 April 2018, a total of 1,865,000 Units were assigned, divided up between Time-based Units (932,500) and Performance Units (932,500) at a price of €0.4401. The Time-based Units accrued, with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 26 April 2020.

The Performance Units will accrue at the same vesting date envisaged for the Time-based Units, but only on condition that share performance targets are achieved.

At 31 December 2018 as per the regulations, 932,500 Time-based Units were in circulation along with 932,500 Performance Units. Disclosure pursuant to Consob Regulation No. 11971 | GEDI Gruppo Editoriale | 51 000) 000) € € 24 111 199 469 Compensations ( Compensations ( Recipient Recipient Subsidiaries GEDI Gruppo Editoriale SpA GEDI Gruppo Editoriale SpA GEDI Gruppo Editoriale SpA KPMG SpA Service provider Service provider KPMG SpA KPMG SpA Nolan Norton Italia Srl The fees do not include VAT, expenses and Consob contributions The fees do not include VAT, The fees do not include VAT, expenses and Consob contributions The fees do not include VAT, (*) Other services Other services Auditing Consob disclosure - Art. 149-duodecies Regulation No. 11971 1) TABLE AUDITORS OR ENTITIES CONNECTED WITH THE SAME TO GEDI GRUPPO EDITORIALE SPA FOR 2018 THE SERVICES SUPPLIED BY INDEPENDENT COMPENSATION(*) Service supplied (*) 2) TABLE TO SUBSIDIARIES (*) IN 2018 FOR SERVICES SUPPLIED BY INDEPENDENT AUDITORS COMPENSATION Service supplied Auditing

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Report on corporate governance and the ownership structure pursuant to article 123-bis of the Consolidated Law on Finance

Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 55

Report on corporate governance and the ownership structure GEDI Gruppo Editoriale SpA

INTRODUCTION This Report aims to illustrate the corporate governance system adopted by GEDI Gruppo Ed- itoriale S.p.A. (the “Company” or “GEDI”). This system is in line with recommendations contained in the Corporate Governance Code issued by the Committee for the Corporate Govern- ance of Listed Companies and furthered by Borsa Italiana S.p.A. (the “Code”). In observance of applicable regulatory and legislative obligations, the Report also contains information on the ownership structure of the company; after having been approved by the Board of Directors’ meeting held on 1 March 2019, it will be made available to shareholders together with the documentation envisaged for the shareholders’ meeting to be called for the approval of the financial statements at 31 December 2018, and simultaneously forwarded to Borsa Italiana (the Italian Stock Exchange), so as to facilitate its disclosure to the general public. The Report can also be consulted on the Company website www.gedispa.it, in the Governance Section, together with other document of interest for the market.

1. THE ISSUER’S PROFILE 1.1) Summary profile of the GEDI Group GEDI Gruppo Editoriale SpA is one of the most important Italian companies in the media industry which operates, directly and via its subsidiaries, in the areas which range from the daily and periodical press and publishing sectors to radio stations, advertising sales, internet and television. The GEDI Group is the owner and editor of the daily national newspaper la Repubblica, the weekly publication L’Espresso and, as from 2017, following the integration with the ITEDI Group, also the daily newspapers La Stampa and Il Secolo XIX, as well as twelve local newspapers (including one which comes out three times a week) and other periodicals; it is the owner of three national radio stations, including Radio Deejay (leader in terms of listeners among the main private broadcasters in Italy) and a number of television music channels. The GEDI Group qualifies as a branded content company capable of promoting its own high-quality original content to its readers and listeners wherever they are and at any time of the day, thanks to a multi-platform strategy. GEDI also operates in the internet and advertising sales segments, through the concessionaire Manzoni, based on its own means and for third party publishers.

1.2) Corporate Governance System adopted The GEDI Gruppo Editoriale S.p.A. corporate governance system is based on the principles and aspects laid out in the Borsa Italiana SpA’s Corporate Governance Code, which the Board of Directors complies with. Reference should be made to the examination of the individual points in the Report for a more accurate analysis of the Corporate Governance System.

2. INFORMATION ON THE OWNERSHIP STRUCTURE (PURSUANT TO ART. 123-BIS (1), TUF) a) Share capital structure (pursuant to Article 123-bis, paragraph 1, sub a), TUF) at 01/03/2019 The Company’s subscribed and fully paid-up share capital amounts to €76,303,571.85 represented by 508,690,479 ordinary shares bearing the right to vote. The share capital is made up as follows:

no. of shares % in relation to s.c. Listed Rights and obligations Ordinary shares 508,690,479 100% MTA - 56 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

The Company has not issued shares with limited voting rights or lacking such rights, nor warrants which grant the right to subscribe newly-issued shares. On April 2, 2014 the Com- pany issued so-called equity linked bonds, convertible into ordinary shares of the Company newly issued or also own shares in the portfolio subject to the approval by the extraordinary shareholders’ meeting of a share capital increase to serve the conversion with exclusion of the purchase option of the shareholders, for a nominal amount of €100,000,000.00 maturing in 2019. The Company’s extraordinary shareholders’ meeting, held on 23 July 2014, resolved to increase the share capital by means of the issue of a maximum of 46,461,925 ordinary shares of the Company, with the same features as the ordinary shares already in circulation, reserved irrevocably and exclusively to service the bond issue conversion. The Company has adopted stock option plans which involve share capital increases and stock grant plans as described in the financial statements in the sections “Information required by Consob Regulation No. 11971”, available on the Company’s institutional website (www.gedispa.it) in the Investors Section, as well as in the disclosure documents drawn up in accordance with Article 84-bis of the Issuers’ Regulations, also available on the website in the Governance Section.

b) Share transfer restrictions (pursuant to Article 123-bis, paragraph 1, letter b), TUF) The Company’s shares can be freely transferred, with the exception of a number of restrictions applicable to specific categories of individuals for limited periods of time on the basis of the Code of Conduct relating to Internal Dealing published on the Company website, in the Governance section. The 2011, 2012, 2013, 2014, 2015, 2016, 2017 and 2018 Stock Grant Plans envisage a “minimum holding” commitment for the shares assigned to the beneficiaries, who have the irrevocable commitment to hold a number of shares equal to at least 10% of those assigned permanently, until the fifth anniversary from the assignment date. During this period the shares will therefore be subject to said disposal restriction, unless authorised otherwise by the Board of Directors. Based on the Shareholders’ Agreement outlined in g), point 2 below, an extract of which is available on the Company’s internet site under the “Governance” section, 23,770,876 ordinary Issuer shares held by Exor N.V., may not be disposed of for the term of the agreement, i.e. until 2 July 2020, the third anniversary from the agreement’s Effective Date, signed on 30 July 2016.

c) Significant investments in the share capital (pursuant to Art. 123-bis, paragraph 1, sub c), TUF) Below are the names of the shareholders who, as envisaged by Consob resolution No. 11971/99, directly and/or indirectly hold investments greater than 5% of the share capital with the right to vote (the Company falls under the SME category as defined by Art. 1 of the Consolidated Law on Finance), as it emerges from the shareholders’ register at 31 December 2018, together with the subsequent communications made as per Article 120 of the Consolidate Law on Fi- nance and the other information available to the Company.

Name of shareholders

Registrant % stake of % stake of ordinary capital voting capital F.lli De Benedetti S.p.A. 43.780% 45.756% Giovanni Agnelli 5.992% 6.263% Giacaranda Maria Caracciolo di Melito Falck 5.078% 5.307% Perrone Carlo 5.019% 5.245% Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 57

Shareholders who directly own more than 5%

Direct shareholder % stake of % stake of ordinary capital voting capital Cir S.p.A. 43.780% 45.756% EXOR N.V. 5.992% 6.263% Sia Blu S.p.A. 5.078% 5.307% Mercurio S.p.A. 5.019% 5.245% d) Shares carrying special rights (pursuant to Article 123-bis, paragraph 1, sub d), TUF) There are no securities which confer special controlling rights. Special powers are not envisaged. Shares with multiple or increased votes are not envisaged by the By-laws. e) Employee share ownership: mechanism to exercise voting rights (pursuant to Article 123-bis, paragraph 1, sub e), TUF) No specific mechanism is envisaged for exercising voting rights in the event of employees with investments in the share capital. f) Restrictions on the right to vote (pursuant to Article 123-bis, paragraph 1, sub f), TUF) No restrictions on the right to vote exist g) Agreements between shareholders (pursuant to Article 123-bis, paragraph 1, sub g), TUF) The Company is aware of agreements between shareholders, which are separate and independent of one another, and significant pursuant to Art. 122 of the Consolidated Law on Finance (TUF), and specifically: 1. CIR, as one party, and Ital Press Holding S.p.A. (IPH) and Mercurio S.p.A. as the other, on 30 July 2016 signed a shareholders’ agreement referring to the ordinary GEDI shares listed on the Mercato Telematico Azionario organised and managed by Borsa Italiana S.p.A.; the shareholders’ agreement was amended on 27 March 2017 and again on 9 November 2017, following the merger by incorporation of IPH in Mercurio S.p.A. 2. CIR and EXOR S.p.A. (now EXOR N.V.) (“EXOR”) on 30 July 2016 signed a shareholders’ agreement referring to the ordinary GEDI shares listed on the Mercato Telematico Azionario managed by Borsa Italiana S.p.A.; the shareholders’ agreement was amended on 27 March 2017 and is effective as from 2 July 2017. The extract of the above-mentioned shareholders agreements are available on the Company’s website, under the “Governance” section. h) Change of control (pursuant to Article 123-bis, paragraph 1, sub h), TUF) clauses and Articles of Association provisions regarding take-over bids (pursuant to Article 104, paragraph 1-ter, and 104- bis, paragraph 1) The Company has not entered into any significant agreements which envisage the so-called “change of control” clause or clauses which become effective in the event of change in investment control of GEDI Gruppo Editoriale S.p.A., with the exception of the Euro 100 million revolving credit facility signed on 16/04/2018 with the following banks: The Company’s By-laws do not envisage exceptions to the provisions on the passivity rules envisaged by Article 104, paragraphs 1 and 1-bis of the TUF, or the application of the neutral- isation regulations contemplated by Article 104-bis, paragraphs 2 and 3 of the TUF. 58 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

i) Power of attorney to increase the share capital and authorisation to purchase own shares (pursuant to Article 123-bis, paragraph 1, letter m), of the TUF)

i.1) Power of attorney to increase the share capital The extraordinary shareholders’ meeting held on 21 April 2016 granted the Board of Directors the power to increase the share capital for a period of five years: (i) for a maximum amount of €300 million in par value, involving the issue of shares with or without a share premium, also belonging to specific categories, to be offered under subscription and also to service warrants or the conversion of bond issues even issued by third parties, both in Italy and abroad, or to be assigned as bonus issues to those with the right to them, by means of charging the available portion of the reserves and funds emerging from the last set of approved financial statements to capital; (ii) for a maximum amount of €10,000,000 in par value, involving the issue of ordinary shares to be reserved for subscription by employees of the Company and its subsidiaries and parent companies in accordance with Article 2441, paragraph 8, of the Italian Civil Code, with the faculty for said Board to establish the issue price which must be no lower than the par value, the subscription requisites and the limits of availability of said shares, as well as in general, the formalities and deadlines for such subscription.

i.2) Authorisation to purchase own shares The ordinary shareholders’ meeting held on 26 April 2018 revoked the previous power to purchase own shares for the period not yet applicable and for the portion not yet exercised and at the same time, granted new authorisation with the following characteristics: a) term: 18 months; b) maximum number of ordinary shares that can be purchased: 20,000,000, in any case not exceeding one fifth of the share capital, including own shares already held; c) the price of each purchase of shares shall be no higher than 10% and no less than 10% with respect to the reference price reported by the ordinary Company shares in the session of the Italian Stock Exchange prior to each purchase transaction and, in any case, where the purchases are made on regulated markets, for a payment not exceeding the highest price between the last independent transaction the highest current independent purchase offer price on the market, in compliance with the provisions in article 3 of the EU Delegat- ed Regulation 2016/1052; d) the purchase shall have to take place on the market, as per the formalities agreed with the market management company so as to ensure equal treatment between the shareholders, in compliance with the matters laid down by Article 132 of Italian Legislative Decree No. 58/1998 and by the provisions of the law or regulations in force at the time of the transaction and in detail: - through a take-over bid or public offer for exchange; - on regulated markets using operational methods established in the rules for the organisation and management of the markets themselves, which do not permit the direct combination of trading proposals purchase side with pre-determinate trading proposals sales side; - via the proportional assignment of sales options to shareholders, to be allocated within 15 months from the date of the meeting’s authorising resolution and exercised within 18 months thereof; - via the purchase and sale of derivative instruments traded on organised markets which involve the physical delivery of underlying shares in compliance with the additional provisions contained in Article 144-bis of the Issuers’ Regulations issued by CONSOB. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 59

In accordance with this power of attorney and those granted in previous years, at 31 Decem- ber 2018, the Company held a total of 21,968,231 own shares, equal to 4.319% of the shares making up the share capital of GEDI Gruppo Editoriale S.p.A. l) Management and coordination activities (pursuant to Article 2497 et seq. of the Italian Civil Code) The Company is subject to the management and coordination activities of the Parent Company CIR SpA. The subsidiaries directly and indirectly controlled by GEDI Gruppo Editoriale SpA have indicated the latter as the party which performs management and coordination activities.

*****

It is hereby stated that: - the information requested by Article 123-bis, paragraph 1, letter i) of the Consolidated Law on Finance (TUF) ("the agreements between the company and the Directors which envisage in the event of resignation or dismissal without just cause or if their relationship ends following a take-over bid”) is contained in the remuneration report published in accordance with Article 123-ter of the TUF; - the information requested by Article 123-bis, paragraph 1, letter l) of the Consolidated Law on Finance (TUF) (“the provisions applicable to the appointment and replacement of the directors as well as the amendment of the By-laws, if different to the legislative and regulatory provisions applicable on an additional basis”) is illustrated in the section of the Report dedicated to the Board of Directors (Section 4.1).

3. COMPLIANCE (PURSUANT TO ART. 123-BIS (2) SUB A), TUF) The Company complies with Borsa Italiana’s Corporate Governance Code approved by the Corporate Governance Committee, which is available to the general public on the Borsa Ital- iana website (http://www.borsaitaliana.it/comitato-corporate-governance/codice/codice.htm), in accordance with the matters specified in the various sections of this Report. Neither the Company nor the subsidiaries (hereinafter also “the Group”) are subject to foreign legal provisions which influence the Company’s Corporate Governance structure.

4. BOARD OF DIRECTORS 4.1) Appointment and replacement of Directors (pursuant to Art. 123-bis (1) sub l), TUF) With regard to the general provisions relating to the appointment and replacement of the Directors, please refer to article 5 of the GEDI Corporate Governance Code attached to this Report. The minimum share percentage required for the presentation of a list of candidates is 2.5% of share capital; in Resolution 13 of 24/01/2019, Consob specified 4.5% as the minimum percentage of share capital to present a list of candidates,without prejudice to the lower percentage indicated in the Company's By-laws. In order to ensure gender balance, in the event of non-compliance with the applicable quorum required, Art. 15 of the By-laws provides a mechanism for the elected candidates to lapse and be replaced, or the Shareholders’ Meeting may supplement the numbers to ensure compliance with legal requirements. Similarly, Art. 15 of the By-laws specifies that the minority shareholders are reserved the appointment of one member of the Board of Directors based on a voting list mechanism. 60 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

The By-laws do not stipulate independence requirements that differ from those in applicable legislation; they further specify the lapsing and replacement of directors in the case of the requisite of independence not existing or ceasing to exist, and if there is no longer the minimum number of independent directors required. It is hereby specified that the criteria used for qualifying Directors as independent have not been supplemented or amended with respect to those envisaged by the Code. It is noted in this regard that on 26 April 2018, the Independent Director Laura Cioli, who was elected on the above date by the Shareholders’ Meeting and subsequently appointed as CEO and General Manager of the Company by the Board of Directors, was lacking in the independence requirement stipulated by the combined provisions under articles 147-ter, paragraph four, and 148, paragraph three of the TUF, and as such lapsed from the appointment. At the same session, the Board of Directors had also resolved that with immediate effect, the Company’s Board of Directors would co-opt Ms Laura Cioli pursuant to Art. 2386 of the Italian Civil Code and up until the next Shareholders’ Meeting, as a non-independent Director, confirming her appointment and the powers conferred as CEO and General Manager. The Board of Directors assesses the independence of Directors at least once a year, also taking into account the information which the individuals concerned are obliged to supply. In conducting this assessment, the Board took into account recommendation No. 2 formulated by the Corporate Governance Committee for 2019, on the publication of the 6th report on the Corporate Governance Code, taking note of the recommendation for imposing greater rigour in the application of the independence criteria defined by the Code, and considering cases for their non-application as an exception that needed to form the subject of an in-depth assessment at individual level, referring to the position of the individual Director, and provide a detailed explanation. With reference to this accounting period, the check had a positive outcome. With- out prejudice to the provisions under Article 147-ter, paragraph 4 of the Consolidated Law on Finance (TUF), the Guideline Document regarding the maximum number of offices for Directors or Statutory Auditors approved on 31 January 2013 (indicated in Art. 1 of the GEDI Corporate Governance Code attached herewith), the Company introduced the obligation for the director who has lost the capacity of independence as per the provisions of Borsa Italiana SpA’s Corporate Governance Code (Criterion 3.C.1) to resign, without prejudice to the faculty of the Board of Directors to evaluate each specific case allowing possible exceptions. In this regard, we note that the Board of Directors’ meeting held on 26 April 2018 and 25 January 2019 endorsed the qualification of independent Directors with reference to the provisions under Art. 148, paragraph 3 of the TUF, which in respect of the Corporate Governance Code, for Directors Agar Brugiavini and Luca Paravicini Crespi. The Board noted that the assessment was made based on substance prevailing over form, as recommended by the Corporate Governance Code. Specifically, the Board of Directors decided that: a) the automatic application of the 9-year limit could result in a formalism that did not correspond with the spirit of the Corporate Governance Code; b) the overall profile of Directors Agar Brugiavini and Luca Paravicini Crespi (and their history with the Company) offers sufficient guarantees in terms of independence, as they have both always shown complete independence in their judgement and an unbiased assessment of management’s operations. The Independent Directors represent the majority of the Board of Directors and the number and authoritativeness of the same is such that it guarantees that their opinion may have a significant influence on the adoption of board decisions, contributing to the formation of balanced decisions especially in the event potential conflicts of interest exist. Upon the proposal of the Appointments and Remuneration Committee, the Board of Directors adopted a Plan for the succession of the Executive Directors, with a resolution dated 31 January 2013. The plan set out the procedure for disciplining the process to be followed for ensuring the Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 61

succession of executive directors in the event of sudden unavailability, termination or suspen- sion from office other than in the case of natural expiry (so-called Contingency Plan). The corporate bodies involved in drafting the plan are the Chairman, the Board of Directors and the Appointments and Remuneration Committee, after consultation with the Board of Statutory Auditors. No provision is made in the event of the early termination as opposed to the ordinary expiry of the term of office. The succession plan is subject to periodic review by the Appointments and Remuneration Committee and in any event to assessment at least every three years. During 2017, the Appointments and Remuneration Committee revised the plan, not deeming it necessary to introduce any amendments or integrations.

4.2) Composition (pursuant to Art. 123-bis (1) sub d), TUF) Reference is made to the matters illustrated in Articles 2, 3 and 5 of the GEDI Corporate Gov- ernance Code, as well as the matters contained in Article 1 of the same relating to the functions of Chairman. The By-laws lay down that the Board of Directors must be made up of between seven and nineteen members. The ordinary shareholders’ meeting held on 26 April 2018 appointed a Board of Directors made up of fifteen members for a three-year period, until approval of the 2020 financial statements, and does not envisage differentiated expiries. Three lists were submitted and there are no associative relationships between them. - List No. 1 submitted by the majority shareholder CIR S.p.A., contained the following names: Prof. Agar Brugiavini, Ms Elena Ciallié, Ms Laura Cioli, Prof. Alberto Clò, Mr Marco De Benedetti, Mr Rodolfo De Benedetti, Mr Francesco Dini, Mr John Philip Elkann, Ms Silvia Merlo, Ms Monica Mondardini, Ms Elisabetta Oliveri, Mr Luca Paravicini Cres- pi, Mr Carlo Perrone, Mr Michael Zaoui. This list obtained 247,416,084 votes in favour (48.673% of the share capital). All the candidates on the list were elected. - List No. 2, jointly submitted by shareholders Prosper S.p.A., Erga Omnes S.r.l. and Sia Blu S.p.A., minority shareholders, contained the following names: Ms Giacaranda Maria Caracciolo di Melito Falck. This list obtained 55.925.873 votes in favour (10.994% of the share capital). The sole candidate was elected. As in article 4 above, it should be noted in this regard that on 26 April 2018, the Independent Director Laura Cioli, who was elected on the above date by the Shareholders’ Meeting and subsequently appointed as CEO and General Manager of the Company by the Board of Directors, was lacking in the independence requirement stipulated by the combined provisions under articles 147-ter, paragraph four, and 148, paragraph three of the TUF, and as such lapsed from the appointment. At the same session, the Board of Directors had also resolved that with immediate effect, the Company’s Board of Directors would co-opt Ms Laura Cioli pursuant to Art. 2386 of the Italian Civil Code and up until the next Shareholders’ Meeting, as a non-independent Director, confirming her appointment and the powers conferred as CEO and General Manager.

On 23 June 2017, the Chairman Carlo De Benedetti resigned from the Board of Directors. On the same date, he was appointed as Honorary Chairman of the Board of Directors. This office is not envisaged by the Company’s By-laws and is purely an honorary function attributed by the Board of Directors without any mandates or representation fees, for the purpose of promoting the Company’s image at events and/or in institutional contexts for the duration of the term. It may also involve specific tasks being entrusted in line with the extensive personal and professional experience of the Honorary Chairman. 62 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

Reference should be made to the attached Table 2, for the composition of the Board of Directors in office and other information relating to the same. The main professional characteristics of the Directors can be found on the Company website, in the Governance section Board of Directors. There were no subsequent changes to the Board’s composition after the year end.

4.2.1) Diversity policies With the entry into force of Italian Legislative Decree No. 254/06, which introduced Art. 123- bis of the TUF (lett. d-bis under paragraph 2), it is required that the Corporate Governance Report should describe the diversity policies applied with regard to the composition of the administrative, management and control structures relating to aspects such as age, gender balance and training and professional development, as well as the objectives, implementation methods and outcomes of these policies. If no policy is applied, the Company needs to clearly motivate this decision. At the most recent renewal of the administrative body, the Company’s Board of Directors meeting on 5 March 2018 confirmed its decision not to adopt any additional policies on diversity regarding the composition of administrative and control structures, as referred to under Art. 123-bis, paragraph 2, lett. d-bis of the TUF, taking into account that, without prejudice to the requirements of good standing, professionalism and independence, and the situations of incompatibility and/or lapsing set by legislation and the By-laws: 1. in its By-laws, the Company has already adopted a policy that ensures gender balance in the composition of the Board of Directors and the Board of Statutory Auditors (see Art. 4.1); 2. similarly, the GEDI Corporate Governance Code has been adopted (attached to this Report), which under Art. 2 (to which reference is made), in incorporating and adopting the content of the Corporate Governance Code, clearly specifies the composition of the Board, its com- petencies and the professionalism of Directors and methods for carrying out their office; 3. the Board regularly makes an assessment of the size, composition and functioning of said Board and its committees, also taking into account elements such as the professional characteristics, experience, including managerial, and gender of its members, as well as their length of service; this assessment then forms the basis of a periodic review by the Board regarding the implementation of the policy referred to under point 2 above; 4. in exercising its functions, the Board may avail itself of the power provided in the GEDI Corporate Governance Code (Art. 1) to express its decisions on the size and composition of the new Board to Shareholders, before the appointment of the new Board, taking into account the evaluation as per the previous point (as conducted at the time of the current Board’s appointment), in this way and in accordance with their reciprocal tasks and pre- rogatives, guiding the choice of Shareholders in freely designating the members of the Board of Directors. Without prejudice to the option to reconsider its position in the future, the Board currently deems the above sufficient to ensure adequate coverage on the issue of diversity in the composition of the administrative body; the assessment is reflected in the current composition of the Board itself based on the different requirements: namely age, gender, experience/seniority, professional skills, training, culture and international dimension. Based on the outcome of the Board Review process for 2018, the overall opinion of adequacy was confirmed regarding the composition of the current Board in terms of diversity (latu sensu).

4.2.2) Maximum number of offices which can be covered in other companies The directors, who act in full awareness of the facts and independently, accept their office when they deem that they can dedicate the necessary amount of time to the diligent perfor- Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 63

mance of their duties, also taking into account the number of positions as Director or statutory auditor they cover in other companies listed on organised markets, in finance, banking or insurance companies or those of significant size. They are also obliged to inform the Board of any activities in competition with the company and of any significant change. The Board Meeting held on 31 January 2013 approved an approach relating to the maximum number of offices of a Director or Statutory Auditor, envisaging certain limits to the number of appointments which can be covered by the executive and non-Executive Directors of GEDI Gruppo Editoriale S.p.A. in other companies listed on regulated markets, in finance, banking or insurance companies or those of a significant size (Significant Companies), as indicated in Article 1 of the attached Corporate Governance Code, to which reference is made. The possibility of departing from these limits is in any event envisaged, by means of resolution justified by the Board of Directors, which also takes into account the level of participation of the director involved in the work of the board and the committees. The current Board of Directors meets the criteria illustrated above.

4.2.3) Induction Programme The Chairman makes sure that the Directors and Statutory Auditors can take part, subsequent to appointment and during their mandate, in initiatives aimed at providing them with adequate knowledge of the sector of activities in which the company operates, the corporate dynamics and their evolution, as well as the reference legislative framework. With regard to the disclosure on business sectors, the CEO presents periodic disclosures on the performance of the markets and the business during Board meetings. During the Board's self-assessment processes, the directors are required to express specific requests of an informative nature, which are satisfied during 2 induction meetings to be held during each year.

Any specific disclosure sessions for the Directors, with the support of vocational training experts, are organised at the time of the renewal of the Board of Directors and subsequently, each time the evolution of the legislative framework requires an update in this connection. In particular, during the period, in keeping with the requirement of gain a deeper understanding on business issues, which had emerged among Board members, the Chairman confirmed that during the Board meetings themselves, and in dedicated inductions sessions, specific topics would be focused on to provide all Board members with a better understanding of the Company’s operational areas in the context of the business development strategies. A programme in this regard had already been introduced last October, and as requested will cover all of the more significant business areas. On 22 October 2018 and 16 January 2019 two induction sessions were held for Directors and Statutory Auditors, lasting 3 hours on average, covering the main business topics (digital world and its development, including in respect of advertising, information on the consolidated budget and focus on the Group’s primary B.Us.).

4.3) Role of the Board of Directors (pursuant to Art. 123-bis (2) sub d), TUF)

4.3.1) Functioning of the Board of Directors With regard to the general provisions relating to the role of the Board of Directors, please refer to article 1 of the GEDI Corporate Governance Code attached to this Report. The By-laws envisage that the Board of Directors meets, as a rule, quarterly upon calling by the Chairman and in any event each time corporate needs demand as such. Board meetings can also 64 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

be called upon the request of at least two Directors, or the Board of Statutory Auditors or at least one of its members, subject to communication to the Chairman of the Board of Directors. The Board of Directors is called by the Chairman or by whomever takes his/her place by means of letter, registered mail, telegram, fax, e-mail or equivalent means, which must be received at least five days before the date of the meeting. In urgent cases, the deadlines for calling are reduced to one day. The Board of Directors has regulated the information flows from the Chairman and the CEO to the Board of Directors, envisaging that the same report on the performance of their powers in relation to the activities carried out and in any event at least once a quarter. The Articles of Association also discipline the information flows for the Board of Statutory Auditors. It is in fact envisaged that the directors report promptly, at least once a month, to the Board of Statutory Auditors on the activities carried out and the transactions of greatest economic, financial and equity significance carried out by the company, with particular reference to transactions in potential conflict of interests. It is also envisaged that the disclosure can be provided directly, in written form or verbally and/or via telephone, if particular time related requirements make such methods preferable.

4.3.2) Activities carried out in 2018 and envisaged for 2019 During 2018, the Company’s Board of Directors met 7 times, with the percentages of participation of the Directors indicated in Table 2 attached hereto. The Board meetings lasted on average around two and a half hours. Five Board Meetings have been scheduled for 2019, three of which were already held on 25 January, 6 February and 1 March 2019.

4.3.3) Pre-meeting disclosure The Chairman takes steps so that the members of the Board and the Statutory Auditors are provided with the documentation and information necessary for permitting said Board to express itself in an informed manner on the business submitted for its attention and approval, possibly supplemented by a summary document, if particularly bulky and complex. In this regard, the deadline is 48 hours before the meeting which, except in sporadic and justified circumstances linked essentially to confidentiality and urgency requirements, is normally observed.

4.3.4) Formalities for the business of board meetings The Chairman coordinated the activities of the Board of Directors and guided the business of the related meeting, making sure that the necessary time is dedicated to the business on the agenda so as to permit the discussion and encourage the contribution of the Directors. The Chairman may request the CEO, also upon the request of one or more Directors, that the executives of the Company and those of the Group companies take part in the board meetings so as to provide appropriate analysis. This participation is consolidated practice for the Com- pany, confirmed in the meetings during 2018. Attendance at these meetings always included the Executive appointed to draw up the company’s accounting documents, the Head of the Group Management Control Division, the Company’s General Manager on a regular basis, and from time to time, the executives responsible for the competent company divisions so as to provide appropriate analysis on the business placed on the agenda.

4.3.5) Role of the Board of Directors On the basis of the Corporate Governance Code and the internal procedures adopted by the Board of Directors on 31 January 2013, theBoard: Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 65

- favourably assessed and approved the strategic, industrial and financial plans of the Com- pany at consolidated level, periodically monitoring the implementation of the same; - defined the nature and the level of risk compatible with the strategic objectives of the Company; - assessed the adequacy of the organisational, administrative and accounting set-up of the Company as well as that of the strategically important subsidiaries, with particular reference to the internal audit and risk management system, in accordance with the matters laid down by the Policies regarding the internal audit and risk management system, contained in the GEDI Corporate Governance Code attached; - at least quarterly received the disclosure on the activities carried out when exercising the powers of attorney granted, from the CEO; - assessed the performance of management operations taking into consideration, in particular, the information received from the CEO, as well as periodically comparing the results achieved with those programmed; - examined and approved in advance the transactions of the issuer and examined those of the subsidiary with significant strategic importance as defined in a specific procedure approved by the Board of Directors. On 31 January 2013, the Board of Directors approved a procedure that defines significant transactions with strategic, economic, asset or financial relevance, based on qualitative (nature of the transactions) and quantitative (expenditure usage) parameters, it regulates the approval process and the parties involved therein. Based on the proposal of the Appointments and Remuneration Committee, and having consulted the Board of Statutory Auditors, the Board established the remuneration of the Chairman, the Deputy Chairpersons, the CEO and non-executive Directors for their attendance at one or more committee meetings, on the basis of the guidelines established in the remuneration policy, while the division of the fee due to the Board members is carried out directly by the Shareholders’ Meeting. During all the Board meetings, the Chairman and the CEO provided an extensive report on the operating performance and where possible forecasts on the performance in the coming months.

4.3.6) Self-assessment At least once a year, the Board makes an assessment of its size, composition and functioning of said Board and of its Committees. During 2018, the first part of the annual assessment process was carried out by the Lead Independent Director by means of a questionnaire. The main topics analysed referred to: the size and composition of the Board; the organisation, management and conducting of Board meetings; the assessment on the Board of Directors’ effectiveness; focus on Audit, Risk Management, ESG and the Compliance Committees; relations between the Board of Directors and Committees; the Committee for Related-Party Transactions; the Internal Au- dit and Risks Committee; the independent Directors. Following on from this first preliminary stage, which was carried out by the Lead Independent Director, in consideration of recommendation No. 3 formulated by the Corporate Governance Committee to issuers, a second stage has been introduced for 2019, on the initiative of the Chairman, which will be entrusted to an external consultant (currently pending the Board’s approval of this Report). This addition aims to examine topics and proposals regarding areas that had emerged during the first phase as requiring improvement. This confirms the special focus on ensuring active interaction between individual Board members and ongoing improvement to the Board’s activities. Running concurrently, improvements had already been undertaken during the period by the Chairman with the support of the CEO, which respond to some of the suggestions received, especially with regard to the frequency of meetings and their content on specific subjects requiring in-depth study. The shareholders’ meeting has not authorised exceptions to the non-compete restrictions envisaged by Article 2390 of the Italian Civil Code, either on a general or precautionary basis. 66 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

4.4) Representative bodies

4.4.1) CEO The Board Meeting held on 26 April 2018, granted the CEO, Laura Cioli, the broadest powers of representation and ordinary business, with the exception of the appointment of the editors in chief and general managers, which remains the responsibility of the Board of Directors. No expenditure limits have been envisaged, with the exception of: 1) purchases of machinery over €10 million; 2) the taking out of loans, entering into of leasing or credit facility agreements also assisted by secured guarantees for amounts over €5 million; 3) the granting of guarantees, pledges, mortgages, liens and sureties for amounts over €5 million; 4) the purchase, sale and exchange of equity investments and real estate property assets over €5 million. The Lead Manager responsible for the management of the company is the Chief Executive Officer Laura Cioli. The Company complies with the so-called interlocking directorate restriction, as specified by Article 2 of the GEDI Corporate Governance Code, or rather the principle according to which the chief executive officer of an issuer cannot undertake the office of Director in another company not belonging to the same group, in which a Director of the same company is chief executive officer. Therefore, this situation does not apply.

4.4.2) Chairman of the Board of Directors The Board Meeting held on 26 April 2018 granted the Chairman of the Board of Directors, Marco De Benedetti, the legal representation of the company and, with the same, the power to represent the company in dealings with third parties. The Board also assigned the Chairman the role of publisher to oversee the editorial business of GEDI Gruppo Editoriale SpA drawing up proposals with regard to the appointment, removal and/or transfer of publication editors in chief.

4.4.3) Information to the Board of Directors During all the meetings and in any event at least quarterly, the Chairman and the CEO reported regularly to the Board on the activities carried out when exercising the powers granted them and also updated the directors with regard to the most significant corporate events, the measures adopted and the transactions carried out, including those with related parties or in potential conflict of interest.

4.5) Other Executive Directors There are no other Executive Directors besides the Chairman and the CEO.

4.6) Independent Directors The Shareholders’ Meeting held on 26 April 2018 appointed 8 Independent Directors. Article 3 of the attached GEDI Corporate Governance Code, to which reference is made, contains the principles on the basis of which the Company, complying with the matters recommended by the Corporate Governance Code and laid down by Article 147-ter, paragraph 4 of the TUF, consider the Directors to be independent. In this regard, reference is made to what has been set out in point 4.1) above. During the year (and after the year-end), applying the agreed criteria, the Board verified the existence of the requisites of independence of the Directors Brugiavini, Caracciolo Di Melito Falck, Ciallié, Clò, Merlo, Oliveri, Paravicini Crespi and Zaoui and informed the market thereof. The Board of Statutory Auditors has duly noted the criteria adopted without making observations. The independent Directors met once during the year in the absence of the other Directors without any specific agenda. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 67

4.7) Lead Independent Director On 26 April 2018 (even though the requirements of the Code no longer apply), Director Elisabetta Oliveri was appointed as Lead Independent Director, and to whom the non-executive Directors report (particularly the independent ones) so as to permit an improved contribution to the business activities and functioning of the Board itself. The Lead Independent Director works together with the Chairman so as to ensure the Directors receive complete and prompt flows of information. The Lead Independent Director is also assigned the authority to call specific meetings of only independent Directors, at his/her discretion or upon the request of the other Directors, to discuss subjects deemed of interest with respect to the functioning of the Board or the corporate operations. The Lead Independent Director carried out the relevant activities essentially taking part in the periodic meetings of the Internal Audit and Risk Committee (of which she is Chairperson), organising meetings during the year with the Board of Statutory Auditors, the Supervisory Body pursuant to Italian Legislative Decree No. 231/2001 and the Independent Auditors, as well as between the Independent Directors. Knowledge of the Company, its organisational and audit system, as well as information on the trend in the results were acquired by means of numerous meetings or conference calls with the Company Internal Audit Department, the Risk Manager and with the Company’s management.

5. PROCESSING OF COMPANY INFORMATION The Company has adopted a procedure to manage and disclose documents and confidential information to the public, with special regard to information referred to as inside information; this procedure was updated on 27 June 2017 and is available on the company website www.gedispa.it in the “Governance” section. The Company has also established and implemented the Register of individuals who have access to privileged information (“Register”), which records the individuals who, due to their work or professional activities, or in relation to the functions performed, have access to inside information. This Register was brought in line to comply with procedures set out under Art. 18 MAR, subsequent to EU Regulation 596/2014 coming into effect. The procedures for keeping the Register are contained in the Code of Conduct relating to internal dealing and the Register of Persons have access to inside information is available on the Company website www.gedispa.it in the “Governance” Section. The Company has appointed the “Corporate Service” office as the body responsible for keeping the Register.

6. THE BOARD OF DIRECTORS’ INTERNAL COMMITTEES (PURSUANT TO ART. 123-BIS (2) SUB D) TUF) The Board Meeting held on 26 April 2018, appointed the Audit and Risk Committee, the Ap- pointments and Remuneration Committee and the Committee for Related-Party Transactions. The principles for the establishment and functioning of the Board’s internal committees are contained in Article 4 of the GEDI Corporate Governance Code to which reference is made. As permitted by the Code, the Company merged for organisational and economic purposes, also in relation to its structure and its features, the functions of the Appointments Committee and the Remuneration Committee into a single committee, within which there is adequate expertise with regard to financial or remuneration policy matters, named the Appointments and Remuneration Committee, which has its own set of regulations. The Audit and Risk Committee (formerly the Internal Audit Committee), established by the Board of Directors, has at least one member who possesses adequate experience with regard to accounting and financial matters or risk management. During the performance of their activities, the committees have the faculty to access the information and the corporate divisions necessary for the performance of their duties and can invite parties who are not members to take part in the meetings. 68 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

7. APPOINTMENTS COMMITTEE The Company does not have a separate Appointments Committee. As referred to in the previous point, the Company combines the functions of the Appointments Committee and the Remuneration Committee. Reference is therefore made to Point 8 below for information on its composition and functioning.

8. REMUNERATION COMMITTEE 8.1) Composition and functioning of the Appointments and Remuneration committee (pursuant to Article 123-bis, paragraph 2, sub The Appointments and Remuneration Committee appointed by the Board of Directors is currently made up of the independent Directors Giacaranda Maria Caracciolo di Melito Falck, Alberto Clò and Michael Zaoui. At least one member of the Committee has knowledge and experience in accounting and financial matters and remuneration policies deemed adequate by the Board at the time of appointment. The Committee’s work is coordinated by the Chairman Alberto Clò and minutes of the meetings are taken. The Chairman provides information on the activities conducted at the first possible Board of Directors meeting. During 2018, the committee met 4 times with an average duration of 30 minutes. At the Committee’s invitation and in respect of single points on the agenda, non-members also took part in the meeting held during the period. The participation of the members is shown in Table 2, as attached. Three meetings are scheduled for 2019, of which one was already held on 28 February 2019.

8.1) Functions of the Appointments and Remuneration Committee The functions of the Appointments and Remuneration Committee are described in Article 5 and 6 of the GEDI Corporate Governance Code to which reference is made. During the year, the Appointments and Remuneration Committee met in order to discuss the proposals to be submitted for the examination of the Board of Directors concerning: (i) the Remuneration Report envisaged by Article 84-quater of Consob Resolution No. 11971/99 implementing Article 123-ter of the Consolidated Law on Finance (TUF); (ii) the adoption of the stock grant plan for 2018, with related Report as per Article 84-bis, aimed at providing incentives and remunerating the employees of the Company or the subsidiaries. The details of the 2018 stock grant plan are illustrated in the financial statements in the section “Information required by Consob Regulation No. 11971”, available on the Company’s institutional website in the “Investors” Section; (iii) the appointment of the new Head of the Internal Audit Depart- ment; (iv) the establishment of the emolument to be paid to the Chairman and the CEO; (v) the performance results relating to the variable portion of the CEO’s emoluments. The Chairman of the Board of Statutory Auditors was always involved in the Committee’s work. Minutes are duly taken of the meetings of the Committee. When performing its functions, the Committee had the possibility of accessing the information and corporate divisions necessary for the performance of its tasks. The Committee does not have an allocated expenditure budget, but if it should be necessary it can authorise costs for consulting, research and anything else useful or appropriate for its activities under the terms established by the Board. The Committee carries out its functions as per the regulations approved by the Board of Di- rectors. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 69

9. REMUNERATION OF THE DIRECTORS With regard to the information concerning this Section, please see the relevant parts of the Remuneration Report published as per Article 84-quater of Consob Resolution No. 11971/99 implementing Article 123-ter of the Consolidated Law on Finance (TUF) which can be consulted on the website www.gedispa.it in the “Governance” section”. The stance of the remuneration policies of the Company is also described in Article 6 of the GEDI Corporate Governance Code to which reference is made.

10. AUDIT AND RISK COMMITTEE 10.1) Composition and functioning of the Audit and Risk Committee (pursuant to Art. 123-bis (2) sub d), TUF) The Audit and Risks Committee adopted by the Board of Directors is currently made up of the independent Directors Agar Brugiavini, Elena Cialliè, Silvia Merlo, Elisabetta Oliveri and Luca Paravicini Crespi. More than one of its members has significant experience with regard to accounting and financial matters, deemed appropriate by the Board at the time of appointment. The Committee’s work is coordinated by the Chairman Elisabetta Oliveri and minutes of the meetings are taken. The Chairman provides information on the activities conducted at the first possible Board of Directors meeting. During the year, the Committee met 9 times with an average duration of 2 and a half hours. The participation of the members is shown in Table 2, as attached. Five meetings are scheduled for 2019, of which two were already held on 23 January and 26 February 2019 respectively. The Chairman of the Board of Statutory Auditors, or another auditor appointed by the same, and with reference to the business on the agenda, the Head of the Internal Audit Department, the Risk Manager, the Executive appointed to draw up the company accounting documents and the Head of the Company’s legal and corporate service, are always invited to attend Committee meetings. Other executives of the Company and the subsidiaries are also periodically invited to the meetings, so as to report on specific matters to the Committee. By means of periodic meetings with the heads of the various company divisions, the Board of Stat- utory Auditors, the Supervisory Body pursuant to Italian Legislative Decree No. 231/01 and the independent auditing firm, the Committee checked the efficacy and efficiency of handling corporate operations, the reliability of the financial information and observance of applicable legislation.

10.2) Functions assigned to the Audit and Risk Committee. The functions of the Audit and Risk Committee are indicated in Article 7 of the GEDI Corpo- rate Governance Code attached to this report and to which reference is made. The activities carried out by the Committee mainly concerned the following aspects: The annual financial report; impairment test procedure; monitoring of the implementation of the work plan for 2018 and analysis of the 2019 work plan of the Internal Audit unit; Risk Management; meetings with management; up-dates regarding Italian Legislative Decree No. 231/2001; assessments and opinions regarding: autonomy, suitability, efficacy and efficiency of the internal audit and risk management system with respect to the characteristics of the company and the risk profile adopted; ways in which the main risks pertaining to the issuer and its subsidiaries are identified, measured, handled and monitored, and on the degree of compatibility of these risks with a management of the company consistent with the strategic objectives identified; specific aspects inherent to the identification of the main business risks, formulated with reference to the information received from the CEO, the Head of Internal Auditing, the Supervisory Body pursuant to Italian Legislative Decree No. 231/2001, the Board of Statutory Auditors, the inde- 70 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

pendent auditing firm, as well as the Executive appointed to draw up the company accounting documents; the results disclosed by the independent auditor, having consulted the auditor and Board of Statutory Auditors on the fundamental aspects emerging during the audit; correct use of the accounting standards and on their consistency for the purpose of drawing up the consolidated financial statements. The Committee has been granted the faculty to access the information and the company divisions necessary for the performance of its tasks, minutes of all the meetings are taken and despite it not having been assigned an expenditure budget, if needed, it can authorise costs so as to acquire information, consulting, collaboration, opinions or anything else.

11. INTERNAL AUDIT AND RISK MANAGEMENT SYSTEM Guidelines regarding the internal audit and risk management system The internal audit and risk management system is the series of rules, procedures and organisational structures aimed at permitting by means of an adequate identification, gauging and monitoring process of the Companies main risks. The aims of the Audit and Risk Management System, the bodies, the responsible units, their respective tasks and procedures for managing risks are illustrated in detail in Article 7 of the attached GEDI Corporate Governance Code to which reference is made. The Board of Directors has assessed the risks that could be significant from the perspective of the Company’s sustainability over the medium-long term and has set guidelines for the internal audit and risk management system, by identifying, measuring, monitoring and managing risks in a way that is compatible with managing the business consistent with the strategic objectives that have been identified. The Board approved the work plan prepared by the Internal Audit unit Manager after consultation with the Board of Statutory Auditors and the Audit and Risk Committee, and assessed the adequacy of the internal audit and risk management system in relation to the company’s characteristics and risk profile, and its effectiveness.

11.1) Director responsible for the internal audit and risk management system Acknowledging the extreme importance of the functioning of the Internal Audit System, the Board of Directors identified the CEO Laura Cioli as the Director appointed with the establishment and maintenance of an efficient internal audit and risk management system. The Appointed Director: - sees to the identification of the main corporate risks taking into account the activities and the characteristics of the activities carried out by the Company; - has executed the guidelines defined by the Board, seeing to the planning, creation and management of the internal audit and risk management system, checking the adequacy and efficacy of the same; - has seen to the adaptation of this system to the dynamics of the operating conditions and the legislative and regulatory panorama; - has promptly reported to the Board of Directors with regard to problems and criticalities emerging during the performance of her activities. The Appointed Director has the power to request that the Internal Audit department carry out checks on specific operating areas and on the observance of the internal rules and procedures in the execution of company operations, at the same time informing the Chairman of the Board of Directors, Chairman of the Audit and Risk Committee and the Chairman of the Board of Statutory Auditors. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 71

11.2) Head of the Internal Audit department On 26 January 2018, the Board has appointed Alessandro Maurelli as the Head of the Internal Audit department (hereinafter “Head of Internal Auditing”) for the purpose of checking that the internal audit and risk management system is functionally adequate. The appointment took place upon the proposal of the Appointed Director in charge of the Internal Audit System, subject to the favourable opinion of the Audit and Risk Committee, the Appointments and Remu- neration Committee and having consulted the Board of Statutory Auditors. The Appointments and Remuneration Committee has checked on the consistency of: (i) the Head of the Internal Audit unit’s remuneration with the corporate policies (ii) the incentive mechanisms with the tasks assigned to the same. The Head of Internal Auditing is not responsible for any operating area, does not depend hierarchically on the Chairman of the Board of Directors nor the CEO, has had direct access to all the information useful for the performance of his/her office and has periodically reported to the Audit and Risk Committee, the Board of Statutory Auditors and the Appointed Director. The Head of Internal Auditing does not have an allocated budget, but has the faculty to incur expenses if the circumstances should require as such. During the year, he/she: - drew up the audit plan submitting it to the Audit and Risk Committee, so that it proposes the adoption of the same to the Board of Directors; - checked, both on an on-going basis and in relation to specific needs, the operations and suitability of the Audit and Risk Management System via the audit plan approved by the Board of Directors; - drafted the interim reports on the related activities, the formalities by means of which the management of the risks is carried out, the observance of the plans defined for the con- tainment of said risks and the suitability of the Audit and Management Risk System and forwarded a copy to the Audit and Risk Committee and the Board of Statutory Auditors before the meeting of the Audit and Risk Committee which precedes the Board meeting for the annual and interim reports; - within the sphere of the audit plan, checked the reliability of the disclosure systems, including the accounting records systems.

11.3) Organisational Model pursuant to Italian Legislative Decree No. 231/2001 The Company and its subsidiaries have adopted the “Organisation, Management and Control Model” (also the “Model”) pursuant to Italian Legislative Decree No. 231/01 for the purpose of preventing the committing of corruption crimes, including corruption between private parties, and other offences linked to dealings with Public Administration authorities, cybercrimes; organised crime; crimes against industry and commerce; corporate offences; crimes against the individual; crimes relating to market manipulation; crimes committed in violation of work acci- dent regulations and the protection of health and hygiene in the workplace; the crimes of money laundering, fencing, self-laundering, etc.; crimes relating to the violation of copyrights; crimes of coercion not to make declarations or make misleading declarations to the legal authorities; environmental crimes; the crime of using third country nationals staying in the country ille- gally; or the offences pertaining to the business activities of the Company which from time to time have been included in the provisions of Italian Legislative Decree No. 231/01 as eligible offences The most recent update to the Model was passed with resolution dated 5 March 2018. The Model comprises a “General Section” and a “Special Section”. Following reference to the provisions of Italian Legislative Decree No. 231/01 and the guidelines issued by Confindustria, the General Section contains: (i) the essential contents of the Model; (ii) the functioning of the Supervisory Board; (iii) the system of sanctions; (iv) staff training and 72 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

formalities for circulating the Model; (v) the adoption of the Model within the entire Group’s structure. The Special Section, broken down into sub-sections on the individual types of crimes applicable to the Company, identified according the Area at Risk-Crime, each section contains: (i) the crimes applicable to the Company; (ii) the sensitive activities; (iii) codes of conduct; (iv) specific control standards. An extract of the Model can be consulted on the Company website www.gedispa.it in the “Governance” section. The task of applying and making sure the Model is adequate is entrusted to the Supervisory Body which, endowed with independent powers of initiative and control and its own budget, has the task of overseeing the functioning and observance of the same, periodically checking the efficacy thereof and proposing its updating to the competent bodies. The Company’s Supervisory Body is made up by Mr Giovanni Barbara, an expert in this field and Mr Giuseppe Gianoglio, formerly the head of Internal Auditing of the Parent Company CIR SpA and Ms Marina Scandurra, a Statutory Auditor of the Company. The Supervisory Body periodically reports to the Board of Directors on its activities. No reprehensible action has emerged as a result of work carried out. For the purpose of guaranteeing the connection between the various audit bodies, the Supervisory Body held a number of meetings in joint session with the Audit and Risk Committee and the Board of Statutory Auditors, to promote the exchange of information among the different structures.

11.4) Independent Auditors The Shareholders’ Meeting held on 21 April 2016 resolved to appoint the company KPMG SpA to audit the annual statutory and consolidated financial statements for the period 2016 - 2024, as well as carry out the limited audit on the half-yearly report as per Italian Legislative Decree no. 39 of 27 January 2010.

11.5) Executive appointed to draw up the company accounting documents The Board of Directors appointed Mr. Gabriele Acquistapace, the Company’s Administration and Reporting Division Manager, as the Executive appointed to draw up the company accounting documents of GEDI Gruppo Editoriale S.p.A. With regard to the professional requisites of the appointed executive, the Articles of Associa- tion envisage suitable accounting and finance experience and that the same is appointed by the Board of Directors upon the proposal of the CEO and subject to having consulted the Board of Statutory Auditors. Gabriele Acquistapace has been granted suitable powers and means for performing his appointment. In particular, he may: a) access any information deemed relevant for the purposes of acquitting his duties; b) dialogue with the management and audit bodies and coordinate the activities to be carried out with the same; c) assess and monitor the adequacy of the procedures adopted within the company which have an impact on the annual statutory financial statements, consolidated financial statements, the half-yearly Report and the documents which must be certified; d) take part in the outlining of the information systems which have an impact on the economic, equity and financial situation; e) organise an adequate structure using resources available internally, such as those relating to information systems, management control and the Internal Audit department, or if necessary, under outsourcing; f) coordinate with the management and audit bodies or with the management of the subsidiaries, identifying specific procedures for the purpose of the correct performance of all the tasks and activities envisaged by law. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 73

On 3 March 2018, Gabriele Acquistapace was appointed as the Executive appointed to draw up the consolidated non-financial declaration pursuant to Italian Legislative Decree 254/2016 - Sustainability Report. The Company’s Board of Directors assigned Michela Marani, head of the Group Management Control Division, the role of Risk manager, envisaged by the Guidelines regarding the Board of Directors internal audit and risk management system, as well as by the GEDI Corporate Gov- ernance Code to which reference is made.

11.6) Coordination between parties involved in the Internal Control and Risk Management System The Company disciplines the co-ordination between the parties involved in the internal audit and risk management system, approving for such purposes a specific document which defines the co-ordination system by means of: 1. the procedures for the initial approval of the work plan of the Internal Audit division, as well as for subsequent amendment, monitoring and reporting; 2. the information flows produced by the head of the Internal Audit division; 3. the information flows produced by the Audit and Risk Committee; 4. the procedure for the self-assessment of the Board of Directors; 5. the Board appraisal of the results presented by the independent auditing firm; 6. the exchanges of information between the Board of Statutory Auditors and the Audit and Risk Committee.

12. DIRECTORS’ INTERESTS AND RELATED-PARTY TRANSACTIONS The company adopted the procedure for related-party transactions envisaged by the Consob Regulation, issued by means of Resolution No. 17221 dated 12 March 2010 as subsequently amended and supplemented. This procedure is available on the website: www.gedispa.it in the “Governance” Section. The aim of the procedure is to establish the lines of conduct which the company is obliged to adopted so as to ensure a correct handling of related-party transactions and accordingly: 1. establish the criteria and formalities for identifying the Company’s related parties; 2. dictate the standards for the identification of related-party transactions; 3. discipline the procedures for carrying out related-party transactions; 4. establish the formalities for fulfilling the related disclosure obligations. The Board Meeting also appointed the Committee for Related-Party Transactions made up of the independent Directors Agar Brugiavini, Elena Ciallié and Elisabetta Oliveri. The Commit- tee’s work is coordinated by the Chairman Elena Ciallié and minutes of the meetings are taken. The procedure for related-party transactions was also implemented by means of the adoption of an appropriate information system and the creation of the related-party database shared with the Parent Company CIR S.p.A. Based on the approval of the Committee for related party-transactions, with a resolution taken on 24 February 2016, the procedure was amended by the Board of Directors with regard to the periodic checking and updating of the procedure itself.

13. APPOINTMENT OF THE STATUTORY AUDITORS The appointment of the Board of Statutory Auditors is disciplined by Article 22 of the By-laws, indicated in Article 8 of the attached GEDI Corporate Governance Code to which reference is made. The minimum share percentage required for the presentation of a list of candidates is 2.5% of share capital; in Resolution 13 of 24/01/2019, Consob specified 4.5% as the minimum percentage of GEDI S.p.A. share capital to present a list of candidates,without prejudice to the lower percentage indicated in the Company's By-laws, specifying 2.5% of the share capital. 74 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

14. COMPOSITION AND FUNCTIONING OF THE BOARD OF STATUTORY AUDITORS The By-laws envisage the Board of Statutory Auditors be made up of three statutory auditors and three alternate auditors who remain in office for three years and can be reappointed. The Company’s Board of Statutory Auditors was appointed on 26 April 2018 and will remain in office until approval of the financial statements at 31 December 2020. Reference should be made to the matters indicated in the attached Table 3, for the composition of the Board of Statutory Auditors and other information relating to the same. The professional and personal characteristics of each auditor can be consulted on the Company website www.gedispa.it, under the “Governance” Section. During 2018, the Board of Statutory Auditors met 10 times. The average duration of the meetings was around 3 and a half hours. 8 meetings are scheduled for 2019, of which three were already held on 23 January, 1 February and 26 February. The existence of the requisites of independence and good standing of the auditors was positive- ly ascertained using the standards envisaged by the Code. Applying all the standards envisaged by the Code with reference to the independence of the Di- rectors, the Board of Statutory Auditors also ascertained the independence of its members both on the first useful occasion after appointment and during the year ended 31 December 2018. The Auditors who have an interest in a specific company transaction must promptly inform the other Auditors and the Chairman of the Board of Directors with regard to the nature, terms and extent of their interest. The Board of Statutory Auditors also oversaw the independence of the independent auditing firm checking the observance of the related legislative provisions. The Board of Statutory Auditors performed its work so as to support the traditional supervisory functions with a proposal-making and stimulating role with reference to the internal audit aspects and those it is responsible for, assigned by law and regulations. With a view to this, the Board of Statutory Auditors placed the exchange of information with the Group’s management bodies, senior management of the operating structure and other control bodies at the centre of its activities. In particular, the Board of Statutory Auditors coordinated its work, by means of taking part in meetings and requesting clarification and/or information, with the Internal Audit division, the Audit and Risks Committee, the Supervisory Body and the independent auditing firm. The auditors have been invited to take part in the induction sessions for the Directors as per point 4.2.3 above, to which reference is made. The remuneration of the statutory auditors is commensurate to the commitment required, the relevance of the role they cover and the size and sector of the business.

15. DEALING WITH SHAREHOLDERS The Company has set up an extensive section on its institutional website www.gedispa.it, easily accessible, which contains important information for the Shareholders. The head of the Investor Relations office is Mr. Stefano Canu who handles the flow of information addressing the Shareholders, the financial analysts and institutional investors, in observance of the rules established for the disclosure of Company information and documents. The Company has always taken active steps to establish and maintain effective dialogue with its shareholders and the market, using various forms of communication such as for example: presentation of the company and Group results during the shareholders’ meetings by means of slide projections, meetings with financial analysts and institutional investors in Italy and abroad, circulation of press releases to the general public and presentations by means of mak- Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 75

ing them available on the company website. During the period, the Company that was already listed on the screen-based trading circuit (Mercato Telematico Azionario (MTA) was admitted for trading on the Electronic Stock Mar- ket’s STAR segment (segment for high requirement shares in terms of transparency of information, liquidity and corporate governance), based on Provision No. 8509 issued by Borsa Italiana S.p.A. on 7 November 2018, with effect as from 15 November 2018.

16. SHAREHOLDERS’ MEETINGS Shareholders’ meetings are called by means of publication of the notice on the Company website and in the newspaper la Repubblica in accordance with the terms and procedures envisaged by current legislation. The date for second calling is established in the same notice. The right to attend general shareholders’ meetings and proxies are disciplined by applicable legislation. Proxy can be communicated to the company by means of certified e-mail message by the com- mencement of the meeting’s work, sent to the address indicated in the notice of calling. The provisions of the law are valid for quorum requirements and the validity of the resolutions adopted by the meeting, both in ordinary and extraordinary session, first or subsequent callings. The Company is endowed with Regulations which, despite not representing an integral part of the By-laws, discipline the orderly and functional course of ordinary and extraordinary shareholders’ meetings of the Company. These Regulations, which can be consulted on the Company website www.gedispa.it, in the “Governance” section, guarantee each shareholder the right to take the floor on the agenda being discussed. The Board, which intervened in its entirety with the exception of three members in the meeting, took action to ensure the shareholders adequate disclosure on the necessary elements so they could make an informed decision on the matters the meeting is responsible for. Changes in the capitalisation of the Company’s shares during the year generally took place in line with market and reference sector changes.

17. ADDITIONAL CORPORATE GOVERNANCE PRACTICES (PURSUANT TO ART. 123-BIS (2) SUB A), TUF) The Company adopted no additional Corporate Governance practice other than those outlined in the points above.

18. CHANGES SINCE THE END OF THE REFERENCE PERIOD There have been no changes to date in the corporate governance structure since the end of 2018. 76 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

CORPORATE GOVERNANCE CODE GEDI Gruppo Editoriale S.p.A.

INTRODUCTION The GEDI Gruppo Editoriale S.p.A. Corporate Governance Code (hereinafter the “Code”) contains the description of the main duties and functions of the corporate bodies and the Com- pany’s internal audit and risk management set-up. The representation of these duties and functions is carried out in a systematic manner in a single document in which it is possible to find, along with the contents, specific references to the framework of applicable rules: the provisions of the law and regulations, the statutory provisions, the principles of the Borsa Italiana SpA Corporate Governance Code which the Company complies with. In this connection, during the Board meeting held on 31 January 2013, following the new provisions of the Borsa Italiana SpA Corporate Governance Code introduced in December 2011, the Company updated its Corporate Governance and approved internal procedures as indicated in the Code.

Art. 1 - Role of the Board of Directors

The matters laid down by the By-laws with regard to the role of the Board of Directors follow.

Article 18 - Powers of the Board of Directors The Board of Directors is vested with powers of ordinary and extraordinary business, with the faculty to carry out all the acts it deems necessary and appropriate for implementing and achieving the corporate purpose, with the exclusion of those acts which the law or these By- laws reserve peremptorily for the shareholders meeting. The Board of Directors may therefore resolve on the reduction of the share capital in the event of withdrawal of the shareholders, the adaptation of the By-laws to binding legislative provisions, the transfer of the registered offices within Italy as well as the merger via incorporation of a wholly-owned subsidiary or investee company held to an extent of at least 90 (ninety) percent in terms of its share capital, all of which in observance of the provisions pursuant to Articles 2505 and 2505-bis of the Italian Civil Code.

Article 19 - Directors’ information to the Board of Statutory Auditors The directors report promptly to the other directors and the Board of Statutory Auditors on the activities carried out and the transactions of greatest importance as per the law. The communication is made at least quarterly during the meetings of the Board of Directors or the executive committee or by means of written, verbal or telephone communication to the Chairman of the board of statutory auditors if particular requirements of promptness make this preferable.

Article 20 - Board of Directors’ meetings The Board of Directors meets, at the registered offices or elsewhere, upon calling by the Chair- man or by anyone taking his/her place, as a rule on a quarterly basis, and, in any event, whenever the interests of the company so require, also upon request from at least two directors. The board also meets according to the matters envisaged by Article 22 below. Calling will be made by means of letter, registered mail, telegram, fax, e-mail or equivalent means which will have to be received at least five days before the date of the meeting. In urgent cases, the deadlines for calling are reduced to one day. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 77

The board meetings and their resolutions are valid, even if formal calling has not been made, when the majority of the directors in office and the statutory auditors take part also via video conference and/or audio conference facilities, all those entitled to take part have been informed in advance of the meeting and the participants have been sufficiently informed of the business to be discussed.

Furthermore, in application of Art. 1 of the Borsa Italiana S.p.A. Corporate Governance Code, the Board of Directors:

- on the basis of a specific internal procedure approved by the Board of Directors, examines and approves the strategic, industrial and financial plans of the issuer at consolidated level, periodically monitoring the implementation of the same; - defines the nature and the level of risk compatible with the strategic objectives of the issuer, as illustrated in Article 7 below; - assesses the adequacy of the organisational, administrative and accounting set-up of the issuer as well as that of the strategically important subsidiaries, with particular reference to the internal audit and risk management system; - establishes the frequency, usually quarterly, by means of which the CEO must report to the Board on the activities carried out during the period as per the authority granted; - assesses the performance of management operations taking into consideration, in particular, the information received from the CEO as well as periodically comparing the results achieved with those programmed; - examines and approves in advance without prejudice to the envisaged exceptions the transactions of the Issuer and examines those of the subsidiary with significant strategic importance as defined in a specific procedure approved by the Board of Directors; - at least once a year, makes an assessment of the size, composition and functioning of said Board and its committees, also taking into account elements such as the professional characteristics, experience, including managerial, and gender of its members, as well as their length of service; - may express to the Shareholders, before the appointment of the new Board, its opinions on the professional figures whose presence on the Board is believed to be appropriate, also taking into account the evaluation as per the previous point; - for the purpose of ensuring the correct handling of the corporate information, the Compa- ny has adopted an updated procedure for the internal handling and disclosure externally of documents and information regarding the issuer, with particular reference to privileged information, made available on the Company’s website; - provides disclosure in the Report on corporate governance, on its composition, on the time scales and formalities for holding its meetings and on the self-assessment process.

The Directors act and resolve in full awareness of the facts and independently, accept their office when they deem that they can dedicate the necessary amount of time to the diligent performance of their duties, also taking into account the commitments associated with their working and professional activities, the number of positions as Director or statutory auditor they cover in other companies listed on organised markets (including foreign), in finance, banking or insurance companies or those of significant size. They are also obliged to inform the Board of Directors of any activities carried out in competition with the issuer and of any significant change to the offices they cover in other companies. 78 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

Again in accordance with the matters envisaged by Article 1 of Borsa Italiana SpA’s Corpo- rate Governance Code, the Board of Directors has approved the following:

STANCE WITH REGARD TO THE MAXIMUM NUMBER OF OFFICES AS DIRECTOR OR STATUTORY AUDITOR IN OTHER COMPANIES LISTED ON ORGANISED MARKETS, ALSO FOREIGN, IN FI- NANCE, BANKING OR INSURANCE COMPANIES OR THOSE OF A SIGNIFICANT SIZE

With reference to the maximum number of offices as director or statutory auditor in other companies listed on organised markets, also foreign, in finance, banking or insurance companies or those of a significant size (hereinafter “Significant Companies”), the general criteria applicable for the assessment of the offices and the hypotheses which may lead to a departure from said criteria, are indicated below.

a) General criteria for assessment 1. Exclude that an Executive director of GEDI can undertake other positions as executive director or statutory auditor in Significant Companies not belonging to the CIR Group; 2. With regard to GEDI executive directors, the possibility of carrying out additional offices for a maximum of five as non-executive Director in Significant Companies not belonging to the CIR Group; 3. With regard to GEDI non-executive directors, the possibility of carrying out additional offices for a maximum of five as non-executive Director and/or statutory auditor and two as executive director in Significant Companies not belonging to the CIR Group or to that of its Parent Company; 4. The offices covered in Significant Companies belonging to the same group will count as a sole office (and this sole office will be considered as executive Director for the purpose of reckoning the limits, if at least one of the offices covered in the same group is as executive Director); 5. “Companies of significant size” are understood to be companies which exceed at least one of the following requisites: sales revenues of more than €500 million, statement of financial assets greater than €1,000 million, number of employees greater than 2,000; 6. "Financial companies" are understood to be only those which carry out activities for the provision of financial services vis-à-vis the general public, subject to supervision.

b) Possibility to depart from the general criteria It is understood that the general criteria indicated above may always be departed from with reference to one or more Directors as a result of justified resolution of the Board of Directors. The Board of Directors called to resolve with regard to these departures may take into account, for the purposes of its assessment, also the information relating to the presence and therefore the guaranteed participation of the Director concerned in Company board and committee meetings.

It is also hereby specified that the Board of Directors assesses the independence of the directors at least once a year, also taking into account the information which the individuals concerned are obliged to supply. Without prejudice to the matters envisaged by Article 147-ter, paragraph 4 of the Consolidated Law on Finance (TUF), the Company obliges the director who has lost the capacity of independence as per the provisions of the Corporate Governance Code (Crite- rion 3.C.1) to resign, without prejudice to the faculty of the Board to evaluate any specific case allowing possible exceptions. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 79

The matters laid down by the By-laws with regard to the Chairman of the Board of Directors follow.

Article 17 - Legal representation The Chairman is the legal representative of the Company. The legal representative is also entrusted separately to the Deputy Chairmen, CEOs, general managers and any legal representatives, within the limits of the powers granted them. In accordance with the matters envisaged by Article 1 of Borsa Italiana SpA’s Corporate Governance Code, the Chairman of the Board of Directors: - calls the Board Meetings and takes steps so that the members of the Board and the Statutory Auditors are provided, at least 48 hours before the date of the meeting (subject to justified exceptions), with the documentation and information necessary for permitting said Board to express itself in an informed manner on the business submitted for its attention and approval, possibly supplemented by a summary document, if particularly bulky and complex; - coordinates the activities of the Board of Directors and guides the business of the related meeting, making sure that the necessary time is dedicated to the business on the agenda so as to permit the discussion and encourage the contribution of the Directors; - may request the CEO, also upon the request of one or more Directors, that the executives of the Issuer and those of the Group companies take part in the board meetings so as to provide appropriate analysis.

Art. 2 – Composition of the Board of Directors

The Board of Directors is made up of executive and non-executive directors, endowed with appropriate expertise and professionalism, aware of the rights and duties of their office and who always operate with independence of opinion. The non-executive directors bring their specific expertise to the board discussions, contributing to the adoption of informed decisions and paying particular attention to the areas in which conflicts of interest may emerge. The composition of the issuer’s Board of Directors also with regard to the number, competence, authoritativeness and availability time-wise of the non-executive directors must be suitable for ensuring adequate conditions of operating autonomy, aimed at maximising the economic-financial objectives of the issuer. The composition of the Board of Directors also respects the balances between genders laid down by current legislation. The Directors are obliged to acquaint themselves with the duties and responsibilities pertaining to their appointment. The Chairman makes sure that the Directors and Statutory Auditors can take part, subsequent to appointment and during their mandate, in initiatives aimed at providing them with adequate knowledge of the sector of activities in which the issuer operates, the corporate dynamics and their evolution, as well as the reference legislative framework. With regard to the disclosure on business sectors, the CEO presents periodic disclosures on the performance of the markets and the business during Board meetings. During the Board self-assessment processes, the directors are required to express specific requests of an informative nature, which are satisfied during a maximum of 2 induction meetings to be held during each year. Any specific disclosure sessions for the Directors, with the support of vocational training experts, may be organised at the time of the renewal of the Board of Directors and subsequently, each time the evolution of the legislative framework requires an update in this regard. 80 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

The Board of Directors appoints a Lead Independent Director who:

a. is a point of reference and coordination for the requests and the contributions of the non-executive Directors and in particular the independent ones; b. works together with the Chairman so as to ensure the Directors receive complete and prompt flows of information.

The Lead Independent Director is also assigned the authority to call specific meetings of only independent Directors, at his/her discretion or upon the request of the other Directors, for the discussion of the subjects deemed of interest with respect to the functioning of the Board of Directors or the corporate operations.

With reference to the possibility that the issuers adopt mechanisms which ensure the differentiated expiry of all or part of the members of the management body (so-called staggered board), the Company did not deem it appropriate to adopt this measure, since it is not in line with the GEDI ownership structure.

The Company complies with the so-called interlocking restriction envisaged by Article 2 of the Borsa Italiana SpA’s Corporate Governance Code, or rather the principle as per which the chief officer of an issuer cannot undertake the office of Director in another company not belonging to the same group, in which a Director of the same company is chief officer.

Art. 3 - Independent Directors

In compliance with the matters envisaged by the Regulation containing implementing provisions of Italian Legislative Decree No. 58/1998 concerning markets, adopted by Consob under Resolution No. 16191/2007, the Independent Directors represent the majority of the members of Board of Directors.

In compliance with the matters recommended by Borsa Italiana SpA’s Corporate Govern- ance Code, the following are considered to be “Independent Directors”:

a) those who directly or indirectly, also via subsidiaries, trust companies or third parties, do not control the Issuer or are not able to exercise significant influence over the same, or do not participate in a shareholders’ agreements by means of which one or more parties may exercise control or significant influence over the Issuer; b) those who are not, or have not been in the previous three years, significant representatives of the Issuer, one of its subsidiaries with strategic importance or a company subject to joint control with the issuer, or of a company or a body which, also together with others via a shareholders’ agreement, controls the issuer or is able to exercise significant influence over the same; c) those who directly or indirectly (for example via subsidiary companies or those which are a significant representative of, or in the capacity of partner of a firm of professionals or a consulting firm), have not, or have not had during the previous year, significant commercial, financial or professional dealings: - with the Issuer, one of its subsidiaries or with any of the related significant representatives; - with a party which, also together with others via a shareholders’ agreement, controls the Issuer, or – if involving companies or bodies – with the related significant representatives; or have not, or have not been in the last three years, employees of one of the aforementioned parties; d) those who do not receive, or have not received in the last three years, from the Issuer or a Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 81

subsidiary or Parent Company, significant remuneration in addition to the fixed emolument as non-executive director of the Issuer, including therein participation in incentive plans linked to company performance, also share-based; e) those who have not been Directors of the Issuer for more than nine years in the last twelve years; f) those who do not cover the position of Executive Director in another company in which an Executive Director of the Issuer is Director; g) those who are not shareholders or Directors of companies or a body belonging to the network of the company appointed to audit the accounts of the Issuer; h) those who are not close family members of an individual who is found in one of the situations indicated in the above points.

If any of the aforementioned hypotheses envisaged by the Borsa Italiana SpA’s Corporate Governance Code should occur, being conditions for the non-independent nature of the non-executive directors, the Board of Directors shall have to assess, with reference to the individual case, if the requisites necessary for the assignment of Independent Director exist or not.

On the basis of the matters laid down by Article 147, paragraph 4 of the Consolidated Law on Finance (TUF), at least one of the members of the Board of Directors, or at least two, if the Board is made up of more than seven members, must possess the independence requisites established for the statutory auditors and therefore, under Article 148, paragraph 3 of the Con- solidated Law on Finance, the following are not considered independent: a) the spouses, relatives and kin up to fourth removed of the Directors of the company, the Directors, the spouse, the relatives and kin up to fourth removed of the Directors of subsidiary companies of the former company, the companies which are its parents and those subject to joint control; b) those who are linked to the company or its subsidiaries or its parents or those subject to joint control or the Directors of the Company and the parties as per the previous point linked by freelance or employment relationships or by other professional or equitable relationships which compromise independence.

The independence of the directors is assessed by the Board of Directors after appointment and, subsequently each year. The Board discloses the outcome of its assessments in the Report on corporate governance.

Art. 4 - Establishment and functioning of the Board’s internal committees

The Board of Directors establishes one or more committees internally, with proposal and advisory functions, defining the duties by means of the resolutions used to established them. The committees are made up of no less than three members, all independent, and are coordinated by a chairman. Minutes are taken of the meetings of each committee. Should he/she deem it necessary, the Chairman may invite other parties from time to time whose presence may be appropriate for the business of the meeting. 82 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

The Company has set up the following committees:

a) The Audit and Risk Committee which has at least one member who must possess adequate experience with regard to accounting and financial matters or risk management; in addition to the advisory and proposal functions, it carries out Audit and Risk Management System monitoring activities; b) The Appointments and Remuneration Committee, which has its own regulations. This committee, within which there is adequate expertise with regard to financial or remuneration policy matters, for organisational reasons combines the functions of the Appointments Committee and Remuneration Committee; c) The Committee for Related-Party Transactions, as envisaged by the Procedure for Related-party Transactions approved by the Board of Directors in compliance with the Consob resolution No. 17221 dated March 12, 2010 and subsequent amendments and integrations.

The tasks assigned to the individual committees are illustrated in the following articles.

Art. 5 Appointment of the Directors

The appointment of the Directors takes place in accordance with the matters laid down by Arti- cle 15 of the By-laws as illustrated below.

Article 15 - Board of Directors The company is managed by a Board of Directors made up of between seven and nineteen members. Before going ahead with the appointment of the directors, the shareholders’ meeting establishes the number of the board members, a number which will remain the same until a different resolution is passed. The minority shareholders are reserved the appointment of one member of the Board of Directors. The directors remain in office for the period of time established by the shareholders’ meeting, in any event for a period of no more than three years, and can be re-appointed. The Board of Directors is appointed by the shareholders’ meeting on the basis of lists presented by the shareholders, in which the candidates must be listed via a consecutive number; the list of candidates, signed by the shareholders presenting them, must be deposited by the deadlines and according to the procedures indicated in the applicable legislation. Only shareholders who, alone or together with others, represent at least 2.5% of the share capital with the right to vote during ordinary shareholders’ meeting or a different percentage which is determined in accordance with the law or regulations, have the right to present lists, and are obliged to prove ownership of the number of shares requested by the deadline and with the methods established in applicable legislation. Lists that have a number of candidates equal to or greater than three must include candidates belonging to both genders, at least in the proportion prescribed by the current legislation on gender balance. The lists presented without observing the above provisions shall be considered as not presented. No shareholder may present or contribute towards presenting more than one list, not even via third parties or trust companies; the shareholders who are subject to mutual control as per Ar- ticle 93 of the Consolidated Law containing financial brokerage provisions or those who take part in the same voting syndicate may present or contribute towards presenting just one list. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 83

Each shareholder may vote for just one list. Each candidate may present themselves on just one list under penalty of ineligibility. The declarations by means of which the individual candidates accept their candidature and declare, under their own liability, the non-existence of causes of ineligibility or incompatibility under the law and the existence of any requirements that may be specified by the applicable laws and regulations for members of the Board of Directors as well as the curriculum vitae regarding the personal and professional characteristics with indications of the management and audit appointments held in other companies and the suitability of being qualified as an independent director as per the law or regulations, are filed together with each list. Any omissions or irregularities relating to the individual candidates will lead to the elimination of the name of the candidate from the list which shall be put to the vote. In order to be able to accomplish the appointment of the indicated candidates, the lists presented and put to the vote must obtain a percentage of the votes at least equal to half that required as per this article for the presentation of said lists; otherwise, these lists will not be taken into account. One shall proceed as follows for the election of the members of the Board of Directors: a) as many directors representing all those to be elected less one are taken from the list which has obtained the greatest number of votes during the shareholders’ meeting, on the basis of the progressive order in which they are listed on the list; b) the remaining director, being the candidate listed in first place on the list, is taken from the second list which has obtained the greatest number of votes during the shareholders’ meeting and who must not be connected in any way, directly or indirectly, with the shareholders who have presented or voted for the list in first place in terms of number of votes. If the application of the procedure in sub a) and b) does not allow compliance with the balance between genders as prescribed by law, the last elected person on the list that obtained the highest number of votes belonging to the most represented gender shall forfeit their place and be replaced by the first unelected candidate from the same list, belonging to the less represented gender, in compliance with the law. Failing this, the shareholders’ meeting integrates the administrative body with the legal majorities thereby ensuring compliance with legal requirements.

All the directors elected shall have to be in possession of the requisites of good standing and professionalism required by current legislation. Lack of these requisites leads to forfeiture of the appointment. In the event just one list is presented or put to the vote, all the Directors are taken from this list. In the event that no list has been presented or put to the vote or a number of directors is elected that is lower than the number established by the shareholders’ meeting, the shareholders’ meeting must be called again for the appointment of the entire Board of Directors. If, as a result of resignation or for other reasons, one or more Directors fall from office, steps will be taken to replace them in accordance with Article 2386 of the Italian Civil Code, ensuring observance of the applicable requisites. At least one of the members of the Board of Directors, or at least two, if the board is made up of more than seven members, must possess the requirement of independence specified by the applicable legislation. Independent directors who, after appointment, lose the independence requisites must immediately inform the board and, in any event, fall from office. The Board periodically assess the independence and good standing of the directors. In the event that the aforementioned requisites do not exist or cease and in the event that the minimum number of independent directors established by these Articles of Association ceases, the Board declares the forfeiture of the directors lacking said requisite from office and sees to the replacement of the same.

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If, due to resignation or other reasons, half or more of the directors fall from office, the entire Board is considered to be outgoing and steps must be taken to call the shareholders’ meeting for the new appointments in accordance with the law. The members of the Board of Directors are entitled to reimbursement of the expenses incurred for official reasons provided these are documented. The shareholders’ meeting may establish an annual fee in favour of the directors also under the form of profit-sharing. Having consulted the Board of Statutory Auditors, the Board of Directors establishes the remuneration for the Directors vested with particular roles. In accordance with the matters envisaged by Article 5 of Borsa Italiana SpA’s Corporate Governance Code, with regard to the appointment of the Directors, the Appointments and Remuneration Committee carries out the following functions: - proposes to the Board of Directors candidates for the office of Director if it is necessary to replace an independent director pursuant to Article 2386 paragraph 1 of the Italian Civil Code; - formulates opinions to the Board of Directors with regard to the size and composition of the same, as well as, possibly, with regard to the professional figures whose presence within the Board is deemed appropriate; - formulates opinions to the Board of Directors with regard to the maximum number of appointments as director and auditor which the company’s Directors can undertake, also by way of departure to the general criteria, in companies listed on organised markets (also foreign), financial, insurance companies and companies of a significant size, taking into account the participation of the directors in committees established within the Board.

Art. 6 Remuneration of the Directors

Upon the proposal of the Appointments and Remuneration Committee, the Board of Directors adopts a Plan for the succession of the Executive Directors. This Plan is subject to periodic review by the Appointments and Remuneration Committee, and in any event to assessment at least every three years. The remuneration policies are aimed at ensuring competitiveness on the labour market in line with the growth and loyalty retention objectives for the human resources, as well as differen- tiating the remuneration instruments on the basis of the individual professionalism and skills. The remuneration of the non-executive Directors, commensurate to the commitment required of each one, is established by the shareholders’ meeting. The Board of Directors establishes the emolument for the office of Chairman and the fees of the Directors for special appointments. Upon the proposal of the Appointments and Remuneration Committee, the Board of Direc- tors establishes a policy for the remuneration of the Directors and Executives with strategic responsibilities. The remuneration of the Directors vested with specific offices, in compliance with the Articles of Association, is established by the Board of Directors, upon the proposal of the Appoint- ments and Remuneration Committee, having consulted the Board of Statutory Auditors, on the basis of the guidelines established in the remuneration policy. When drawing up any remuneration plans based on shares, the Board of Directors ensures the observance of the criteria laid down in Borsa Italiana SpA’s Corporate Governance Code. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 85

In accordance with the matters envisaged by Article 6 of the CORPORATE GOVERNANCE CODE of BORSA ITALIANA S.P.A. with regard to the remunerations, the Appointments and Remuneration Committee carries out the following functions:

- formulates proposals or expresses opinions for the remuneration of the CEO and the Direc- tors vested with specific offices, which may also include remuneration plans which envisage the assignment of stock options or the disbursement of other incentives parametrised on shares; - formulates proposals to the Board with regard to the payment plans for employees based on shares (for this purpose drawing up the specific Regulations), identifying the beneficiaries and entity of the assignment options to each of the same upon the indication of the CEO, with regard to the criteria for the remuneration of the Company’s management staff; - periodically assesses the adequacy, coherence and effective application of the policy for the remuneration of the Directors and executives with strategic responsibilities formulating proposals to the Board in this connection; - periodically assesses the adequacy of the incentive mechanisms for the Head of Internal Auditing and the Executive appointed to draw up the company accounting documents with respect to the tasks assigned to the same.

Art. 7 - Internal Audit and Risk Management System

The Board of Directors approves the general principles of the internal audit and risk management system. Specifically, the Board of Directors has adopted the Guidelines regarding the internal audit and risk management system, indicated below.

GUIDELINES REGARDING THE INTERNAL AUDIT AND RISK MANAGEMENT SYSTEM

INTRODUCTION The Board of Directors of GEDI Gruppo Editoriale S.p.A. (“GEDI” or the “Company”) has adopted these Guidelines which lay down the general principles of the GEDI internal audit and risk management system (the “Audit and Risk Management System”). GEDI is the holding company operating in the publishing and media sector, with business areas entrusted to the subsidiary companies belonging to the GEDI Group (the “Group”). The Guidelines are divided up into: A. Audit and Risk Management System B. Tasks and the bodies and functions of the Audit and Risk Management System C. Risk management

A. Audit and Risk Management System The Audit and Risk Management System is the series of rules, procedures and organisational structures aimed at permitting the sound and correct running of the company on a consistent basis with the pre-established objectives and encouraging the adoption of informed decisions, by means of an adequate identification, gauging and monitoring process of the main risks. The Audit and Risk Management System contributes towards guaranteeing the protection of the 86 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

company assets, the efficiency and efficacy of the corporate processes, the reliability of the financial information, the observance of the laws and regulations as well as the By-laws and internal procedures adopted by the Company. The Audit and Risk Management System contributes towards reducing and containing, but cannot eliminate the possibility of erroneous decisions, errors, fraudulent violations of the audit system and unforeseeable events. The Audit and Risk Management System contributes towards defining the tasks of each responsible body and the collaboration and exchange of information mechanisms between the various parties involved in the financial disclosure and risk management process.

The Audit and Risk Management System includes not only the principles expressed in these guidelines but also: i) the specific Articles of Association and internal regulatory provisions concerning the division of the responsibilities and authorisations; ii) the system of authorisations, procedures and areas at risk mapped by the Organisation model pursuant to Italian Legislative Decree 231/2001; iii) the objectives and methods for assessing the risks and the provisions concerning the administrative, accounting and financial system.

B. Tasks and the bodies and functions of the Audit and Risk Management System The bodies and functions responsible for the Audit and Risk Management System are as follows: a) the Board of Directors; b) the Director appointed with regard to the Audit and Risk System Management (the “Ap- pointed Director”); c) the Audit and Risk Committee; d) the Head of the Internal Audit Department; e) the Risk Manager; f) the Board of Statutory Auditors; g) the Supervisory Body pursuant to Italian Legislative Decree No. 231/2001; h) the other bodies and company functions responsible for internal audits and risk management.

Furthermore, it is understood that all the employees are required to take action so as to ensure the efficient functioning of the Audit and Risk Management System, each within the sphere of their duties and for the roles covered within the company organisation. In fact, on the basis of the tasks assigned, the company’s human resources have the necessary training for fulfilling their responsibilities with the necessary knowledge and comprehension of the activities, the organisation and functioning methods of the reference market and the specific sector in which they operate, without neglecting the related risks and the operating objectives of the Company. The bodies and functions indicated above each operate in accordance with their duties and responsibilities and as per the indications envisaged in these Guidelines and in the legislative, regulatory and internal provisions applicable.

The Board of Directors The Board of Directors has the final responsibility for the Audit and Risk Management System and defines the guidelines, on a consistent basis with the strategic aims and the risk profile of the Company. Within the sphere of the Audit and Risk Management System, the Board of Directors: a) defines the guidelines of the Audit and Risk Management System, seeing to the appropriate Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 87

amendments and updates; b) identifies the nature and the level of risk compatible with the strategic objectives of the Company, re-assessing them each time the circumstances render this necessary; c) annually evaluates the adequacy, efficacy and efficiency of the Audit and Risk Management System with respect to the business activities and the risk profile adopted, also taking into account the assessments of the Appointed Director and the Audit and Risk Committee; d) approves, upon the proposal of the Audit and Risk Committee, annually, at the same time as approval of the annual financial statements, the audit plan, having consulted the Board of Statutory Auditors and the Appointed Director; e) having consulted the Board of Statutory Auditors assesses the results disclosed by the independent auditor in the opinion letter and in the report in the fundamental aspects emerging during the audit; f) appoints the Appointed Director; g) appoints an Audit and Risk Committee internally and nominates the chairman; h) approves the regulations of the Audit and Risk Committee and any amendments and updates; i) appoints and removes the Head of the Internal Audit department, upon the proposal of the Appointments and Remuneration Committee, subject to the favourable opinion of the Au- dit and Risk Committee and having consulted the Board of Statutory Auditors, periodically checking the consistency of the incentive mechanisms with the tasks assigned to the same; j) ensures that the Head of the Internal Audit Department is equipped with adequate resources for the fulfilment of the related responsibilities.

The Appointed Director The Appointed Director is responsible for ensuring the functionality and adequacy of the internal audit system. In the existing company system and on the basis of the structure of the powers within the Company, the Appointed Director coincides with the CEO. The Appointed Director: a) sees to the identification of the main company risks and submits them periodically for the examination of the Board of Directors; b) sees to the planning, realisation and management of the Audit and Risk Management Sys- tem, envisaging co-ordination formalities between the bodies and divisions concerned aimed at maximising the efficiency thereof and reducing duplications; c) partly on the basis of the reports drawn up by the Head of Internal Auditing and the indications of the Audit and Risk Committee, constantly checks the adequacy, efficacy and efficiency of the Audit and Risk Committee, proposing the appropriate amendments and updates to the Board of Directors; d) may request that the Head of the Internal Audit department carry out checks on specific operating areas and on the observance of the internal rules and procedures in the execution of company operations, at the same time informing the Chairman of the Board of Directors, Chairman of the Audit and Risk Management System and the Chairman of the Board of Statutory Auditors; e) promptly reports to the Board of Directors with regard to problems and critical aspects emerging during the performance of his/her activities or which in any event he/she becomes aware of, so that the Board of Directors can adopt the appropriate initiatives; f) may avail himself/herself in the performance of his/her functions, of the support of the Au- dit and Risk Committee. 88 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

The Audit and Risk Committee The Audit and Risk Committee carries out advisory, proposal-related and monitoring functions on the Audit and Risk Management System: The Audit and Risk Committee: a) assesses, together with the Executive appointed to draw up the company’s accounting documents and having consulted the independent auditors and the Board of Statutory Au- ditors, the correct use of the accounting standards and their uniformity for the purpose of drafting the statutory and consolidated financial statements and presents the results of its assessments to the Board of Directors as envisaged by letter f) below; b) expresses opinions on specific aspects inherent to the identification of the main corporate risks, and in particular on the identification, gauging and monitoring of the main corporate risks; c) examines the reports concerning the assessment of the Audit and Risk Management Sys- tem drawn up by the Internal Audit department and reports to the Board of Directors on its assessments with regard to the matters envisaged by letter f) below; d) monitors the autonomy, adequacy, efficacy and efficiency of the Internal Audit department and proposes any corrective action to the Board of Directors; e) may request that the Internal Audit department carry out checks on specific operating areas, at the same time informing the Chairman of the Board of Statutory Auditors and the Board of Directors and the Appointed Director; f) reports to the Board of Directors on the activities carried out and on the adequacy of the Audit and Risk Management System, at least once every six months on approval of the annual and half-yearly financial reports; g) examines the audit plan and proposes the adoption of the same to the Board of Directors. The Audit and Risk Committee is made up of at least 3 independent directors, of which at least one has suitable experience with regard to accounting and financial or risk management matters, and operates in compliance with the provisions of the internal regulations approved by the Board of Directors, which describes the appointment formalities, tasks, functioning methods, powers and the budget. The Chairman of the Board of Statutory Auditors or another auditor appointed by the same takes part in the work of the Audit and Risk Committee (and in any event the other auditors can also take part).

The Head of the Internal Audit department Within the sphere of the Audit and Risk Management System, the Head of the Internal Audit department: a) draws up the audit plan submitting it to the Audit and Risk Committee, so that it proposes the adoption of the same to the Board of Directors; b) checks, both on an on-going basis and in relation to specific needs, the operations and suitability of the Audit and Risk Management System via the audit plan approved by the Board of Directors; c) drafts the interim reports on the related activities, the formalities by means of which the management of the risks is carried out, the observance of the plans defined for the con- tainment of said risks and the suitability of the Audit and Risk Management System and forwards a copy to the Audit and Risk Committee and the Board of Statutory Auditors before the meeting of the Audit and Risk Committee which precedes the Board meeting for the annual and interim reports; d) promptly draws up the reports on particular important events, forwarding a copy to the Chairmen of the Board of Directors, the Audit and Risk Committee and the Board of Stat- utory Auditors and to the Appointed Director; Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 89

e) within the sphere of the audit plan, checks the reliability of the disclosure systems, including the accounting records systems. The Head of the Internal Audit department does not depend hierarchically on the Chairman of the Board of Directors or the CEO and has direct access to all the information useful for the performance of his appointment. Recurrence of the flows is envisaged.

The Risk Manager The description of the activities and functions of the Risk Manager are indicated in point C below.

The Board of Statutory Auditors The Board of Statutory Auditors oversees the efficacy of the Audit and Risk Management Sys- tem. When carrying out its functions, the Board of Statutory Auditors may request the Head of the Internal Audit department to carry out checks on specific operating areas or company operations, informing the Chairman of the Board of Directors. The Board of Statutory Auditors and the Audit and Risk Committee promptly exchange information significant for the accom- plishment of their duties.

The Supervisory Body In accordance with Italian Legislative Decree No. 231/2001, the Supervisory Body carries out the tasks envisaged for the same by the Company’s Organisation Model and works together with and exchanges information regularly with the Audit and Risk Committee, the Board of Statutory Auditors and the Appointed Director.

The other competent bodies and functions The other bodies and company functions responsible for internal audits and risk management include the Executive appointed to draw up the accounting documents and all the procedures and bodies which make up the corporate structure.

C. Risk management The Risk Management System is divided up into the following three levels of control: a) the functions operative within the Company detect the risks and establish the action to be adopted for managing the same; b) the functions tasked with risk management carry out constant analysis and monitoring activities; c) the Internal Audit department checks the functioning of the System and provides its independent opinions.

Definition of the nature and level of risks compatible with the strategic objectives of GEDI At least once a year, at the time of drawing up the budget, the Company carries out a global assessment of the risks with the related evaluation of their possible impact on the achievement of the results. The analysis is carried out with the method-based support of the “Risk analysis and assessment” document illustrated as an attachment (Attachment A), which forms an integral part of this document. The output of these activities is a document which fully represents the level of risk for each business area and defines the action for mitigating the envisaged risks. The general content of the information processed is provided by the document (Attachment B) and must be discussed by the Risk Manager with company management and with the Audit and 90 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

Risk Committee. The Audit and Risk Committee may request explanations and/or additions to the document so as to report in a thorough manner to the Board of Directors. The Board of Directors will have to be placed in the position to be able to easily assess whether the level of risk compatible with the company’s strategic objectives is acceptable as indicated in the document drawn up by management and discussed with the Audit and Risk Committee. The Board of Directors shall have to express its opinion with regard to the mitigation action proposed and on the entity of the remaining risk. The examination, discussion and definition within the Board of Directors, of the nature and level of risk compatible with the company’s objectives is implemented by means of a critical analysis of the assessment of probability/impact of the Audit and Risk Committee and takes into account the parameters linked to the operating result, the shareholders’ equity and the net financial position of the Company.

Operating steps The activities indicated above must be subject to a complete review and constant monitoring during the year by the Risk Manager in close collaboration with the heads of the process and with the Head of the Internal Audit department. Effectively, the activities of the Risk manager in collaboration with the heads of the process involve the performance of the following operations: a) mapping of the company processes and the related updating when necessary; b) detection of the internal and external risks annually, referring to the individual processes; c) gauging of the risks in terms of probability/impact and assessment of the effect on the business plan and the budget; d) analysis of the risk mitigation factors; e) presentation of the results of the activities to the Audit and Risk Committee for examination and preliminary discussion, for the purpose of presentation of the same to the Board of Directors. The aforementioned activities are carried out following the method-related guidelines contained in the “Risk analysis and assessment” document, attached to this document, which aspire to the “ERM - Enterprise Risk Management” framework drafted by the “Committee of Sponsoring Organizations of the Treadway Commission” (COSO report).

On-going monitoring The Risk Manager carries out constant monitoring on the possible consequences deriving from strategic, operating, compliance and reporting risks. He/she defines a series of information flows originating from the operational divisions so as to continually monitor the level of risk. He/she reports quarterly to the Audit and Risk Committee and coordinates with the contact individuals of the business areas so as to draw up a risk assessment and monitoring document. With reference to the subsidiaries, the analysis and assessment of the related risks is handled directly by the Company’s Risk Manager.

Time scales for the annual analysis and assessment of the risks By 31 October of each year, the Risk Manager meets the Audit and Risk Committee so as to illustrate the annual risk analysis and assessment activities of the company; the Audit and Risk Committee analyses the document and carries out the appropriate investigations during the subsequent months of November and December so as to then submit the final document to the Board of Directors at the time of approval of the budget in January. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 91

Art. 8 - Statutory Auditors

The matters laid down by the By-laws with regard to the Statutory Auditors follow.

Article 22 - Board of Statutory Auditors The Board of Statutory Auditors is made up of three statutory auditors and three alternate auditors who remain in office for three years and can be reappointed. The minority shareholders are reserved the appointment of a statutory auditor and an alternate auditor. The lists that have a number of candidates equal to or over three must include in each section candidates belonging to both genders. The statutory auditors are appointed on the basis of lists presented by the shareholders in which the candidates are listed by means of consecutive number. The list is made up of two sections: one for the candidates to the office of statutory auditor, the other for the candidates to the office of alternate auditor. The list of candidates, signed by the shareholders who present the same, must be deposited within the deadlines and under the formalities envisaged by applicable legislation. Only shareholders who, alone or together with others, are overall the holders of shares with the right to vote representing at least 2.5% (two point five per cent) of the share capital with the right to vote during ordinary shareholders’ meetings or a different percentage which is determined in accordance with the law or regulations, have the right to present lists, and are obliged to prove ownership of the number of shares requested by the deadline and with the methods established in applicable legislation. The lists presented without observing the above provisions shall be considered as not presented. No shareholder may present or contribute towards presenting more than one list, not even via third parties or trust companies; the shareholders who are subject to mutual control as per Ar- ticle 93 of the Consolidated Law containing financial brokerage provisions or those who take part in the same voting syndicate may present or contribute towards presenting just one list. Each shareholder may vote for just one list. Each candidate may present themselves on just one list under penalty of ineligibility. The lists cannot contain candidates who already hold appointments as regular statutory auditors in another five companies or bodies, whose shares are admitted for trading on a regulated market included in the list specified by Articles 63 and 67 of Italian Legislative Decree no. 58/1998, or candidates who are not in possession of the requirements of good standing, professionalism and independence, established by applicable legislation or who do not comply with the limits regarding the accumulation of offices established in accordance with the law or regulations. The declarations by means of which the individual candidates accept their candidature and declare, at their own liability, the non-existence of causes of ineligibility or incompatibility, and the existence of the requisites laid down by the law and regulations in force for such appointments, as well as the curriculum vitae regarding the personal and professional characteristics of the candidates with indication of the management and audit appointments covered in other companies, are filed together with each list, by the deadline indicated above. Any omissions or irregularities relating to the individual candidates will lead to the exclusion of the name of the candidate from the list put to the vote. Steps are taken as follows to appoint the statutory auditors: a) two regular statutory auditors and two alternate auditors are taken from the list which has obtained the greatest number of votes during the shareholders’ meeting, on the basis of the progressive order in which they are listed in the sections of the list; b) the remaining statutory auditor and the other alternate auditor are taken from the second list which has obtained the greatest number of votes during the shareholders’ meeting, on the basis of the progressive order in which they are listed in the sections of the list, not being linked, directly or indirectly, with the shareholders who have presented or voted for the list which was first due to number of votes. 92 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

In the event just one list is presented or put to the vote, all the statutory and alternate auditors are taken from this list. If the application of the procedure in sub a) and b) above does not allow compliance with the balance between genders as prescribed by law, the last elected person in the section of the list that obtained the highest number of votes from the most represented gender shall forfeit their place and be replaced by the first unelected candidate of the same list and same section from the least represented gender. Failing this, the shareholders’ meeting integrates the Board of Statutory Auditors with the legal majorities thereby ensuring compliance with the requirement. The chair of the Board of Statutory Auditors goes to the candidate on the minority list which obtained the greatest number of votes. In the event of presentation of just one list, the chair of the Board of Statutory Auditors goes to the first candidate on the list. In the event that no list has been presented or put to the vote, the shareholders meeting shall have to be called again for the appointment of the entire Board of Statutory Auditors. In the event that the requisites required by legislation and the Articles of Association cease to apply, the auditor falls from office. If a statutory auditor is to be replaced, the alternate auditor belonging to the same list as the one leaving office shall take his/her place, ensuring compliance with legal requirements and the By-laws and specifically taking account of the obligation regarding gender balance. The meetings of the Board of Statutory Auditors can be held also by means of video conference and audio conference facilities in observance of the following conditions: a) that the participants are in a position to examine, receive or transmit all the necessary documentation; b) that participation in the discussion in real time in observance of the collective method is permitted. The meetings are held in the place of calling where the Chairman must be present. The board of statutory auditors may, subject to communication to the Chairman, call a shareholders’ meeting, a meeting of the board and of the executive committee. The power to call a meeting of the Board of Directors and of the executive committee may be exercised individually by each member of the board of statutory auditors; that for the calling of the shareholders’ meeting, by at least two members of the Board of Statutory Auditors.

Furthermore, the Statutory Auditors are chosen from among individuals who may be qualified as independent also on the basis of the criteria envisaged for the Directors. The Board of Statutory Auditors checks the observance of said criteria after appointment and subsequently each year. The Auditors accept their office when they deem that they can dedicate the necessary amount of time to the diligent performance of their duties. The supervisory activity on the efficacy of the Audit System is described in article 7 above.

Art. 9. - Dealing with Shareholders

The Company takes steps to establish and maintain effective dialogue with its shareholders and the market, using various forms of communication such as: presentation of the company and Group results during the shareholders’ meetings, meetings with financial analysts and institutional investors in Italy and abroad, the circulation of press releases to the general public and presentations by means of making the corporate documentation envisaged by legislation available on the company website. Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 93

The Company also complies with the principles of the Guide for Market Disclosure. The Company has appointed a head for the Investor Relations unit to handle the flow of information addressing the shareholders, the financial analysts and institutional investors, in observance of the rules established for the disclosure of Company information and documents.

The matters laid down by the By-laws with regard to the formalities and deadlines for calling shareholders’ meetings follow.

Article 10 - Calling shareholders’ meetings

Shareholders’ meetings are called, both in ordinary and extraordinary session, in the cases envisaged by the law and each time the Board of Directors deems it appropriate or in accordance with the provisions of Article 22 below. Shareholders’ meetings are called care of the registered offices or elsewhere in Italy, by means of publication of the notice on the Company website and in the “la Repubblica” newspaper in accordance with the deadlines and formalities envisaged by current legislation. The date for the second call can be established in the same notice. Ordinary meetings must be called at least once a year, within 120 (one hundred and twenty) days of the end of the accounting period. If the legal conditions apply, the deadline may be extended to within 180 (one hundred and eighty) days of the end of the accounting period. Ordinary meetings may adopt the resolutions required by the Regulations for Related-Party Transactions adopted by the Company in observance of current legal and regulatory provisions.

The Board of Directors provides the Shareholders, within the deadlines envisaged by current legislation, with a dossier containing the proposals for the agenda of the shareholders’ meeting, which can be consulted in the Company website.

The Shareholders’ Meeting Regulations, which can be found on the Company website, ensure the orderly and functional business of the shareholders’ meetings. 94 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

Table 1 List of the offices covered by the directors of GEDI Gruppo Editoriale SpA in other listed companies on regulated markets (also foreign), in finance, banking or insurance companies or those of a significant size1.

Board of Directors Members Other appointments Massimo Belcredi2 Director of ERG SpA; Director of BPER Banca Agar Brugiavini Member of the Supervisory Board of Bank of Italy in Venice Giacaranda Maria Caracciolo di Melito Falck3 - Laura Cioli4 Director of Pirelli SpA; Director of Brembo SpA; Director of Sofina SpA Elena Ciallié Director of Banca Interprovinciale SpA Alberto Clò Director of De Longhi SpA Marco De Benedetti Director of CIR SpA; Director of Cofide SpA; Director of Moncler SpA Rodolfo De Benedetti Director of CIR SpA; Director of Cofide SpA; Director of Sogefi SpA; Director of Decalia Asset Management SA; Director of V-P Decalia Asset Management Sim SpA; Director of AON Italia Francesco Dini - John Elkann Director of Ferrari NV; Director of Ferrari SpA; Director of FCA NV; Director and CEO of Exor NV; Director of G.A. BV; Director of The Economist Group (unlisted); Chairman of Partner RE Silvia Merlo CEO of Merlo SpA Industria Metalmeccanica (unlisted); Director of Leonardo SpA; Director Erga SpA Monica Mondardini CEO of CIR SpA; Chairperson of Sogefi SpA; Director of Atlantia SpA Director of Trevi-Finanziaria Industriale SpA; Director of Crédit Agricole S.A. Elisabetta Oliveri Director of SNAM SpA; Director of ERG SpA Luca Paravicini Crespi Director of Consilium SGR SpA; Director of Ecor Natura Sì SpA (unlisted) Carlo Perrone - Michael Zaoui -

1 N.B. The company is understood to be “listed” unless otherwise indicated. 2 Left office on 26 April 2018. 3 Appointed on 26 April 2018. 4 Appointed on 26 April 2018. Table 2 Table Structure of Board and Committees Report on corporate governance and the ownership structure | GEDI Gruppo Editoriale | 95 - - - - 2/2 2/2 2/2 **** CRP:2 P °°° M M Related Par °°°°° M Committee for ty-transactions M **** 2/2 4/4 2/2 4/4 (**) ARC: 4 ° °° Committee M M M °°°°° Remuneration **** Appointment & P - 9/9 8/9 5/5 8/9 6/9 4/4 (**) ARC: 9 P M M M M M Committee Internal Au dit and Risk **** 7/7 6/7 7/7 5/7 3/3 7/7 7/7 7/7 7/7 6/7 7/7 7/7 7/7 7/7 7/7 (**) ------1 1 6 4 2 7 5 2 3 1 3 pointments (***) Number of otherap x x x x x x x x x TUF based , of CEO and General Manager on Ms Laura Cioli. The latter’s independence requirement had lapsed, inter alia , of CEO and General Manager on Ms Laura Cioli. The latter’s independence x x x x x x x x x Code Indep. of x x x x x x x x x x x x x x exec. Non-- x x Exec. M M M M M M M M M M M M M M M M List (M/m) * -

“ “ “ “ “ “ “ “ “ “ “ “ 2020 FS 2020 FS approval approval 26/04/2018 at next Share In officeuntil holders’ Meeting Board of Directors from In office 26/04/2018 23/04/2015 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 26/04/2018 23/04/2012 23/04/2015 16/09/2008 27/04/2017 26/04/2018 23/06/2017 27/04/2017 23/04/2015 19/05/1997 21/04/2004 27/04/2017 18/04/2013 23/04/2012 26/04/2006 27/04/2017 23/04/2012 Date of first appointment ------DIRECTORS LEAVING OFFICE DURING THE REFERENCE PERIOD ------DIRECTORS LEAVING 1965 1963 1954 1956 1958 1967 1947 1961 1968 1956 1962 1972 1960 1976 1963 birth 1962 Year of Year The Company’s Board of Directors meeting held on 26 April 2018 after the Shareholders’ Meeting conferred appointment, The Company’s

Members Laura Cioli Alberto Clò Silvia Merlo Elena Ciallié Giacaranda M. Carlo Perrone Michael Zaoui Francesco Dini Agar Brugiavini Elisabetta Oliveri Massimo Belcredi John Philip Elkann Monica Mondardini required to present lists during the last nomination: 2.5% Rodolfo De Benedetti Surname and name Marco De Benedetti Luca Paravicini Crespi Caracciolo di Melito Falck M/m is indicated in this column depending on whether the member was elected from list voted by majority (M) or a minori ty (m). This column indicates the investment holding of directors in meetings BoD and Committees, respectively (No. attended/No. that party could have attended) This column indicates the number of offices as director or statutory auditor covered by party concerned in other listed comp anies on organised markets, also foreign, finance, banking insurance companies those a significant size. The Corporat e Governance Report contains the full details of appointments. The position of the member within Committee is designated as “P” for Chairman (“Presidente”) and “M” committee member. Board member Paravicini was a of the Appointments and Remuneration Committee up until 26/04/2018 Board member Zaoui was a of the Appointments and Remuneration Committee up until 26/04/2018. From 26/04/2018, he app ointed same Committee. up until 26/04/2018. As from 26/04/2018, he was Chairman of the Appointments and Remuneration Committee. Board member Clò was a of the Committee for Related-Party Transactions Director Director Director Director Director Director Director Director Director Director Director Director Manager Chairman Appointment CEO and General Deputy Chairman Deputy Chairman Specify the quorum Number of meetings during reference period BOD: 7 Table 2 Table Structure of Board and Committees the of appointment the for presented were lists two following The statements. financial 2020 the of approval until period, three-year a for members fifteen of up made Directors of Board a appointed 2018 April 26 on held Meeting Shareholders’ ordinary and extraordinary The and single List presented by minority shareholder Erga Omnes Srl, Prosper Srl SIA BLU SpA Board of Directors: List presented by the company CIR SpA, majority shareholder, In compliance with the Articles of Association provisions, fourteen directors have been elected from majority list and one minority list. It is hereby specified that presented by shareholder CIR SpA single aforementioned share holders respectively obtained a percentage of favourable votes equal to 48.673% and 10.994% the share capital. For any other information pertaining lists presented or personal professional characteristics directors, please refer documentation available on the website www.gedispa.it. and she was co-opted by the Board of Directors until next Shareholders’ Meeting. NOTES * ** *** **** ° °° °°°°° 96 | GEDI Gruppo Editoriale | Report on corporate governance and the ownership structure

Table 3 Composition of the Board Of Statutory Auditors

Board of Statutory Auditors

Date of first In office In office List Indep. Part. in Stat. Number other of Code Appointment Members Year of birth appointment from until (M/m) * Audit. meetings appointments *** approval Chairman Gaetano Rebecchini 1987 26/04/2018 26/04/2018 m x 6/6 8 2020 FS

Statutory Auditor Maurizio Lauri 1962 26/04/2018 26/04/2018 " M x 5/6 5

Statutory Auditor Marina Scandurra 1969 23/04/2012 26/04/2018 " M x 10/10 9

Alternate Auditor Riccardo Zingales 1960 16/12/1998 26/04/2018 " M - - -

Alternate Auditor Antonella Dellatorre 1971 16/04/2014 26/04/2018 " M - - -

Alternate Auditor Lorenzo Giovannelli 1988 26/04/2018 26/04/2018 " m - - -

------STATUTORY AUDITORS LEAVING OFFICE DURING THE REFERENCE PERIOD ------

Surname and name

approval Chairman Stefania Mancino 1963 23/04/2015 23/04/2015 2017 FS m x 4/4 4

approval Statutory Auditor Pietro Manzonetto 1944 23/04/2015 23/04/2015 2017 FS M x 4/4 4

approval Alternate Auditor Andrea Bignami 1964 23/04/2015 23/04/2015 2017 FS m - - -

Number of meetings during reference period 10

The extraordinary and ordinary Shareholders’ Meeting held on 26 April 2018 appointed the aforementioned Board of Statutory Auditors for a three-year period, until approval of the 2020 financial statements. The following two lists were presented for the appointment of the Board of Statutory Auditors: List presented by the company CIR SpA, majority shareholder, and single List presented by minority shareholder Erga Omnes Srl, Prosper Srl and SIA BLU SpA In compliance with the Articles of Association provisions, the Chairman of the Board of Statutory Auditors has been elected from the minority list. It is hereby specified that the list presented by the shareholder CIR SpA and the single list presented by the aforementioned shareholders respectively obtained a percentage of favourable votes equal to 48.638% and 11.013% of the share capital. For any other information pertaining to the lists presented or the personal and professional characteristics of the statutory auditors, please refer to the documentation available on the website www.gedispa.it.

NOTES * M/m is indicated in this column depending on whether the member was elected from the list voted by the majority (M) or a minority (m). ** This column shows attendance of statutory auditors at the Board of Statutory Auditors meetings (No. of meetings attended/No. of meetings that the party could have attended) *** This column indicates the number of offices as director or statutory auditor covered by the party concerned relevant for the purposes of Article 148-bis of the Consolidated Law on Finance (TUF) and the relevant implementation directives contained in the Consob regulation. The complete list of appointments is published by Consob on its website, pursuant to Art. 144-quinquiesdecies of Consob RE. APERTURE_SFUMATURA.qxp_impaginato 06/02/19 11:46 Pagina 11

Consolidated financial statements of the GEDI Group at 31 December 2018 Statement of Financial Position and Income Statement

Consolidated Financial Statements | GEDI Gruppo Editoriale | 99

Consolidated Statement of Financial Position ASSETS 31 December 2017 31 December 2018 (€ thousand) Notes restated* Intangible assets with an indefinite useful life 577,036 556,656 Other intangible assets 8,998 10,052 Intangible assets (1) 586,034 566,708 Property, plant and equipment (2) 90,559 80,164 Investments valued at equity (3) 124,325 109,371 Other investments (4) 10,258 10,244 Non-current receivables (5) 1,400 1,159 Deferred tax assets (6) 36,685 39,228 NON-CURRENT ASSETS 849,261 806,874 Inventories (7) 12,936 14,902 Trade receivables (8) 208,277 187,207 Receivables and other financial assets (9) 222 814 Tax receivables (10) 18,803 6,617 Other receivables (11) 30,561 22,218 Cash and cash equivalents (12) 63,518 77,279 CURRENT ASSETS 334,317 309,037 TOTAL ASSETS 1,183,578 1,115,911

LIABILITIES Notes 31 December 2017 31 December 2018 (€ thousand) restated* Share capital (13) 76,304 76,304 Reserves (14) 236,278 227,302 Retained earnings (losses) (14) 367,808 251,371 Net profit (loss) (123,336) (32,153) Group Shareholders’ Equity 557,054 522,824 Minority interests (15) 502 580 SHAREHOLDERS’ EQUITY 557,556 523,404 Financial debt (16) 95,651 3,507 Provisions for risks and charges (17) 29,152 24,529 Employee termination indemnity and other retirement benefits (18) 59,197 54,814 Deferred tax liabilities (6) 113,475 114,905 NON-CURRENT LIABILITIES 297,475 197,755 Financial debt (16) 83,191 177,766 Provisions for risks and charges (17) 27,456 34,758 Trade payables (19) 113,194 111,154 Tax payables (20) 45,929 11,598 Other payables (21) 58,777 59,476 CURRENT LIABILITIES 328,547 394,752 TOTAL LIABILITIES 626,022 592,507 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,183,578 1,115,911

* The comparative figures at 31 December 2017 were reclassified to include the portion referring to the deferred price on the credit portfolio sold in the scope of the securitisation transaction among “Financial debt”, which had previously been recognised under “Receivables and other financial assets”.

The notes from page 105 to page 174 represent an integral part of these consolidated financial statements. 100 | GEDI Gruppo Editoriale | Consolidated Financial Statements

Consolidated Income Statement

Year 2017 Year 2018 (€ thousand) Notes restated* Revenues (22) 615,834 648,736 Change in inventories (7) 45 128 Other operating income (23) 10,792 15,545 Purchases (24) (54,256) (59,820) Costs for services (25) (293,793) (308,321) Other operating charges (26) (14,496) (13,344) Personnel costs (27) (211,331) (249,855) Depreciation, amortisation and write-downs (28) (24,570) (44,153) Operating profit 28,225 (11,084) Financial income (expense) (29) (8,686) (22,791) Valuation of investments at equity (3) (444) 725 Profit (loss) before taxes 19,095 (33,150) Taxes (30) (150,512) 1,092 Net profit (loss) of assets destined to continue (131,417) (32,058) Profit (loss) from discontinued operations and assets held for sale 8,161 - Net profit (123,256) (32,058) Minority interests (31) (80) (95) GROUP PROFIT (LOSS) (123,336) (32,153) Earnings per share, basic (32) (0.281) (0.066) Earnings per share, diluted (32) (0.247) (0.059)

* The Group has applied the international accounting standard IFRS 15 as from 1 January 2018, using the “retrospective method”. The comparative information was therefore restated. The application of the new standard has had no impact on the operating profit, profit for the period or the Group’s shareholders’ equity, with differing accounting treatment only in certain items. The details regarding the effects of applying IFRS 15 are explained under paragraph 5 of the Notes to the Financial Statements.

Consolidated Statement of Comprehensive Income

Year Year (€ thousand) 2017 2018 NET PROFIT (123,256) (32,058) Other comprehensive income components: Actuarial profit (loss) on personnel provisions (677) 1,005 Profit (loss) on restatement of available-for-sale financial assets - - Tax effect of other profit (loss) 162 (241) Other comprehensive income components, net of tax effect (515) 764 TOTAL COMPREHENSIVE INCOME (123,771) (31,294) Total comprehensive income attributable to: Shareholders of the Parent Company (123,851) (31,389) Minority interests 80 95

The notes from page 105 to page 174 represent an integral part of these consolidated financial statements. Consolidated Financial Statements | GEDI Gruppo Editoriale | 101

Consolidated Cash Flow Statement

Year Year (€ thousand) Notes 2017 2018 OPERATING ACTIVITIES Net profit (loss) for the period, including minority interests (123,256) (32,058) Adjustments: Depreciation, amortisation and write-downs (28) 24,570 44,153 - Actuarial assessment stock option plans (27) 734 780 - Net change in provisions for personnel costs (18) (2,611) (4,383) - Net change in provisions for risks and charges (17) (29,152) 2,679 - Losses (gains) on disposal of fixed assets (568) (3,268) - Losses (gains) on disposal of investments and securities (208) (68) - Adjustments to the value of financial assets (28) 12,026 - Adjustments for investments valued at equity 4,726 2,928 - Loss (profit) from discontinued operations (8,161) - Self-financing (133,954) 22,789 Changes in current assets and other flows 14,005 (1,285) CASH FLOW FROM OPERATING ACTIVITIES (119,949) 21,504 of which: Interest received (paid) (2,966) (3,120) Income taxes received (paid) (6,245) (1,657) INVESTING ACTIVITIES Outlay for purchase of fixed assets (13,103) (16,410) Outlay for purchase of investments (6,530) (5) Collections from sales 5,326 4,537 Cash flow generated by purchase of ITEDI 8,965 - Cash flow generated by sale of assets 2,000 7,000 CASH FLOW FROM INVESTING ACTIVITIES (3,342) (4,878) FINANCING ACTIVITIES (Purchase) sale of own shares (35) 110 Issue (repayment) of other financial debt 40,192 (3,533) (Dividends paid) (33) - - Other changes (1,897) 519 CASH FLOW FROM FINANCING ACTIVITIES 38,260 (2,904) Increase (decrease) in cash and cash equivalents (85,031) 13,722 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 148,498 63,467 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 63,467 77,189

The notes from page 105 to page 174 represent an integral part of these consolidated financial statements. 102 | GEDI Gruppo Editoriale | Consolidated Financial Statements

------734 780 764 (36) (17) (566) (817) (515) (118) equity 83,652 (1,003) (2,500) 598,360 557,556 523,404 (32,058) (123,256) Total share Total

------80 95 487 502 580 (36) (29) (17) Third party share equity

------734 780 764 (566) (788) (515) (118) equity 83,652 (1,003) (2,500) 597,873 557,054 522,824 (32,153) (123,336) Own share

------10,356 123,336 (10,356) (32,153) (32,153) (123,336) (123,336) Profit (loss) for the period

------764 (531) (788) (515) (228) 8,313 8,863 10,356 (2,500) 350,973 367,808 251,371 earnings Retained (123,336)

------Equity (7,521) (8,904) 141,523 134,002 125,098 Reserves

------734 780 (792) Option 12,010 11,952 12,732 Res. Stock -

------41 IFRS 52,904 52,904 51,942 (1,003) Reserve

------reserve Fair value

------110 (35) Own shares (34,544) (34,469) (34,579)

------2,845 Share 69,154 71,999 71,999 Premium

------Share 61,806 14,498 capital 76,304 76,304 Movements in net profit Consolidated Statement of Changes in Equity (€ thousand) (€ Position at 31 December 2016 Dividends

Capital increases, capital contributed by shareholders of stock options Valuation Own share transactions Transfers between reserves Transfers Other changes Changes in statement of comprehensive income: Actuarial profit (loss) on personnel provisions Movements in net profit Profit (loss) on restatement of financial assets available for sale Net profit (loss) for the period Position at 31 December 2017 Dividends Capital increases, capital contributed by shareholders Valuation of stock options Valuation Own share transactions Transfers between reserves Transfers Other changes Effect of adopting IFRS9 Changes in statement of comprehensive income: Actuarial profit (loss) on personnel provisions Net profit (loss) for the period Position at 31 December 2018 APERTURE_SFUMATURA.qxp_impaginato 06/02/19 11:46 Pagina 11

Notes to the Consolidated Financial Statements of the GEDI Group

Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 105

Notes to the Consolidated Financial Statements

1. General Information

GEDI Gruppo Editoriale SpA (hereinafter “GEDI”, the “Company” or “Parent Company”) and those companies in which it holds either directly or indirectly an interest (hereinafter jointly referred to as the “GEDI Group” or the “Group”) operates mainly in the publishing sector and more specifically in the newspapers and periodicals segment, that of radio stations, advertising sales and online publishing. GEDI Gruppo Editoriale SpA has its registered office in Italy at Via Cristoforo Colombo 90, Rome. CIR Compagnie Industriali Riunite SpA controls the Company and exercises coordination and management functions pursuant to Article 2497 of the Italian Civil Code. GEDI Gruppo Editoriale stock is listed on the screen-based trading circuit (Mercato Telematico Azionario (MTA) of Borsa Italiana SpA (Reuters code: GEDI.MI, Bloomberg code: GEDI IM). The draft consolidated financial statements and their circulation were approved by the Board of Directors on 1 March 2019.

2. Form and content of the financial statements and accounting standards

These consolidated financial statements, based on the principle of the company as an ongoing concern, were prepared in accordance with international accounting standards (International Accounting Standards, IAS and International Financial Reporting Standards, IFRS), as integrat- ed by the related interpretations (Standing Interpretations Committee – SIC and International Financial Reporting Interpretations Committee, IFRIC) issued by the International Accounting Standards Board (IASB) and approved by the European Union. The general principle adopted in the preparation of the financial statements is that of the historical cost for all assets and liabilities, with the exception of derivative instruments and certain financial assets/liabilities, some of which could be accounted for at their fair value. The classification, form, order and nature of items in the financial statements, are unchanged to those in the financial statements approved at 31 December 2017, with the exception of the component referring to the deferred price on the credit portfolio sold in the scope of the securitisation transaction recorded under “Receivables and other financial assets”, which was reclassified among “Financial debt”. The accounting principles adopted were also unchanged, except for the new IFRS 9 and IFRS 15 standards, referred to under Note 5. The comparative data in the 2017 Income Statement was restated to reflect the retrospective application of the international IFRS 15 accounting standard. It is noted that the application of the new standard has had no impact on the operating profit, profit for the period or the Group’s shareholders’ equity, with differing accounting treatment only in certain items. As mentioned, the details regarding the effects of applying IFRS 15 are explained under paragraph 5 of the Notes to the Financial Statements. The comparative figures at 31 December 2017 were reclassified to include the portion referring to the deferred price on the credit portfolio sold in the scope of the securitisation transaction among “Financial debt”, which had previously been recognised under “Receivables and other financial assets”. 106 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

The classification adopted in the Statement of Financial Position, both for assets and liabilities, is that of “current” and “non-current” as, contrary to the classification by liquidity, such criteria is deemed to provide a better representation of the Group’s financial position. The State- ment of Financial Position is divided into two separate facing sections. The order of reporting is assets, shareholders’ equity and liabilities (from the least current to the most current). In order not to make the reporting unnecessarily complex and to use the same format for interim reports, financial statements include only major captions and all sub-classifications (e.g. nature of the debtor/creditor, expiration term, etc.) are instead disclosed in the notes. The contents of the Statement of Financial Position are in compliance with the minimum requirements established by IAS 1 as, with the exclusion of publications, radio frequencies and trademarks, classified under “Intangible assets with an indefinite useful life”, no significant or particular items were deemed to require separate reporting. Income Statement items were classified by nature as, considering the activities of the Group, it has not been deemed that a classification by destination could better represent the operating performance of the Company. In the Cash Flow Statement, prepared according to the “indirect method”, cash flows arising from operating, investing and financing activities, and those arising from discontinued operations are reported separately. The Consolidated Statement of Changes in Equity shows income and charges for the period and other changes in reserves. Unless otherwise specified, amounts reported in the financial statements and tables are stated in thousands of euro, rounded to the nearest unit.

3. Principles of consolidation

The scope of consolidation includes the financial statements of the Parent Company, its subsidiaries and affiliated companies. Subsidiaries are those companies in which the Parent Company exercises decisional power over financial and operating policies. Control is deemed to occur when more than half of actual voting rights or those potentially exercisable at a shareholders’ meeting are held by the company, either directly or indirectly, at the date of the financial statements. Affiliated companies are those in which the Parent Company exercises a significant influence. Such influence is deemed to occur when the Group controls 20% or more of actual voting rights or those potentially exercisable at the date of the financial statements. Subsidiaries are consolidated from the date on which the Group acquires control and decon- solidated as from the date on which control is lost. Subsidiaries and affiliated companies are recorded at purchase cost. Purchase cost corresponds to the value of assets acquired, shares issued or liabilities generated at the time of acquisition, in addition to directly attributable costs. The excess of the purchase cost over the book value of assets of subsidiaries acquired by the Group is recorded as goodwill, while that of affiliated companies acquired is included in the value of the investment. The accounting treatment of goodwill is described in Note 4.1. Subsidiaries were consolidated under the line-by-line method, thus including all assets and liabilities, costs and revenues of subsidiaries, regardless of the share held. The book value of consolidated companies was therefore netted against the related portion of the shareholders’ equity. Transactions, balances and unrealised gains and losses among Group companies were therefore eliminated. The portions of shareholders’ equity and profits accruing to minority shareholders were recorded separately under shareholders’ equity in the consolidated state- Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 107

ment of financial position and under a separate caption in the consolidated statement of comprehensive income. Subsequent to their acquisition, investments in affiliated companies are recorded under the equity method, recording the share of the Group in the profit and in the change in reserves, respectively in the income statement and in the statement of financial position under shareholders’ equity. The pertinent portion of unrealised gains and losses on infragroup transactions was eliminated. When the Group’s share in the loss of an affiliated company is equal or higher than the book value of the investment, the Group does not recognise further losses unless it is has obligations to cover losses or has made payments on behalf of the affiliated company. The consolidated financial statements do not include non-operational subsidiaries or those in liquidation. Their impact on total assets and liabilities, on the financial position and on the share in net profit attributable to the shareholders of the Parent Company is not relevant. All financial statements of Group companies for consolidation purposes are prepared at the same date, using the same accounting standards and relate to a financial year of the same duration.

3.1. IFRS 12 With reference to the disclosure purposes of IFRS 12, it is hereby indicated that the companies designated as subsidiaries in the Attached Summary statement of Group companies, are entities in which GEDI Gruppo Editoriale exercises control, either by directly or indirectly holding the larger quota of voting rights in the respective shareholders’ meetings, or due to its rights to receive the variable benefits arising from its relations with the latter, impacting on said benefits and exercising its power over the company, even aside from its equity relationships. With regard to the summary of the economic-financial data of the subsidiaries with minority holdings, please see the matters presented in section 11.8 of the Notes to the financial statements of the Parent Company. For the purpose of the disclosure relating to changes in the composition of the Group, reference is made to the matters illustrated in the section on the Scope of consolidation. The companies designated as associated in the Summary statement of Group companies, are companies in which the Group exercises significant influence, but not control or joint control, over the financial and operating policies. For the purpose of the disclosure relating to the nature, extent and economic-financial effects of the Group holdings in associated companies and the summary of the economic-financial data of the associated companies, reference is made to the matters illustrated in section 12.3 “Investments valued at equity”. There are no restrictions on the ability of the Group to assess or use the assets and to discharge liabilities nor provisions which limit the distribution of dividends or other distributions of capital of both the subsidiaries and the associated companies.

4. Valuation criteria

4.1 Intangible assets Intangible assets are initially recorded at acquisition or production cost. The acquisition cost is represented by the fair value of the price paid for the asset, inclusive of any direct cost incurred for preparing the asset for use. The purchase cost is the equivalent price paid in cash at the time of the acquisition. In case the amount paid for the acquisition is deferred beyond normal 108 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

payment terms, the difference with respect to the equivalent cash price is recorded as interest over the longer payment term. The cost of intangible assets developed internally is recorded by separating costs incurred in the research phase (not capitalised) and costs incurred in the subsequent development phase (capitalised). In case the two phases cannot be separated, the whole project is accounted for as research. The book value of intangible assets is in line with the amount expected to be retrieved through future use or disposal. At least once a year and in case there arise doubts as to the possibility to retrieve the book value of an asset, the latter is subjected to an impairment test, as described in Note 4.7.

Publications, trademarks and frequencies The useful life of newspaper publications and trademarks allocated to their respective CGU, is considered as undefined. Radio frequencies are also considered as assets having an indefinite useful life as they are used based on concessions for broadcasting whose duration is unlim- ited. Such assets are not amortised and are instead subjected annually, and any time there is an indication that the asset may have experienced a loss in value, to an impairment test. Any impairment loss is recorded in the income statement under “Depreciation, amortisation and write-downs”.

Goodwill Goodwill represents the premium paid over the fair value of the share of assets and liabilities, including potential ones, at the time of acquisition. Goodwill arising from the acquisition of affiliated companies is included in the value of the related investments. Goodwill purchased for a cost is not subject to amortisation but to an impairment test at least once a year. Accordingly, goodwill is allocated from the date of acquisition to one or more cash generating units (CGU). Reductions in value resulting from an impairment test do not give rise to adjustments in subsequent years and are recorded in the income statement under “Depreci- ation, amortisation and write-downs” and are not reinstated in subsequent years.

Other intangible assets Other intangible assets are represented by industrial patents and intellectual property rights, concessions, licenses, trademarks and similar rights, and software. They are recorded at cost, net of accumulated amortisation calculated on a straight line over their expected useful life, and possible losses in value.

4.2 Property, plant and equipment Property, plant and equipment at the beginning are recognised at purchase price or at production cost. Cost includes associated expenses and any direct and indirect costs incurred to make the asset ready for use. The capitalisation of costs for the upgrade, update or improvement of structural elements owned or leased from third parties is carried out exclusively when the same fulfil the requisites that allow their separate classification as assets or part of assets. Ordinary maintenance costs are charged to the income statement. After the initial recording, property, plant and equipment are carried at cost, net of accumulated depreciation (with the exception of land) and any losses in value. The depreciable value of each significant component of a tangible asset having a different useful life is calculated on a straight line over its expected useful life. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 109

Amortisation criteria, the useful life of assets and their residual value are reviewed and redefined at least at the end of each financial period to take into account possible significant changes. Capitalised costs relating to leasehold improvements are depreciated over the shorter term between the residual term of the lease and the residual useful life of the asset to which the leasehold improvement relates. The book value of property, plant and equipment is in line with the amount expected to be retrieved through future use. In case doubts arise as to the possibility of recovering the net book value of an asset, the latter is subjected to an impairment test, as described in Note 4.7. The original value is reinstated when the reasons that gave rise to the impairment cease to exist.

4.3 Business combinations Business combinations were recorded using the acquisition method, where the purchase cost (fee transferred) equals the fair value at the purchase date for the assets acquired, the liabilities incurred or undertaken, and the financial instruments issued by the buyer. The purchase cost includes the fair value of any assets and liabilities for potential fees. The charges associated directly with the acquisition are recorded in the Income Statement, or where the acquisition was carried out with the issue of capital instruments, in Shareholders’ Equity, on the date the services were rendered. The purchase cost is allocated recording the assets, liabilities and potential liabilities which can be identified by the sale at the relative fair value at the purchase date. Any positive difference between the fee transferred, measured at fair value at the purchase date, and the amount for any minority interests, in relation to the net value for the amounts of assets and liabilities identified in the purchase itself measured at fair value, is recorded as goodwill or, if negative, in the Income Statement. The value of minority interests is calculated in proportion to the shareholding percentage held by third parties in the net assets identified in the purchase, or at their fair value on the date of purchase. When a business combination is implemented over different stages, at the time of gaining control, the shareholdings previously held are remeas- ured at fair value and any difference (positive or negative) is recorded in the Income Statement. Any potential fee is recorded at fair value on the purchase date. Subsequent changes to the fair value of the potential fee, classified as a financial instrument in terms of IAS 39, are recorded in the Income Statement. In the case where the fair value for the assets, liabilities and potential liabilities can only be determined provisionally, the business combination is recorded using the provisional figures. Any adjustments arising from the completion of the valuation process are recorded within 12 months as from the purchase date, with the comparative figures recalculated if necessary.

4.4 Leasing Leasing contracts relating to assets for which the Group essentially bears all costs and benefits deriving from use are classified as financial leases. Assets held under a financial lease are recorded at the lower between the current value of the asset leased and the present value of the minimum lease payments provided for in the lease contract. The total for these payments is accounted for as interest and principal so as to obtain a fixed rate of interest on the residual part of the debt. Residual lease payments, net of financial costs, are recorded as financial debt. Borrowing costs are charged to the income statement over the life of the lease. Assets held under a financial lease are depreciated in line with the nature of the good. Leasing contracts in which the lessor holds a significant share of the risks and benefits deriving from ownership are classified as operating leases. Lease payments are recorded in the income 110 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

statement in equal instalments over the life of the lease contract. In sale and lease-back operations, the difference between the sale price and the book value of the asset is not recorded, except in the case of a write-down in the value of the asset.

4.5 Grants Grants are recorded when there exists, regardless of the formal granting of the amount, reasonable certainty that the company will meet the conditions for the entitlement to the grant and that the same will actually be received. Capital grants are recorded in the statement of financial position as deferred revenue. The grant is credited to the income statement based on the useful life of the asset for which it is granted by discounting it so as to net out the related amortisation recorded. Grants receivable as compensation for expenses and costs already incurred or aimed at providing immediate financial help to the company not correlated to future costs are recorded as income in the year in which they become receivable.

4.6 Financial expenses Financial expenses incurred for an investment in assets which normally require a certain period of time to be prepared for use or for sale, are capitalised and amortised over the life of the assets to which they relate. All other financial charges are recorded in the income statement in the year in which they are incurred.

4.7 Loss in value of assets A loss in value of an asset originates whenever the book value of an asset is higher than the amount expected to be retrieved from the same. At each accounting date, the presence of factors indicating a possible loss in value is assessed. Whenever one of these factors is present, the retrievable value of the asset is assessed through an impairment test and the write-down is recorded where appropriate. Assets not yet available for use, those recorded in the financial statements in the current financial year, intangible assets having an indefinite useful life and goodwill are subject at least annually to an impairment test, independently from the presence of factors indicating possible loss in value. The retrievable value of an asset is the higher between its fair market value, net of costs to sell, and its value in use. The retrievable value is calculated with reference to each individual asset, unless said asset is able to generate positive cash flows deriving from ongoing use independently from positive cash flows generated by other assets or groups of assets, in which case the test is carried out at the level of the smallest Cash Generating Unit that includes said asset. The original value of the asset is restored whenever the reasons for the write-down cease to exist, with the exception of goodwill whose original value is not restored.

4.8 Investments in associates and joint arrangements Joint ventures (companies with joint control) refer to companies where the Group has joint control and has rights in respect of the former’s net assets. Joint control is intended as the shared control, which only exists when decisions referring to significant assets require the unanimous consent of all parties sharing the control. Associate companies are those in which the Group exercises significant influence. Significant influence is the power to participate in determining the financial and operating policies of the investee company without having control or joint control over it. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 111

Investments in associates and joint ventures are measured using the equity method. By applying this method, these investments are initially recorded at cost, assigning the fair value of the assets acquired and liabilities undertaken in their book value, as well as any goodwill resulting from the difference between the cost of the shareholding and the Group’s interest portion at the purchase date; this goodwill is not subject to separate impairment testing. Subsequently, the cost of the investment is adjusted to record the portion of the total profit (loss) for the associate or joint venture belonging to the Group, realised as from the purchase date. The components in the Statement of comprehensive income related to these investments are recognised as specific items in the other components of the Group’s Statement of comprehensive income. Dividends received from investments in associates and joint ventures are recognised at the investment’s adjusted book value. Profits and losses arising from transactions between the Group and an associate or joint venture are only recorded in the Consolidated Financial Statements to the extent of the third party interest portion in the associate or in the joint venture. The financial statements for associates and joint ventures are submitted for the same accounting period as the Group, and may contain adjustments if necessary to bring them in line with the Group’s accounting standards. After applying the equity method, the Group assesses whether it is necessary to record an impairment regarding the investment in the associate or joint venture. If there are signs that the investment has undergone an impairment, the Group calculates the amount for the impairment based on the relevant test, which measures the recoverable value for the investment. Investments in affiliated companies or those in which the Parent Company exercises a significant influence, are recorded at equity.

4.9 Non-current assets held for sale and discontinued operations Non-current assets (or groups subject to disposal) where the book value will mainly be recov- ered by means of sales transactions rather than their on-going use, are classified as held for sale, and recognised separately from other assets and liabilities in the Statement of Financial Position. Based on this, the asset (or groups subject to disposal) must be available for immediate sale in its current status, subject to conditions that are customary and common practice for the sale of said asset (or groups subject to disposal), and the sale must be highly probable within one year. If these criteria are met subsequent to the close of the period, the non-current asset (or group subject to disposal) is not classified as held for sale. Nonetheless, if these conditions are met subsequent to the close of the period, but before the financial statements are approved for publication, information in this regard is provided in the notes to the financial statements.

Non-current assets (or groups subject to disposal) classified as held for sale are recognised at their net book value or the fair value net of sales costs, whichever is the lower; the corresponding amounts from the previous period are not reclassified. Discontinued operations represent a portion of the company that has been disposed of or classified as held for sale, and: • represent a significant business segment or geographical business area; • are part of a coordinated disposal plan for a significant business segment or geographical business area; • is a subsidiary acquired for the sole purpose of being resold.

Profit (loss) from discontinued operations, whether disposed of or classified as held for sale and being disposed of, are recognised separately in the Income Statement, net of tax. The cor- 112 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

responding figures for the previous period (if applicable), are reclassified and recognised separately in the Income Statement, net of tax, for comparative purposes.

4.10 Inventories Inventories are recorded at the lower of the acquisition or production cost, determined by applying the weighted average cost method, and the presumed net realisable value. The cost is represented by the fair value of the price paid and any other cost that may be attributed, with the exception of interest expenses. The net realisable value is represented by the estimated sale price under normal conditions, net of completion costs and costs to sell. Write-downs are reversed in subsequent years when the reasons for their recording cease to exist.

4.11 Trade receivables Trade receivables are recorded at the fair value of future cash flows, written-down for losses in value. The Group transfers a portion of its trade receivables by means of recourse factoring and securitisation transactions. The factored receivables do not meet the requirements for elimination as defined by IFRS9, from the perspective of essentially maintaining the risks and benefits and therefore remain in the Group’s financial statements, even if they have legally been transferred; a financial liability for the same amount is recognised in the consolidated financial statements as Current Financial Debt. The gains and losses relating to the transfer of these assets are only recognised when the assets themselves are removed from the Group’s statement of financial position.

4.12 Cash and cash equivalents Cash and cash equivalents are represented by short-term investments in highly liquid assets that may be easily converted into known amounts of cash posing a minimal risk of fluctuation in value, and by transactions carried out in the context of centralised treasury management. For the purposes of the cash flow statement, cash and cash equivalents consist of cash, demand deposits with banks, other highly liquid short-term financial assets with an original maturity generally not exceeding 3 months, and bank overdrafts. For the purposes of the statement of financial position, the latter are included among financial debt under current liabilities.

4.13 Share capital The share capital is represented by capital underwritten and paid-up. Costs strictly correlated with the issue of shares are recorded as a reduction of the share capital, provided they are directly attributable to operations involving the same.

4.14 Own shares Own shares are recorded in a specific Shareholders’ Equity reserve. Gains or losses on the purchase, sale, issue or cancellation of own shares are not recorded in the income statement.

4.15 Fair value reserves Fair value reserves include changes in the fair value, net of the related tax effect, of items recorded at fair value with compensation in the Shareholders’ Equity.

4.16 Other reserves Other reserves are represented by specific capital reserves. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 113

4.17 Retained earnings (losses) “Retained earnings (losses)” includes the part not distributed and not accrued to the mandatory reserve (in case of profits) or not balanced (in case of losses), of profits and losses accrued. The item also includes transfers from other equity reserves freed-up, in addition to the effect of the change in accounting standards and relevant errors.

4.18 Employee benefits Short-term benefits Short-term employee benefits are recorded in the income statement over the period in which the employment takes place.

Post-retirement benefits As from 1 January 2007, Italian Law No. 296/2006 (2007 Budget Law) and related implementation regulations introduced substantial changes in norms regarding Employee Termination Indemnities (TFR), including the choice left to workers as to the destination of individual indemnities accruing from such date. In particular, new norms provide for the payment by the company of indemnities accrued to the pension fund of choice or, in case the worker has opted to maintain accrued benefits with the company and the company has less than 50 employees, into a treasury account set-up with INPS – the national Social Security Fund. These regulatory changes resulted in a new accounting treatment of Employee Termination Indemnities. Before the reform introduced with Italian Law No. 296/2006, under international accounting principles Employee Termination Indemnities were considered as a defined benefit plan, while now only indemnities accrued up to 31 December 2006 by companies with more than 50 employees continue to qualify as such, and indemnities accrued after such date are treated as a defined contribution plan. All obligations of the company are thus now fulfilled with the periodic payment of a contribution to other entities. The amount recorded in the Income Statement is therefore no longer that of discounted back indemnities, but the amounts actually paid to the pension fund of choice of the employee or the INPS treasury account, calculated pursuant to Article 2120 of the Italian Civil Code.

Defined benefit plans Employee termination indemnities (limited to the share accrued up to 31 December 2006 by companies with more than 50 employees) and Fixed indemnity for managers of newspapers are determined by independent actuaries to estimate the amount of the future benefits that the employees have accrued at the statement of financial position date. All the possible actuarial effects are recorded under Shareholders’ Equity and included in the statement of comprehensive income.

Defined contribution plans The Group participates in defined contribution plans contributing to mandatory, contractual or voluntary public or private pension plans. As already mentioned, Employee Termination Indemnities accrued by companies with more than 50 employees, calculated pursuant to Article 2120 of the Italian Civil Code, are paid out to the various pension plans or to the separate treasury service offered by INPS, as determined by individual employees. The payment of contributions extinguishes the obligation of the Group towards its employees. Contributions constitute therefore costs for the period in which they are due. 114 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Benefits based on financial instruments The Group recognises additional benefits to certain top managers through plans based on financial instruments. Plans adopted by the Group over time provide for the awarding of rights to participate in the share capital of the Parent Company (Stock Options and Stock Grants).

Stock Options – Stock Grants (bonus assignment of shares) The cost of these operations involving shares, recorded in the income statement among personnel costs, is calculated based on the fair value of such instruments at the time at which they are assigned. The cost is recorded in the period included between the date on which the options are assigned and that at which they become exercisable, and is also recorded under Shareholders’ Equity. The fair value of the options thus determined is not updated or reviewed at the end of each accounting period. When options or rights are exercised before or at expiration, the respective value recorded under Shareholders’ Equity is reclassified under the “Share premium reserve”. Whenever options expire unexercised, on the contrary, the related amount is reclassified under “Retained earnings (losses)”. In the transition to IFRS, the Group took advantage of a specific waiver and has not applied the above standards to stock option plans assigned before 7 November 2002.

4.19 Provisions for risks and charges, potential assets and liabilities Provisions for risks and charges are accrued against possible liabilities whose amount and/or timing is uncertain and whose fulfilment requires the use of financial resources. Provisions are made exclusively when an actual obligation, either legal or implicit exists towards third parties that requires the use of financial resources, and whenever a reliable estimate of the obligation can be made. The provision recorded represents the best estimate of the liability relating to the fulfilment of the obligation at the date of the financial statements. Provisions made are reviewed at each accounting date and adjusted to the best available estimate. Where the payment of the obligation takes place beyond normal payment terms and the discounting effect is relevant, the amount accrued is represented by the present value of expected future payments needed to extinguish the obligation. Potential gains and losses are not recorded in the financial statements, though adequate information about the same is provided.

4.20 Financial liabilities and equity Financial liabilities are recorded initially at the fair value of amounts received, net of transaction costs incurred, and subsequently carried at amortised cost using the effective interest rate approach. Convertible bond issues are recognised as compound financial instruments, made up of two components, which are dealt with separately only if significant: a liability and a conversion option. The liability corresponds to the current value of the future cash flows, based on the current interest rates as of the date of issue for an equivalent non-convertible bond issue. The value of the option is defined as the difference between the net amount received and the amount of the liability and is recorded under shareholders’ equity. The value of the conversion option is not changed in subsequent periods. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 115

4.21 Taxes Income taxes are calculated based on expected taxable income and current tax regulations. Deferred and prepaid taxes arising from timing differences between the profit reported in the financial statements and that reported for tax purposes, and the carry-forward of losses and tax credits not retrieved, are also recorded, provided their retrieval (elimination) reduces (increases) future tax payments with respect to the amount that would be payable in the future in case such retrieval (elimination) did not have a tax effect. The probability of recovery (elimination) is assessed on the basis of both the income capability of the Group’s individual companies, and on the basis of the income capability emerging at tax consolidation level. The tax effect of operations or other events are recorded in the income statement or directly under shareholders’ equity in the same manner as operations or events that originate a tax liability and on the basis of tax rates applicable at the statement of financial position date. In case of changes in said tax rates, the book value of deferred tax assets and liabilities is adjusted and entries are made in the income statement or under Shareholders’ Equity as appropriate. Since the 2004 financial year, GEDI Gruppo Editoriale SpA and the majority of its subsidiaries participate in the Parent Company’s CIR “tax consolidation” procedure pursuant to Art. 117/129 of the Consolidated Tax Law (T.U.I.R.). In June 2016, participation in the consolidated tax regimen was extended for the three-year period 2016-2018. Nonetheless, due to the capital increase resolved by the Shareholders’ Meeting of 27 April and released with the ITEDI SpA deed of transfer dated 27 June, CIR lost the controlling right of GEDI SpA, and consequently the Group’s tax consolidation that the Company had subscribed to for the three- year period 2016-2018 lapsed. With the CIR tax consolidation having lapsed, it was decided to adopt a tax consolidation at the level of GEDI SpA and its subsidiaries. The application of this regimen required that the holding company and each of the companies it controls jointly exercise a specific option, in terms of Art, 120 of the TUIR. The option is valid for the three-year period 2017-2019. Each company subscribing to the national tax consolidation transfers its tax income or losses to the consolidating company; the consolidating company records a receivable in respect of companies that contribute taxable amounts equalling the IRES payable (payable for the consolidated company). On the other hand, for companies that contribute tax losses, the consolidating company records a payable equalling IRES on the portion of the loss effectively offset at Group level (receivable for the consolidated company). The portion of consolidated companies’ tax losses exceeding the possible offset in the period at the tax consolidation level is recorded by the consolidated company as a receivable for prepaid taxes, taking into account the probability of these being realised in the future in the scope of the tax consolidation. Companies subscribing to the tax consolidation with net non-deductible financial expenses can benefit from tax surpluses available in other participating companies (thus making these expenses deductible).

4.22 Foreign currencies Financial statement items are recorded in the currency of the primary economic environment in which the company operates (“functional currency”). The consolidated financial statements are prepared in euro, which is the functional currency of the Parent Company. Transactions denominated in other currencies are translated into the reporting currency at the exchange rate at the date of the transaction. Foreign-exchange gains and losses arising from the settlement of these transactions and the translation of assets and liabilities denominated in currencies other than the functional currency are recorded in the income statement. 116 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

4.23 Changes in accounting estimates A change in the accounting estimate must be recognised by adjusting the book value of the asset, liability, shareholders’ equity items in the period in which the change took place, to the extent that a change gives rise to changes in value of the assets and liabilities concerned, or refers to a shareholders’ equity item. The forecast recognition of the effect of a change in the accounting estimate means that the change is applied to the transactions, other events and circumstances which have taken place as from the date of the estimate change. A change in the accounting estimate may influence just the economic result for the current year, or the economic result for the current year and for future years. A change in the estimated useful life or the methods envisaged for the use of the economic benefits referring to an asset which can be amortised/depreciated influences the amortisation/depreciation charge for the current year and each future year of the residual useful life of said asset. The effect of the change relating to the current year is recognised as income or expense in the same year. The impact, if it exists, on future years is recognised as income and expense in future years.

5. New IFRS and IFRIC interpretations

Standards, amendments and interpretations applied as from 1 January 2018.

The Group represents the Agent/Principal as follows. Repercussions have been identified for the recording of revenues referring to the circulation business, where the Publisher recognises the revenue based on the cover price gross of all the fees paid to the distribution chain, including the portion paid to newsagents. Pursuant to IFRS 15, the Publisher is considered the Principal in the execution of the performance obligations because the risk of not selling and the price are under the former’s control, including the portion payable to newsagents. Consequently contrary to the previous accounting treatment, this fee is also recorded as a distribution cost, and not as a reduction in revenue. Unit revenue with the aforementioned characteristics are therefore recognised as the result of copies sold, calculated at the cover price. Consequently, the application of IFRS 15 on the Financial Statements at 31 December 2018 resulted in an increase on circulation revenues for €75.0 million (€69.4 million in 2017) and a corresponding increase for the same amount in distribution costs under the costs for services, with no impact found however for shareholders’ equity or the operating profit and profit for the period. The Group has also analysed the contract obligations relative to the Advertising Concession- aire, concluding that performance refers to whoever covers the role of Agent, as they do not control the performance obligation, and consequently need to recognise the relative costs and revenues on a net basis. Consequently the application of IFRS 15 on the Financial Statements at 31 December 2018 resulted in a decrease on advertising revenues for €79.1 million (€86.9 million in 2017) and a corresponding reduction for the same amount in publisher fees arising from the advertising revenues on behalf of third party publishers under the costs for services, with no impact also in this case, for shareholders’ equity or the operating profit and profit for the period. The Group has applied the international accounting standard IFRS 15 as from 1 January 2018, using the “retrospective method”. The comparative information was therefore restated. As mentioned, the application of the new standard has had no impact on the operating profit, profit for the period or the Group’s shareholders’ equity, with differing accounting treatment as mentioned only in certain items.

- IFRS 9 standard On 24 July 2014, the IASB published the final version of IFRS 9 - Financial Instruments. The document contains the results of the IASB project aimed at replacing IAS 39. The standard introduces new criteria for the classification and measurement of financial assets and liabilities. In particular, with regard to financial assets, the new standard uses a single approach based on the management methods for financial instruments and on the characteristics of the contract cash flows from the financial assets themselves in order to determine the assessment criteria, replacing the different rules set by IAS 39. Regarding financial liabilities on the other hand, the main change refers to the accounting treatment of changes to the fair value of a financial liability designated as a financial liability measured at fair value in the Income Statement, in the case that these changes are due to a change in the issuer of the liability’s credit worthiness. Based on the new principle, these changes must be recognised under “Other comprehensive income” and no longer in the Income Statement. Furthermore, for non-substantial changes to liabilities, the economic effects of the renegotiation on the residual term of the debt thus changing the effective interest rate to that date, can no longer be spread, but instead the relevant effect must be recognised in the Income Statement. 118 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

The new standard for impairment requires that the estimate of losses on receivables is carried out based on the expected losses model (and not on the incurred losses model utilised by IAS 39), using available information that includes historic, current and forecast data, without incurring any unreasonable charges or effort. The standard requires that this impairment model is applied to all financial instruments, i.e. the financial assets measured at amortised cost, to those measured at fair value through other comprehensive income, to receivables from rental contracts and to trade receivables. Finally, the standard introduces a new hedge accounting model so as to correspond with the requirements of the current IAS 39 that were sometimes considered very stringent and unsuited to reflect the risk management policies of companies. The main changes to the document refer to: • the increase in the types of transactions eligible for hedge accounting by also including the risks of non-financial assets/liabilities that are eligible to be managed under hedge accounting; • the change in the process for recognising forward contracts and options when included in a hedge accounting relationship so as to reduce the volatility of the Income Statement; • changes to the effectiveness test with the current procedures based on the 80-125% parameter replaced with the principle of “economic relationship” between the item hedged and the hedging instrument; in addition, a retrospective effectiveness evaluation will no longer be required on the hedging relationship. The increased flexibility with the new accounting rules is counterbalanced by added disclosure requirements on the Company’s risk management activities. The table below provides a summary of the effects of adopting IFRS 9 on opening balances, and the recording of the relevant deferred taxes. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 119

ASSETS (€ thousand) Intangible assets - Property, plant and equipment - Investments valued at equity - Investments valued at cost - Non-current receivables (87) Deferred tax assets 314 Non-current assets 227 Assets held for sale - Inventories - Trade receivables (1,085) Financial receivables - Tax receivables (35) Other receivables (53) Cash and cash equivalents (57) Current assets (1,230) Total Assets (1,003)

LIABILITIES AND EQUITY (€ thousand) Share capital - Reserves - Retained earnings (losses) (1,003) Net profit (loss) - Shareholders’ Equity (1,003) Minority interests - Shareholders’ Equity (1,003) Non-current liabilities - Current liabilities - Total liabilities - Liabilities and Shareholders’ Equity (1,003)

The effect of applying IFRS 9 on financial assets at 1 January 2018 refers only to the new provisions regarding the losses due to a reduction in value, detailed hereunder. 120 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

The table below sets out the gross tax effect for the original assessment categories envisaged under IAS 39 and those introduced by IFRS 9 for each of the Group’s financial asset types at 1 January 2018:

Financial Original IAS 39 New classification Assets classification as per IFRS 9 Impairment (€/000) Investments Cost Classification and recognition: N/A Fixed asset, FVTOCI no recycling Impairment: none Non-current receivables Cost Classification and recognition: €87 Fixed assets, Amortised cost Impairment: none Trade receivables Cost Classification and recognition: €475 (Receivables vs Amortised Trade receivables, Amortised cost distribution customers) Impairment: counterparty expected loss risk Trade receivables Cost Classification and recognition: €357 (net advertising receivables) Amortised Trade receivables, Amortised cost Impairment: counterparty expected loss risk Trade receivables Cost Classification and recognition: €253 (sundry receivables) Amortised Trade receivables, Amortised cost Impairment: counterparty expected loss risk Tax receivables Cost Classification and recognition: €35 Tax receivables, Amortised cost Impairment: none except for receivables requested as reimbursement (counterparty expected loss risk) Other receivables Cost Classification and recognition: €53 Tax receivables, Amortised cost Impairment: none except for receivables requested as reimbursement (counterparty expected loss risk) Cash and cash equivalents Cost Classification and recognition: €57 Amortised Cash and cash equivalents, Amortised cost Impairment: counterparty default expected loss risk TOTAL €1,318

Because the effects of the first application of the accounting standard are recognised under the opening shareholders’ equity at the date of first application (1 January 2018), in accordance with the standard’s provisions, the comparative information was therefore not recalculated. In order to provide a better comparison however, certain data was reclassified for negligible amounts.

Accounting principles, amendments and interpretations not yet applicable and not adopted early by the Group

The Group has assessed the possible effects arising from the application of the following principles:

- IFRS 16 standard The new IFRS 16 standard – Leases, (published on 13 January 2016), destined to replace IAS 17 – Leases, provides a new definition of leases and introduces a criterion based on the control (right of use) of an asset to distinguish leasing contracts from services contracts, identifying the following as being determining: the identification of the asset, the right to replace the latter, the right to obtain all the economic benefits referring to the use of the asset, and the right to supervise the use of the asset underlying the contract. The standard sets a single model for the Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 121

recognition and measurement of leasing contracts for the lessee, which requires the recording of the asset under the lease under assets with a contra-entry under financial liabilities. It also makes provision for contracts referring to low-value assets and leasing with a contract term equal to or less than 12 months not to be recognised as leasing. The standard does not however envisage any significant changes for the lessor. The standard will be applicable as from 1 January 2019, but early application is permitted only in the case of companies that had already applied IFRS 15 - Revenue from Contracts with Customers. With regard to the effects from the adoption of the new standard, the Group has undertaken a study of contracts and gathered information relating to leases that are operational pursuant to the current IAS 17 - Leases. The impact will be estimated once the Group has completed this study. The approach that needs to be adopted during the transition stage will also be decided once the study is completed.

The main impact on the Group’s consolidated financial statements, which are currently being finalised and which are significant on the assumption of the amended retroactive approach being applied, with the option in the case of certain contracts of assuming equal usage rights to future liabilities. The main impacts are summarised below:

- Statement of Financial Position: higher non-current assets due to the recognition of “the right to use the asset”, with a contra-entry of higher financial liabilities; consequently, a negative impact is expected on net financial debt for approximately €62.6 million at the time of tran- sitioning on the date of first application.

- Income Statement: different nature, qualification and classification of expenses (amortisation of “the right to use the asset” and “financial expenses from interest” regarding “Costs for the use of third party assets”) with a consequent positive impact on the Gross Operating Profit.

Furthermore, the combination of the straight line amortisation portions for the “right to use the asset” and the effective interest rate method applied to leasing payables result in higher costs for the Income Statement during the contract’s initial years and then decreasing costs over the last years.

- Cash Flow Statement: the payment of fees for the capital portion of the debt repayment will be reclassified from “cash flows from operations” to “cash flows from financing activities”. Considering the contract clauses stipulated in the current financing contract, detailed under paragraph 11 of this document, the adoption of IFRS 16 will not influence the ability to comply with the financial covenant based on the relationship between Net Financial Debt and EBITDA. The Group is also assessing the possible effects arising from the application of the following principles and interpretations effective as from 1 January 2019:

- IFRIC 23 (Uncertainty over income tax treatments); - Amendments to IFRS 9 (Prepayment features with negative compensation); - Amendments to IAS 28 (Long-term Interest in associates and Joint Ventures); - Amendments to IAS 19 (Plan Amendments, Curtailment or Settlement); - Improvements to the IFRS 2015-2017 cycle – amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23); - IFRS 9 Insurance contract. 122 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

6. Industry information

During the second half of 2017, the Group completed the ITEDI integration process, after which the disclosure of sector information was changed to take into account the new organisational structure, which is now a matrix structure with special reference to the transversal digital area. More specifically, the Group is structured as follows:

• three publishing business units: - National Press (La Repubblica, L’Espresso and other periodicals); - News Network (La Stampa, il Secolo XIX and the 13 former Finegil local newspapers); - Radio (Radio Deejay, Radio Capital, m2o); • three transversal businesses: - a division for advertising revenue, which operates in support of the three publishing business units referred to above, and in respect of third parties. Detailed sector information is provided on the basis of the period reporting structure used by Group’s management, for the purposes of assigning resources and the results of the analyses; - a dedicated transversal activity referring to digital (development and marketing of Group and non-Group digital products), where the figures are included among those for the three publishing business units, and for the remainder, among other businesses; - transversal activity that includes industrial production (with 8 production sites located in the Group’s newspapers main distribution areas), and the services carried out by the Parent Company in favour of other sectors; the information relating to this activity is provided in the sector disclosure under “Other activities”. The determination of segments of activity of the Group and the presentation of the related information was carried out on the basis of periodical internal reports used by Group management to allocate resources and analyse results. The structure of the internal management reports is based on goods and services rendered. The Group evaluates the performance of its segments of activity based on Operating profit (loss). Revenues of the segments presented are those directly achieved or attributable to the segment and deriving from its core business. These include both revenues deriving from transactions with third parties and those deriving from transactions with other segments, the latter being carried out at remunerative terms, in line with market conditions. Specifically, in the publishing segments (national newspapers and news network) sales mainly include revenues from the sale of publications and/or add-on products sold with publications taking into account both the traditional printed channel and the transversal digital platforms (internet sites and digital products on various web platforms, tablets and mobile phones, and other minor channels) and advertising revenues; in the radio segment, sales are represented by ads on the three Group radio stations as well as the sale of programs, services to third parties and the issuer’s digital channels. The advertising sales segment accounts for the revenues realised by the concessionaire A. Man- zoni & C. SpA through both Group means and vis-à-vis third party publishers. Information regarding taxes and financial management is set forth without distinction in the consolidated results column, in line with the structure of internal reporting and, also because specific allocation would not be significant. For assets or liabilities that cannot be attributed to an individual segment, specific parameters were applied in their attribution. Assets and liabilities that may not be attributed using specific parameters are reported separately in the table below. Accounting standards under which segment information is reported in the notes are consistent with those adopted in the preparation of the consolidated financial statements. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 123

Industry information

Financial Statements 2018 National Advertising Other Elisions and (€ million) press GNN Radio revenue activities adjustments TOTAL Circulation revenues 139.7 172.5 - - 0.0 (0.8) 311.5 Advertising revenues 110.2 76.5 61.0 67.3 - 2.9 318.0 Other revenues 3.9 5.1 1.0 1.8 51.1 (43.6) 19.3 Total revenues 253.8 254.1 62.0 69.2 51.1 (41.5) 648.7 Revenues from other segments (111.0) (65.2) (59.3) 244.3 (50.4) 41.5 - Net revenues 142.8 188.9 2.8 313.5 0.8 - 648.7 Operating profit (43.6) 13.5 15.8 2.2 0.9 0.1 (11.1) Financial income (expense) (22.1) Taxes and minority interests 1.0 Group net profit (32.2)

Financial Statements 2017 National Advertising Other Elisions and (€ million) press GNN Radio revenue activities adjustments TOTAL Circulation revenues 157.3 136.9 - - 0.6 (1.0) 293.8 Advertising revenues 115.7 61.0 57.6 66.5 - 2.3 303.1 Other revenues 3.4 6.0 1.4 1.5 44.2 (37.7) 18.9 Total revenues 276.4 204.0 59.0 68.0 44.8 (36.4) 615.8 Revenues from other segments (117.4) (54.9) (55.8) 236.3 (44.6) 36.4 - Net revenues 159.1 149.0 3.2 304.3 0.2 - 615.8 Operating profit (3.4) 19.1 15.3 3.8 (6.5) 0.0 28.2 Financial income (expense) (9.1) Taxes and minority interests (142.4) Group net profit (123.3)

Financial Statements 2018 National Advertising Other Elisions and (€ million) press GNN Radio revenue activities adjustments TOTAL Net investments 5.2 0.3 5.8 0.6 2.5 - 14.4 Assets 797.5 158.2 115.6 225.3 106.4 (332.8) 1,070.1 Tax assets 45.8 Total Assets 1,115.9

Financial Statements 2017 National Advertising Other Elisions and (€ million) press GNN Radio revenue activities adjustments TOTAL Net capital expenditure 6.5 (0.2 ) 4.0 1.2 1.9 - 13.4 Assets 828.5 168.9 113.4 235.2 102.7 (320.7) 1,128.1 Tax assets 55.5 Total Assets 1,183.6

124 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

7. Changes in accounting principles, errors and adjustments to estimates

Accounting standards adopted are modified from one financial year to the next only in case the change is required by an accounting standard or it contributes to provide more reliable and relevant information on the effect of transactions carried out on the financial position, economic performance or cash flows of the entity involved. The changes in accounting principles are recorded retrospectively under shareholders’ equity for the first accounting year, with the exception of IFRS 9, which was applied as from 1 Janu- ary 2018 as permitted by this standard. For additional information, reference is made to paragraph 5 “New IFRS and IFRIC interpretations”. Comparative information has been adapted accordingly. This approach is adopted only when it is impractical to restate the accounts for comparative purposes. The application of a new or modified accounting principle is accounted for as required by the same principle. In case the principle does not provide for the transition, the change is accounted for under the retrospective method or, when this is impractical, through the use of projections. In case of relevant errors, the method described in the paragraph above with reference to accounting standards applies. In case of immaterial errors, the recording is carried out in the income statement in the period in which it is detected. Changes in estimates that have an impact exclusively on the income statement are accounted for through the use of projections in the same year in which the review takes place in case changes affect only such year, or in the year in which the review takes place and in subsequent years in case the change has an impact also in subsequent accounting periods.

8. Events subsequent to the reference date of the financial report

Events occurring after the date of the financial statements are events occurring between said date and the date on which the publication of the same is authorised. The date of approval for the publication of the financial statements is the date when the Board of Directors approves them. This date is indicated in Note 1. Subsequent events relate to facts that provide evidence of situations existing at the date of the financial report (subsequent events that imply adjustments) or facts providing evidence of situations after the statement of financial position date (subsequent events that do not require adjustments). The effect related to the first is recorded in the financial statements and the appropriate note is adjusted accordingly, while in the second case only suitable information is provided in the Notes, where relevant. Subsequent to the close of the year, the Parent Company received (indirectly through the other shareholder TIM SpA) a non-binding offer to acquire shares in Persidera SpA, in which it holds a 30% stake. The bidder was granted an exclusivity period, during which to conduct the necessary assessments with a view to formalising a subsequent binding offer. This exclusivity period was still valid at the date to approve GEDI Gruppo Editoriale S.p.A. draft financial statements. Based on the above, there are currently no indications that would make the sale of the shareholding seem at all likely over the short term, even in the absence of a binding offer.

9. Main causes of uncertainty over estimates

With the application of IFRS-EU, the drafting of the consolidated financial statements requires Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 125

that management makes assumptions and estimates that could affect the value of revenues, costs, assets and liabilities in the balance sheet and the relevant disclosures, as well as potential assets and liabilities at the reporting date. Management estimates and assumptions are based on prior experience and on aspects deemed reasonable according to the matter under consideration. Estimates and assumptions are reviewed on a periodic basis, and the effects of any changes are reflected according to the reference accounting standards applicable from time to time. Effective results could therefore differ from these estimates. For the GEDI Group, estimates are made primarily in the context of recording impairments in the value of intangible assets and investments in associates, to estimate returns, provisions for bad accounts, employee benefits, taxes and other provisions and reserves.

9.1 Retrievability of intangible assets with an indefinite useful life The consolidated financial statements include intangible assets with an indefinite useful life with a significant value, referring to publications, trademarks, frequencies and goodwill. At least on an annual basis, management conducts impairment tests to identify possible losses due to reductions in a CGU’s value, which has been assigned intangible assets with an indefinite useful life. In the case of publications, trademarks and goodwill, these impairment tests are based on the value of use that is determined by discounting back expected cash flows. This method is characterised by a high component of estimates, with special reference to the expected cash flows and financial parameters to be used to discount back the aforementioned cash flows. With regard in particular to the current uncertain outlook for the short and medium term, which is resulting in negative performance for advertising and circulation revenues for the print segment, this has made it difficult to estimate future performance and cash flow projections. Therefore, it cannot be excluded in the near future that the generation of results will differ from estimates. Circumstances and events that may affect future performance will be monitored closely by management, which will assess on an ongoing basis possible losses in the value of assets and, where necessary, adjust the book value of the same accordingly.

9.2 Recoverability of investments in associates The Group has significant investments in associates, and of particular relevance among these is the investment in the subsidiary Persidera Spa. Management conducts an impairment test in this respect to identify possible losses due to impairment at least on an annual basis. In the impairment test, the recoverable value for the subsidiary was based on the value of uses estimated using the method of discounting back future expected cash flows, which as stated above, is characterised by utilising estimates, which by their nature are uncertain and subjective relating to the expected cash flows for the subsidiary and the financial parameters to be used to discount back said financial flows.

9.3 Legal risks and tax disputes The GEDI Group is involved in various legal disputes relating to its publishing business. Given the nature of these disputes, the estimates made by directors are based on the weighting of historic trends referring to the previous three-year period, which essentially show a linear trend. With regard to the other legal and tax disputes, it is not always objectively possible to foresee their final outcome, some of which may even close with an unfavourable outcome. Provisions have been made to cover all significant liabilities in cases where lawyers envisage the possibility of an unfavourable outcome, based on a reasonable estimate of the loss. 126 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

9.4 Estimate of returns Estimates of returns for publications and the related add-on products are carried out monthly and constantly updated through the use of statistical methods applied to up-to-date information on sales.

10. Scope of consolidation

The scope of consolidation was unchanged during the period. Nonetheless, we note that on 27 June 2017, the merger operation was completed of the company Italiana Editrice SpA and its subsidiaries Publikompass SpA and Nexta Srl (“ITEDI Group”) into GEDI. Italiana Editrice SpA is the publishing company for two leading daily newspapers “La Stampa” and “Il Secolo XIX”; in addition to the publishing business referred to above, it also operates in the local advertising sales sector through Publikompass SpA, as well as in the multi-media sector through Nexta Srl, which is involved, inter alia, in the development, production, management and promotions of publishing services and products and e-commerce and the provision of marketing, IT and telecommunication services. The integration operation was carried out with a share capital increase with the exclusion of option rights for pre-existing shareholders, reserved under subscription to Fiat Chrysler Automobiles N.V. (“FCA”) and to Ital Press Holding SpA (“IPH”), which was released by the latter with a contribution in kind of the shares, aggregately representing the entire share capital of Italiana Editrice SpA. As a result of the transaction, on 27 June 2017, GEDI gained control of the ITEDI Group. The date of 30 June 2017 was taken as the consolidation date, and consequently the Income Statement of the GEDI Group for 2017 will include the ITEDI Group as from 1 July.

11. Information relating to financial instruments

On 1 April 2014, GEDI placed an equity linked 5-year Convertible Bond issue for a total of €100 million (maturity date 9 April 2019), and repayment with an interim coupon at the fixed rate of 2.625% per annum. The Convertible Bond Issue and related interest payments are unsecured and do not include covenants. The Convertible Bond Issue regulation provides the bondholder with the possibility of converting the bond into a specific number of shares of the issuer company, which on the basis of a formal document (deed poll) signed on 28 January 2015, is not entitled to redeem the convertible bonds (in the event of exercising the conversion right), by means of cash payment instead of payment in ordinary shares. Based on the bondholder’s option call, the instrument was recorded by splitting the instrument into its two components: one relating to the call option and one to the debt component. The option’s fair value for €4,290 thousand was classified under Shareholders’ Equity. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 127

In addition to the Bond issue, the Group has a further funding channel provided by the conferral transactions on the trade receivables of the subsidiary A. Manzoni & C. SpA, the concessionaire for advertising revenues. Specifically at the end of 2013, A. Manzoni & C. SpA, signed two separate factoring contracts (uncommitted) with UniCredit Factoring SpA and Société Général Factoring SpA respectively for a total loan of €50 million. Furthermore, during December 2017, the subsidiary A. Manzoni & C. SpA completed a securitisation transaction(committed) on the trade receivables’ portfolio based on an agreement signed with Unicredit. The agreement envisages that the vehicle company (Diamante SPV Srl) will acquire a total maximum financed amount of trade receivables for €45 million, with an interest margin of 1.5% and costs for non-use at 0.60%. The contract has a three-year term. Specifically, the Agreement envisages that A. Manzoni & C. SpA cedes and transfers specific receivables included in the portfolio to Diamante SPV Srl, which have been previously agreed based on the receivables subject to transfer having certain qualitative characteristics (i.e. counterparty’s rating). The transfer aims to securitise the receivables in question, with the issuing by Diamante SPV S.r.l. back secured securities (the “Securities”). These Securities are placed on the market for subscription and the resulting revenue from the issue is used by Diamante SPV Srl to finalise the acquisition of additional receivables conferred by A.Manzoni&C. SpA up to the limit agreed on in terms of the contract. A. Manzoni&C. SpA, in turn, will collect a portion of the price relating to the transferred receivables on a deferred basis; this part of the deferred price then carries the risk for non-payment on the receivables transferred. The risk of non-payment essentially remains with the company in terms of this mechanism, which in compliance with applicable accounting standards, considers the transfers of receivables in the scope of the securitisation transaction as being with recourse. Finally, at the start of 2018, the subsidiary A. Manzoni & C. SpA, signed an additional factoring contract (uncommitted) with Aosta Factor SpA for a total loan of €15 million. As a consequence of the consolidation of the companies in the ITEDI Group, on 27 June 2017 the Group became the holder of loan contracts with a pool of banks for an original amount of €10.7 million: amortisation began during the 2016 financial period and will be completed in the 2022 financial year. On 16 April 2018, the Parent Company GEDI Gruppo Editoriale S.p.A. signed a loan contract for €100 million, on a four-year term with four primary banks. The contract envisages compliance with a financial covenant based on the ratio between Net Financial Debt and EBITDA. This served to already refinance the Company in view of the repayment of the convertible bond loan issued in 2014 for €100 million, falling due in April 2019. 128 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

12. Notes to the statement of financial position items assets

Assets

Intangible assets (1) The breakdown of the category is shown below.

31/12/2017 31/12/2018 Publications and trademarks 453,999 432,485 Radio frequencies 87,375 91,242 Goodwill 35,662 32,929 Industrial patents and intellectual property rights 505 451 Concessions and licenses 6,986 8,394 TV frequencies - 1,200 Assets in process 1,507 7 TOTAL INTANGIBLE ASSETS 586,034 566,708

of which: Intangible assets with an indefinite useful life 577,036 556,656 Intangible assets with a defined useful life 8,998 10,052

Intangible assets, amounting to €566,708 thousand, decreased by €19,326 thousand compared to 31 December 2017 (€586,034 thousand), due to the write-downs following the impairment test for €24,247 thousand and amortisations for the period for €4,501 thousand. New investments during the year came to €9,422 thousand, referring primarily to the acquisition of radio frequencies and improvements to network infrastructure.

Research and Development costs were not capitalised and no revaluation of intangible assets was carried out.

The breakdown of intangible assets and changes in the period are shown in the tables that follow. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 129

Intangible assets with an indefinite useful life

Publications and trademarks 31/12/2018 Opening balance Original cost 453,999 Write-downs - Opening balance 453,999 ADJUSTMENTS TO ORIGINAL COST Increases - Decreases (21,514) Closing balance Original cost 432,485 Write-downs - Closing balance 432,485

Frequencies 31/12/2018 Opening balance Original cost 87,375 Write-downs - Opening balance 87,375 ADJUSTMENTS TO ORIGINAL COST Increases 3,867 Decreases - Closing balance Original cost 91,242 Write-downs - Closing balance 91,242

Goodwill 31/12/2018 Opening balance Original cost 35,662 Write-downs - Opening balance 35,662 ADJUSTMENTS TO ORIGINAL COST Increases - Decreases (2,733) Closing balance Original cost 32,929 Write-downs - Closing balance 32,929 130 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

The detailed list of the CGUs subject to impairment test is presented in the following table.

Cash Generating Unit Book value Book value or groups of CGU 31/12/2017 31/12/2018 1. La Repubblica 229,952 219,782 2. GEDI News Network Nuova Sardegna 6,113 6,113 3. GEDI News Network Livorno 13,957 12,004 4. GEDI News Network Lombardy-Emilia 17,655 17,655 5. GEDI News Network North East 108,064 95,940 6. GEDI News Network North West 110,611 110,611 7. Radio (R.Deejay, R.Capital and m2o) 88,546 92,413 8. Mo-Net 2,138 2,138 TOTAL 577,036 556,656

The impairment test carried out as at the end of 2018 on publications, radio frequencies, the internet company, trademarks and goodwill, revealed the following losses in value to be recorded in the financial statements:

• €10,170 thousand relating to the “La Repubblica” CGU; • €1,953 thousand relating to the “GEDI News Network Livorno” CGU; • €12,127 thousand relating to the “GEDI News Network GNN NorthEast” CGU. The expected retrievable value of assets was estimated based on fair value less costs to sell and value in use. The table that follows shows the main information used to carry out the impairment test for each cash generating unit or group of units whose value is significant.

Cash Generating Unit Criterion Segment Impairment or groups of CGU used loss 1. La Repubblica Value of use Newspapers (10,170) 2. Publications GEDI News Network (Div. Nuova Sardegna, Livorno, Lombardy-Emilia, Nord East, Nord West) Value of use Newspapers (14,077) 3. Radio: frequencies and Deejay trademark Fair value Radio - 4. Mo-Net Fair value Digital -

Determination of value in use of Cash Generating Unit The value in use of the Cash Generating Units (CGU) was determined by discounting back, at an appropriate rate, future cash flows, both positive and negative, generated by the unit in its operational phase and upon disposal. In other terms, the value in use was estimated by applying the Discounted Cash Flow model using the unlevered (or asset side) version that applies a formula that includes the discounting back of cash flows analytically expected during the period of the anticipatory plans and the expected terminal value of the cash generating unit. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 131

In order to correctly estimate the value in use of a Cash Generating Unit, it was necessary to care- fully estimate the cash flows expected from it over time; expectations regarding possible fluctuations in the amount and timing of cash flows; the discounting back rate to be applied, and other possible risk factors inherent in the long-term nature of the investment made in the unit. The approach selected to calculate the value of use and the discounting back rate is the “post- tax” method. This approach is recognised by IFRS standards, the Italian Accounting Board (OIC) and the Italian Valuation Foundation (OIV - “Organismo Italiano di Valutazione”) and exceeds the limits of the “pre-tax” approach, which is the subject of debate amongst professionals due to the simplification of the estimate for the tax shield effects. The discounting back rate is estimated net of taxes, on a consistent basis with the configurations of the flows to be discounted. In the specific case the discounting rate adopted was the average cost of invested capital (wacc) for the GEDI Group at 31 December 2018, equal to 7.04% (6.58% at 31 December 2017). The impairment tests carried out at 31 December 2018 are based on the forecast of the cash flows expected from the related CGUs, which can be taken from the 2019 Budget and the 2019- 2021 Three-year Plan approved by the Board of Directors on 25 January 2019, with reference to the results and business objectives. Based on the impairment test conducted on 31 December 2017, it was not necessary to extrapolate forecast data per additional subsequent years to the specific period, because the strategic measures will be implemented by 2021. Therefore the last year in the explicit forecast contained in the approved industrial plan (i.e. 2021) is deemed representative of a normalised situation that could be used to estimate the terminal value. Based on the above, for this period it was therefore assumed that the terminal value was estimated by taking as a reference a terminal (or “fully operational”) flow, or rather the normalised income determined on the basis of the gross operating profit expected in the last year of the analytical forecast period (2021), from which the outlays for normalised investments were deducted, together with taxes on operating income. The change in working capital was taken as zero in the terminal flow, in line with common practice. In addition, it is noted that on the assumption of an ongoing concern, and according to the method for calculating the terminal value, the value for amortisation corresponds with the investment value. It is also assumed that the “g” growth rate is nil, with the exception of the “Mo-Net” CGU which presents a progressively evolving trend in the underlying business.

The determination of fair value less costs to sell of Cash Generating Units IAS 36 establishes that the fair value less costs to sell of an asset or a group of assets (for example a Cash Generating Unit) is best expressed through a price “set” in a binding sale offer between independent parties, net of direct costs incurred in the disposal of the asset. In case such evidence does not exist, the fair value net of costs to sell can be determined making reference, in order of importance, to the following values: the current price negotiated in an active market; the price recorded in previous similar transactions; the price estimated on the basis of other information gathered by the company. In the case in question, the fair value less costs to sell has been determined following a differentiated method approach for the publishing operational divisions, to which the publications have been allocated, for the broadcasting frequencies and for the internet companies. 132 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

In greater detail: a) with regard to the publishing operational divisions, reference was made to direct valuation multipliers; this approach was necessary due to the lack of an active transfer market for similar cash generating units, as well as the difficult comparability of the transactions struck on the market by units similar to those being evaluated; b) with regard to the radio frequencies, a price/users-type empiric multiple was used, observing the transfer prices of frequencies similar to those being evaluated in relation to the population reached by the related signal; c) with regard to the Group company active in the digital sector (the internet company), or rather Mo-Net, reference was made to direct valuation multipliers which can be taken from comparable listed companies. To determine the fair value less the sales cost of the cash generating units in the publishing sector, the following entity side multiples, either of the trailing (historical/punctual multiples) or leading (expected/average multiples) indicator type, were used: Enterprise Value/Sales, En- terprise Value/Ebitda and Enterprise Value/Ebit. The multipliers used are taken from the estimates reported by Bloomberg with reference to the average multiples relating to a panel of companies that are comparable to the GEDI Group, consistent with the panel used to calculate the beta and financial structure in the discounting rate (wacc) and relative to the time frame 2018-2020. Compared to last year, where the average was taken between the actual 2017 and the next three-year period 2018-2020, with the absence of an appropriate number of economic forecasts for comparable companies for 2021 (forecasts are only available for one comparable company), the current calculation has excluded this year from the calculation. The panel of comparable companies was continued in the same way as the previous years, similarly to the source of data underlying the calculation (Bloomberg). The calculation referred to the average multiples relating to the time frame 2018-2020, so as to consider both the current multiples (trailing) and forecast multiples (leading) and thus reduce the variability associated with using forecast figures (characterised by an estimate). With regard to the related business magnitudes, for each cash generating unit the following are considered, on a consistent basis with the type of multiple to be applied: the turnover (Sales), gross operating margin (Ebitda) and operating profit (Ebit); in detail, with regard to the values for the publications at the reference date for the impairment test, the related business dimensions were determined as the average for the 2018-2020 period, following the multiple time frame. In order to establish the fair value less cost to sell, account is therefore taken of the average value resulting from the application of the three multipliers mentioned before. The estimated fair value less costs to sell of the radio frequencies has been calculated based on prices recorded on the sale of similar frequencies, verified through an assessment of the potential audience reached by the signal. The use of this approach allows estimating the fair value of radio frequencies by correlating the market price of the frequency and the number of inhabitants reached by the signal. Transactions relating to television frequencies on the Italian market were analysed when applying this method, with the definition of “price” intervals of radio frequencies in relation to the number of people reached by the signal (transmission system lighting up); these “price” intervals fluctuate between 1.54 times (average figure deduced from the most recent market transactions relative to radio acquisitions, where data was available to the public), and 2.23 times (average figure taken from the acquisition of frequencies done by the GEDI Group) the number of residents that could potentially be reached by the signal. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 133

With regard to the internet company (Mo-Net), the estimate of the fair value less cost to sell is based on the direct multipliers (Enterprise Value/Sales, Enterprise Value/Ebitda and Enterprise Value/Ebit) which can be taken from comparable listed companies. The multipliers based on the observance of the sales prices of similar companies in fact emerge as being difficult to apply, due to both the scarcity of the internet transactions in the Italian scenario and the essential differences of the business models of the companies subject to transaction. By contrast, the financial metrics seem to indicate a clearer correlation between the consensus which the market expresses with regard to the potential growth of the revenues and the evolution of the operating margins of the business and the stock market prices of the internet companies. So as to take into account the different size-related factor and the related “illiquidity” of the company subject to valuation with respect to the related internet company panel, as suggested by the main industry studies, a discount factor of 30% was applied to the equity value of Mo-Net obtained by applying the market multipliers.

Main assumptions on which the 2019-2021 anticipatory plans are based The impairment tests carried out at 31 December 2018 are based on the forecast of the cash flows expected from the related cash generating units, which can be taken from the 2019 Budget and the 2019-2021 Three-year Plan approved by the Board of Directors on 25 January 2019. Furthermore, you are reminded that in line with the recommendations issued by Consob jointly with the Bank of Italy and ISVAP in Documents No. 2 dated 6 February 2009 and No. 4 dated 3 March 2010, the impairment test procedure adopted by the GEDI Group adopted underwent prior examination and valuation by the Audit and Risk Committee and the Board of Statutory Auditors, and was approved by the Board of Directors on 25 January 2019; subsequently, the impairment test document was subject to the approval of the Board of Directors in a previous and separate point on the agenda of the Board meeting during which the financial report is approved. The main hypotheses underlying the forecast plans of the publishing CGUs are summarised below, with reference to the performance of the advertising and circulation revenues, the contribution deriving from the add-ons attached to the newspapers and the evolution of the costs.

Advertising revenues With regard to 2019, it is assumed that the advertising market will remain substantially stable compared to 2018, with this based on the contained growth envisaged in GDP. The advertising market is assumed to remain stable for subsequent years in the plan. With regard to the individual media, a change is envisaged to be substantially in line with the aspects observed in previous years, which would lead: for the press, to a further drop in its percentage weighting and consequently a further reduction in investments;with regard to radio, television and the internet, improved market performance is envisaged. The market trends were therefore reflected in the forecast plans for 2019-2021 for the Group’s publications CGU, hypothesising a drop in advertising on hard copy publications and growth in revenues in the internet, essentially in line with the trend envisaged for the market. 134 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Circulation revenues The hypotheses formulated for the 2019 Budget relating to the trend in news stand sales of Group newspapers, are based on the observance of the market data between 2007 and 2018. In this period, on the basis of the ADS figures, news stand and subscription sales of newspapers fell 56.0% (-7.2% annual average), dropping from 4.8 to 2.1 million average daily copies. By segment, the national information and sporting newspapers reported a more negative trend, losing 65.7% (-9.3% annual average) and 62.0% (-8.4% annual average) respectively as from 2007, while local newspapers lost 49.3% (-6.0% a year). This negative has however acceler- ated over the last few years. The latest figures available at the time of drawing up the 2019 Budget (ADS through November) indicated an overall drop in news stand and subscription sales of 7.4% for 2018 (-8.3% for national newspapers and -6.7% for local newspapers). Taking into account these trends, the Budget envisages that the evolution of the market in the three-year period 2019-2021 will be similar to that in 2018. Alongside the structural decrease in hard copies, the plan presumes growth in revenue from the digital edition of the newspapers on PCs, mobile phones and tablets, and more specifically, an increase in subscriptions to premium content for all publications. In conclusion, the 2019-2021 plans envisage an increase of €0.10 in the cover price of newspapers, which makes it possible to balance the effect of the sales revenue deriving from the drop in copies sold.

Add-on products The 2019 Budget and the subsequent years plan envisage essential stability in the margins of the add-on initiatives sold together with newspapers.

Costs With regard to the evolution of the costs, the 2019-2021 forecast plans take into account a series of savings measures launched in all the business areas: • reduction in the printing run and the foliation on all the publications further to the foreseen drop in circulation and the advertising revenues; • further rationalisation of the industrial structure and recovering efficiencies in all printing centres; • measures to reduce payroll costs for printing staff; • reduction in the editing costs by means of containing costs for bordereau, photos and agencies as well as with measures vis-à-vis costs for the journalistic workforce; • optimising yields and efficiencies in the distribution process; • reduction of all the main items of the general costs (rents, consulting, telephone, travel. etc.). This action to reduce the costs makes it possible over the plan period to offset the inertial increases envisaged for payroll and related costs and for the prices of printing materials.

Sensitivity analysis With regard to the cash generating units that have a value for the publications and/or goodwill considered relevant for the purposes of the Group consolidated financial statements, and a recoverable value, net of the impairments recorded in the period, that is not significantly different from the book value, a sensitivity analysis of results of the impairment test was also carried out with respect to the changes of the underlying assumptions. Specifically, in the context of the publishing CGUs, this analysis was done on the “La Re- pubblica”, “GEDI News Network Livorno”, “GEDI News Network North East” and “GEDI News Network North West” CGUs, with the following outcome: Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 135

• for the “La Repubblica” CGU, taking the assumptions for the 2019-2021 plan as valid, the impairment loss value would decrease with the reduction in WACC applied for the purposes of the test, coming down to zero, assuming a discount rate on expected cash flows at 6.73% instead of 7.04% used in the base scenario. A sensitivity analysis was also done on the main variables that could influence economic results and expected operational cash flows, identified in advertising revenues and circulation revenues. This analysis shows that the impairment loss for the “La Repubblica” CGU is zero, assuming an annual average drop in 2019-2021 of 4.6% for hard-copy advertising revenues and 4.0% for hard-copy circulation revenues, which appear better than those included in the plan; • for the “GEDI News Network Livorno” CGU, taking the assumptions for the 2019-2021 plan as valid, the impairment loss value would decrease with the reduction in WACC applied for the purposes of the test, coming down to zero, assuming a discount rate on expected cash flows at 5.68% instead of 7.04% used in the base scenario. A sensitivity analysis was also done on the main variables that could influence economic results and expected operational cash flows, identified in advertising revenues and circulation revenues. This analysis shows that the impairment loss for the “GEDI News Network Livorno” CGU is zero, assuming an annual average drop in 2019-2021 of 5.0% for hard-copy advertising revenues and 4.0% for hard-copy circulation revenues, which appear better than those included in the plan; • for the “GEDI News Network North East” CGU, taking the assumptions for the 2019-2021 plan as valid, the impairment loss value would decrease with the reduction in WACC applied for the purposes of the test, coming down to zero, assuming a discount rate on expected cash flows at 6.13% instead of 7.04% used in the base scenario. A sensitivity analysis was also done on the main variables that could influence economic results and expected operational cash flows, identified in advertising revenues and circulation revenues. This analysis shows that the impairment loss for the “GEDI News Network North East” CGU is zero, assuming an annual average drop in 2019-2021 of 3.5% for hard-copy advertising revenues and 2.5% for hard-copy circulation revenues, which appear better than those included in the plan; • for the “GEDI News Network North West” CGU, the value of use would be equal to the book value (€71.13million) assuming that the trends envisaged in the three-year plan for 2019-2021 are realised, additional annual reductions of 1.3p.p. in hard-copy advertising revenues and 1.0p.p. in hard-copy circulation revenues, with cost trends being equal. Alter- natively, taking the assumptions for 2019-2021 as valid, the retrievable value of use for the “GEDI News Network North West” CGU as valid, would be equal to the book value, on the basis of a discount rate for expected cash flows (wacc) of 9.24% compared to 7.04% used in the base test version.

Second level impairment test The second level impairment test is required by IAS 36 when there are costs and/or assets not assigned to the CGUs. In the case of the GEDI Group, the market capitalisation at the reporting date is lower than the Group shareholders’ equity, and so the second level impairment test also aims to check on the recoverability of the entire Group’s shareholders’ equity. The second level impairment test was carried out considering the sum of the cash flows of the individual CGUs already considered at the time of first level impairment, plus the valuation of the unallocated costs. This led to the estimate of the current value of the corporate costs not allocated to the CGUs, where the current 136 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

value of these costs has been considered as a reduction to the overall value of the Group in its entirety and has been estimated using the tax flows deriving from these costs and a discounting back rate(net of taxes) similar to that used for the level I test on the CGUs. With regard to the projections of the corporate costs and the calculation of the cash flows, criteria have been used in line with those applied for the purpose of the first level impairment test (average expected cash flows) in terms of explicit forecast period and in terms of growth (beyond the explicit forecast period). The operating cash flows were taken as the benchmark for the calculation of the value in use, net of the taxes for the whole Group, which can be taken from the plans drawn up for the years 2019-2021; with regard to the projections of the related cash flows, a net tax rate was used, equating to 7.04% and a growth rate of zero. In detail, over the period of the plan a progressive reduction in corporate costs was assumed, also including the management and administration costs (consulting, rentals, travel expenses, etc.), on the same basis as achieved by the Group over the last few years. The impairment procedure carried out at the level of the entity in its entirety, did not reveal any impairment loss.

Other intangible assets

The table below illustrates the useful life and related amortisation rates for the various classes of intangible assets with a defined useful life.

Useful life Rate Industrial patents and intellectual property rights 2-3 years 33.33%-50.00% Concessions and licenses 3-5 years 20.00%-33.33% Other intangible assets 3-6 years 16.67%-33.33%

The breakdown and changes in intangible assets is shown below.

Industrial patents and intellectual property rights 31/12/2018 Opening balance Original cost 10,774 Accumulated amortisation and write-downs (10,269) Opening balance 505 ADJUSTMENTS TO ORIGINAL COST Increases 446 Decreases - ADJUSTMENTS TO PROVISIONS Increases (501) Decreases - Reclassifications 1 Closing balance Original cost 11,220 Accumulated amortisation and write-downs (10,769) Closing balance 451 Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 137

Concessions and licenses 31/12/2018 Opening balance Original cost 61,173 Accumulated amortisation and write-downs (54,187) Opening balance 6,986 ADJUSTMENTS TO ORIGINAL COST Increases 5,179 Decreases (66) ADJUSTMENTS TO PROVISIONS Increases (3,700) Decreases - Reclassifications (5) Closing balance Original cost 66,286 Accumulated amortisation and write-downs (57,892) Closing balance 8,394

TV frequencies 31/12/2018 Opening balance Original cost - Accumulated amortisation and write-downs - Opening balance - ADJUSTMENTS TO ORIGINAL COST Increases - Decreases - Reclassifications 1,500 ADJUSTMENTS TO PROVISIONS Increases (300) Decreases - Closing balance Original cost 1,500 Accumulated amortisation and write-downs (300) Closing balance 1,200 138 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Assets in process 31/12/2018 Opening balance Original cost 1,507 Opening balance 1,507 ADJUSTMENTS TO ORIGINAL COST Increases - Decreases - Reclassifications (1,500) Closing balance Original cost 7 Closing balance 7

Other intangible assets 31/12/2018 Opening balance Original cost 3,742 Accumulated amortisation and write-downs (3,742) Opening balance - ADJUSTMENTS TO ORIGINAL COST Increases - Decreases - ADJUSTMENTS TO PROVISIONS Increases - Decreases - Closing balance Original cost 3,742 Accumulated amortisation and write-downs (3,742) Closing balance -

Property, plant and equipment (2)

The breakdown of the category is shown below. 31/12/2017 31/12/2018 Land 6,220 6,220 Industrial and civil buildings 26,336 24,279 Leasehold improvements 8,351 7,173 Plant and machinery 43,070 36,600 Technical equipment 1,086 925 Furniture, fixtures and vehicles 4,739 4,059 Assets under construction 422 602 Other assets 335 306 TOTAL PROPERTY, PLANT AND EQUIPMENT 90,559 80,164 Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 139

At 31 December 2018, property, plant and equipment amounted to €80,164 thousand, down €10,395 thousand with respect to the end of 2017, due to the downward trend in depreciation for €14,139 thousand and write-downs for €1,266 thousand relating to printing plants, an increase in net investments for the period for €5,010 thousand.

In view of the homogeneity of assets recorded in the statement of financial position, the expected useful life of assets by category and the related depreciation rates is as follows.

Useful life Rate Land - - Industrial and civil buildings 33 years 3% Printing plants 7 years 15.5% Generic plants 10 years 10% Other plants 5/10 years 20%/10% Full colour rotary presses 20 years 5% Industrial equipment 4 years 25% Vehicles 4 years 25% Furniture, fixtures and ordinary equipment 8 years 12.5% Electronic equipment 3 years 33% Editorial systems 4 years 25% Leasehold improvements per contract per contract

A breakdown of property, plant and equipment owned is included in the tables that follow.

Land 31/12/2018 Opening balance Original cost 6,220 Opening balance 6,220 ADJUSTMENTS TO ORIGINAL COST Increases - Decreases - Closing balance Original cost 6,220 Closing balance 6,220 140 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Industrial and civil buildings 31/12/2018 Opening balance Original cost 50,553 Accumulated amortisation and write-downs (24,217) Opening balance 26,336 ADJUSTMENTS TO ORIGINAL COST Increases 426 Decreases (4,427) ADJUSTMENTS TO PROVISIONS Increases (1,603) Decreases 3,547 Closing balance Original cost 46,552 Accumulated amortisation and write-downs (22,273) Closing balance 24,279

Leasehold improvements 31/12/2018 Opening balance Original cost 51,594 Accumulated amortisation and write-downs (43,243) Opening balance 8,351 ADJUSTMENTS TO ORIGINAL COST Increases 900 Decreases (1) ADJUSTMENTS TO PROVISIONS Increases (2,076) Decreases (1) Closing balance Original cost 52,493 Accumulated amortisation and write-downs (45,320) Closing balance 7,173 Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 141

Plant and machinery 31/12/2018 Opening balance Original cost 211,801 Accumulated amortisation and write-downs (168,731) Opening balance 43,070 ADJUSTMENTS TO ORIGINAL COST Increases 2,955 Decreases (2,521) Reclassifications 144 ADJUSTMENTS TO PROVISIONS Increases (9,444) Decreases 2,396 Closing balance Original cost 212,379 Accumulated amortisation and write-downs (175,779) Closing balance 36,600

Technical equipment 31/12/2018 Opening balance Original cost 2,564 Accumulated amortisation and write-downs (1,478) Opening balance 1,086 ADJUSTMENTS TO ORIGINAL COST Increases 33 Decreases (9) ADJUSTMENTS TO PROVISIONS Increases (238) Decreases 5 Reclassifications 48 Closing balance Original cost 2,588 Accumulated amortisation and write-downs (1,663) Closing balance 925 142 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Furniture, fixtures and vehicles 31/12/2018 Opening balance Original cost 94,758 Accumulated amortisation and write-downs (90,019) Opening balance 4,739 ADJUSTMENTS TO ORIGINAL COST Increases 1,382 Decreases (823) ADJUSTMENTS TO PROVISIONS Increases (1,996) Decreases 757 Closing balance Original cost 95,317 Accumulated amortisation and write-downs (91,258) Closing balance 4,059

Assets under construction 31/12/2018 Opening balance Original cost 422 Opening balance 422 ADJUSTMENTS TO ORIGINAL COST Increases 361 Decreases (37) Reclassifications (144) Closing balance Original cost 602 Closing balance 602

Other assets 31/12/2018 Opening balance Original cost 4,881 Accumulated amortisation and write-downs (4,546) Opening balance 335 ADJUSTMENTS TO ORIGINAL COST Increases 65 Decreases (30) ADJUSTMENTS TO PROVISIONS Increases (48) Decreases 28 Reclassifications (44) Closing balance Original cost 4,916 Accumulated amortisation and write-downs (4,610) Closing balance 306 Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 143

Investments valued at equity (3) The table that follows shows investments valued at equity and the percentage share owned.

Ownership percentage 31/12/2017 31/12/2018 Le Scienze SpA* 50% 50% Editoriale Corriere Romagna Srl 49% 49% HuffingtonPost Italia Srl 49% 49% Editoriale Libertà SpA 35% 35% Altrimedia SpA 35% 35% Persidera SpA 30% 30% * Joint venture company

The tables that follow show changes in investments valued at equity. With regard to the interest held in Persidera SpA by the Group, the former included the fair value amortisation of the digital terrestrial frequencies recorded at the time the shareholding in the subsidiary was acquired.

31/12/17 Incr. Write-downs Dividends Result 31/12/2018 Le Scienze SpA* 103 - - (19) 4 88 Editoriale Corriere Romagna Srl 3,267 - - - 122 3,389 HuffingtonPost Italia Srl 371 - - - 75 446 Editoriale Libertà SpA 14,095 - (871) (350) 417 13,291 Altrimedia SpA 762 - - (53) 30 739 Persidera SpA 105,727 - (11,155) (3,231) 77 91,418 TOTAL INVESTMENTS VALUED AT EQUITY 124,325 - (12,026) (3,653) 725 109,371 * Joint venture company

At 31 December 2018, the equity investments held in Persidera SpA, Editoriale Libertà SpA and Editoriale Corriere di Romagna Srl were subjected to an impairment test, using for the determination of both the fair value and the value in use methods and assumptions similar to those adopted for the Group CGUs taking into account the specific business sectors of each company. In greater detail, the recoverable value of the investments term of comparison for ascertaining the presence of impairment losses has been assessed under IAS 36 as the higher between the fair value net of costs to sell and the value in use: the first was estimated by making reference to the market multiples relating to a panel of comparable companies; the second was quantified on the basis of the flows expected from the investee company, on the basis of the 2019-2021 forecast plans. Furthermore, you are reminded that in line with the recommendations issued by Consob jointly with the Bank of Italy and ISVAP in Documents No. 2 dated 6 February 2009 and No. 4 dated 3 March 2010, the impairment test procedure adopted by the GEDI Group adopted underwent prior examination and valuation by the Audit and Risk Committee and the Board of Statutory Auditors, and was approved by the Board of Directors on 25 January 2019; subsequently, the impairment test document was subject to the approval of the Board of Directors in a previous and separate point on the agenda of the Board meeting during which the financial report is approved. 144 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

The recoverable amount evaluation method for all investments was therefore based on the value of use, as it was higher than the fair value net of sales costs. The methods and assumptions used to determine the cash flows for the shares held in Editori- ale Libertà SpA and Editoriale Corriere di Romagna Srl with regard to the value for use were similar to those described in Note 12.1, including those relating to the discounting back rate (wacc 7.04%) and the trend in revenue and costs. With regard to the interest held in Persidera SpA, on the other hand, the 2019-2021 forecast plan approved by Persidera SpA’s Board of Directors on 19 February 2019 was used. The discounting back rate for assumed flows is at 8.02% and incorporates an execution risk of 0.5% which considers the underlying risk to the new economic-financial forecasts prepared by the management of Persidera with specific reference to the changes in technology (“switch off”) envisaged as from 2020, the variability in the costs and investments needed to undertake this technology change and also results for 2018 that were lower than the budget forecasts drawn up the previous year. With regard to the investment in Persidera SpA, assuming the assumptions of the aforementioned plan to be valid, with the change in WACC of +/- 50bp, the loss in value would stand at €16.6 mn and €5 mn respectively. The impairment tests done at the close of 2018 on the investments in Persidera SpA, Editoriale Corriere di Romagna Srl and Editoriale Libertà SpA showed the following write-downs that needed to be recognised in the financial statements:

– €11,155 thousand relating to the investment held in Persidera SpA; – €871 thousand relating to the investment held in Editoriale Libertà SpA;

Financial highlights of the mentioned investee companies are reported below.

Assets Liabilities 31/12/2017 31/12/2018 31/12/2017 31/12/2018 Le Scienze SpA* 3,296 2,259 3,080 2,074 Editoriale Corriere Romagna Srl 1,967 1,969 165 21 HuffingtonPost Italia Srl 1,331 1,759 695 801 Editoriale Libertà SpA 26,169 26,171 4,019 3,775 Altrimedia SpA 4,275 4,086 2,370 2,247 * Joint venture company

Revenues Profit (losses) 31/12/2017 31/12/2018 31/12/2017 31/12/2018 Le Scienze SpA* 3,023 3,118 39 8 Editoriale Corriere Romagna Srl 175 177 4 145 HuffingtonPost Italia Srl 1,990 1,990 121 153 Editoriale Libertà SpA 12,016 11,200 1,265 1,245 Altrimedia SpA 6,482 6,053 184 84 * Joint venture company

The financial year of the above companies coincides with that of GEDI Gruppo Editoriale SpA. For the purposes of IFRS 12, the economic-financial balances of Persidera SpA are presented below, which is a significant associated company with respect to total consolidated assets. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 145

Persidera SpA 31/12/2017 31/12/2018 Non-current assets 131,729 118,074 Current assets 32,346 32,187 Total Assets 164,075 150,261 Non-current liabilities 34,843 15,667 Current liabilities 29,246 30,893 Total liabilities 64,089 46,560

2017 2018 Revenues 72,614 76,144 Net profit 10,771 14,433 Comprehensive income 10,744 14,380

At 31 December 2018, Persidera SpA’s current assets include cash and cash equivalents for €6,026 thousand, while the current liabilities include current financial liabilities for €14,076 thousand. Profit for 2018 includes amortisation/depreciation for €18,967 thousand, financial expense for €619 thousand and income taxes for €5,504 thousand. The financial year of the above companies coincides with that of GEDI Gruppo Editoriale SpA.

Other investments (4)

Book value at 31 December 2017 10,258 Acquisitions and increases 5 Sales and decreases (19) Book value at 31 December 2018 10,244

The table that follows shows other investments, changes in the percentage of ownership and the book value of the investment. 146 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Ownership percentage Book value 31/12/2017 31/12/2018 31/12/2017 31/12/2018 Radio Italia SpA 10.00% 10.00% 6,500 6,500 ANSA Soc. Coop.a r.l. 24.26% 24.26% 2,172 2,172 D-Share Srl 10.96% 10.96% 1,000 1,000 Telelibertà SpA 4.32% 4.32% 136 136 Club Dab Italia Soc. Consortile p.A. 37.50% 37.50% 78 78 Liguria Press Srl 20.00% 20.00% 68 68 Immobiliare Editori Giornali Srl 7.96% 7.96% 53 53 CSEDI Consorzio 11.11% 11.11% 30 30 Consorzio Edicola Italiana 33.33% 33.33% 20 20 Premium Publisher Network Consorzio 23.96% 23.96% 19 19 FCA servizi per l’industria Soc.Consortile p.A. 1.50% - 19 - Tavolo Editori Radio Srl 12.50% 12.50% 14 19 Trento Press Service Srl 1.60% 1.60% 4 4 Other investments - - 145 145 TOTAL OTHER INVESTMENTS 10,258 10,244

The financial year of the above companies coincides with that of GEDI Gruppo Editoriale SpA.

Non-current receivables (5) 31/12/2017 31/12/2018 Long-term security deposits 500 632 Other non-current receivables 900 527 TOTAL NON-CURRENT RECEIVABLES 1,400 1,159

Deferred tax assets and deferred tax liabilities (6)

The table that follows shows changes in deferred tax assets/liabilities.

Prepaid taxes Taxable prepaid tax assets 31/12/2017 31/12/2018 On personnel provisions 11,889 14,541 Provision for risks and charges 27,472 34,831 On write-down of current assets 47,744 30,903 On write-down of non-current assets 20,161 18,974 On previous years’ tax losses 39,030 58,130 TOTAL 146,296 157,379 Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 147

Deferred tax assets 31/12/2017 31/12/2018 On personnel provisions 2,893 3,695 Provision for risks and charges 7,379 8,898 On write-down of current assets 11,639 7,488 On write-down of non-current assets 5,407 5,196 On previous years’ tax losses 9,367 13,951 TOTAL 36,685 39,228

Deferred taxes Taxable deferred taxes 31/12/2017 31/12/2018 On lower valuation of personnel provisions 3,395 3,646 On higher valuation of non-current assets 409,728 412,421 TOTAL 413,123 416,067

Deferred tax liabilities 31/12/2017 31/12/2018 On lower valuation of personnel provisions 866 875 On higher valuation of non-current assets 112,609 114,030 TOTAL 113,475 114,905

31/12/2017 31/12/2018 Deferred taxes credited/charged 162 (241) TOT. DIRECT RECOGNITION UNDER EQUITY 162 (241)

Inventories (7)

31/12/2017 31/12/2018 Gross Write-downs Net Gross Write-downs Net Inventories inventories inventories inventories Paper (raw materials) 8,516 (82) 8,434 10,236 (74) 10,162 Printing materials (raw materials) 3,477 - 3,477 3,563 - 3,563 Publications (finished products) 129 - 129 143 - 143 Add-on and multimedia products (finished products) 116 (7) 109 129 (7) 122 Products sold optionally (finished products) 1,911 (1,719) 192 2,920 (2,628) 292 Other goods 688 (63) 625 683 (63) 620 TOTAL INVENTORIES 14,807 (1,871) 12,936 17,674 (2,772) 14,902 148 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

At 31 December 2018, the increase in inventories recorded in the income statement amounted to €2,334 thousand (as compared with a decrease of €1,532 thousand at 31 December 2017), of which €128 thousand relating to the increase in inventories included under “Change in inventories” (at 31 December 2017 this change was positive for €45 thousand), and €2,206 thousand relating to the increase in paper, raw material, goods and printing material inventories included under “Purchases” (as compared with a negative €1,577 thousand at the end of 2017).

Trade receivables (8) 31/12/2017 31/12/2018 News stands and distributors 11,042 15,252 Advertising and exchanges 173,857 158,770 Other trade receivables 21,368 12,425 Receivables from Group companies 2,010 760 TOTAL TRADE RECEIVABLES 208,277 187,207

Receivables from Group companies refer to trade receivables due from companies consolidated under the equity method (Le Scienze, Altrimedia, HuffingtonPost Italia and Persidera). For details, see the table in Note 14.4.

At 31 December 2018, the provision for doubtful accounts amounted to €17,809 thousand (€17,845 thousand at 31 December 2017).

31/12/2018 Opening balance 17,845 Write-downs 2,772 Uses (2,808) Closing balance 17,809

Receivables and other financial assets (9)

31/12/2017 31/12/2018 Financial receivables 222 814 TOTAL RECEIVABLES AND OTHER FINANCIAL ASSETS 222 814

At 31 December 2018, Receivables and other financial assets amounted to €814 thousand and refer to the upfront fees paid to banks to establish the credit line for €100 million that had not yet been utilised at the reporting date. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 149

Tax receivables (10) 31/12/2017 31/12/2018 Customers Corporate income tax (Ires) and regional tax on business activities (IRAP) receivables 5,052 3,804 IRES receivable from Parent Company 11,784 - IRES/IRAP to be reimbursed 145 121 VAT receivable 731 2,053 Tax receivables provision IFRS9 - (2) Other tax receivables 1,091 641 TOTAL TAX RECEIVABLES 18,803 6,617

Tax receivables came to €6,617 thousand, down by €12,186 thousand compared to the €18,803 thousand at 31 December 2017, mainly due to the tax receivable relating to the application submitted in 2013 pursuant to Art. 2 of Italian Legislative Decree 201/2011 for €13.6 million.

Other receivables (11) 31/12/2017 31/12/2018 Social security receivables 1,077 1,119 Security deposits 475 390 Advances to suppliers and agents 6,348 4,553 Receivables from employees and associates 1,549 1,324 Receivables for disposals of investments 7,000 - Other receivables 14,112 14,832 TOTAL OTHER RECEIVABLES 30,561 22,218

Other receivables refer mainly to rights for add-on products and television programmes to be launched in the first few months of 2019. During the year, €7,000 thousand was received from the portion of the fee related to the sale of All Music to Discovery Italia.

Cash and cash equivalents (12) 31/12/2017 31/12/2018 Financial receivables from Group companies 173 174 Current account deposits 63,122 77,127 Cash on hand 233 60 Cash flow hedge reserve IFRS9 - (82) Accrued interest on bank and post office deposits (10) - TOTAL CASH AND CASH EQUIVALENTS 63,518 77,279

Cash and cash equivalents totalled €77.3 million recording an increase of €13.8 million compared to 31 December 2017 (€63.5 million): the self-financing for €22.8 million combined with revenues for €7.0 million from the portion of the fee related to the sale of All Music to Discov- ery Italia, €4.1 million from the sale of proprietary real estate and €13.6 million from the tax 150 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

receivable referring to the application submitted in 2013 pursuant to Art. 2 of Italian Legisla- tive Decree 201/2011, which were only partially absorbed by investments for €16.4 million, and the payment of €35.1 million representing the last instalment to settle the tax dispute.

Current account deposits with banks and the post office represent highly liquid short-term financial investments that are readily convertible into known cash amounts and not subject to relevant fluctuations in value. These deposits were made in relation to the Group’s financial requirements and were remunerated at a previously agreed fixed rate.

Liabilities and Equity

Share capital (13) At 31 December 2018, the share capital amounted to €76,303,571.85 and was made up of 508,690,479 shares with a par value of €0.15 each.

31/12/2017 31/12/2018 No. of shares resolved 568,614,904 566,624,904 No. of shares issued 508,690,479 508,690,479 of which: No. of own shares: 21,850,609 21,968,231

All ordinary shares issued are fully paid-in. There are no shares subject to restrictions on the distribution of dividends, with the exception of the matters envisaged by Article 2357 of the Italian Civil Code regarding own shares.

Reserves (14) The breakdown of reserves and changes occurred in the period are reported in the “Statement of Changes in the Consolidated Shareholders’ Equity”. As resolved by the Shareholders’ Meeting, authorising the Parent Company’s Board of Direc- tors to acquire ordinary shares of GEDI Gruppo Editoriale SpA., during 2018, 262,500 shares were acquired for at total of €118,106 thousand. Considering the acquisitions in previous years, own shares held by the Company at 31 December 2018 amounted to 21,968,231, representing 4.319 % of the share capital.

Benefits based on financial instruments The Group recognises additional benefits to the Managing Director and other employees of the Parent Company and its subsidiaries holding top positions within the Group through compensation plans based on financial instruments. Specifically, plans adopted by the Company provide for the awarding of rights to participate in the share capital “stock option”) and in other cases, the awarding of rights to freely receive the Parent Company’s ordinary shares (“stock grant”). All stock option plans adopted by the Group between 2001 and 2010 assign beneficiaries the right to exercise, at a pre-determined price and for a set term, an option for the underwriting of new shares of the Company to be issued pursuant to specific resolutions. The shareholders’ Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 151

meetings held on 20 April 2011, 23 April 2012, 18 April 2013, 16 April 2014, 23 April 2015, 21 April 2016, 27 April 2017 and 26 April 2018 resolved the assignment of a stock grant plan for 2011, a stock grant plan for 2012, a stock grant plan for 2013, a stock grant plan for 2014, a stock grant plan for 2015, a stock grant plan for 2016, a stock grant plan for 2017 and a stock grant plan for 2018, respectively, as tools for providing incentives and increasing loyalty in the Group’s management. The stock grant plans provide for attributing each beneficiary of the Plan a specific number of contingent rights (Units) to receive ordinary shares already in the Company’s portfolio (own shares). The Units have been assigned free-of-charge, are not transferable and are divided into two categories: “Time-based Units”, whose vesting is subordinate only to the passing of time and “Performance Units”, whose vesting is subordinate to the passing of time and the achievement of the targets of appreciation in the value of the shares, as well as an additional performance parameter linked to the Group’s financial results. The related rules regulate, among other terms and conditions, also the case in which the assignee of said options and rights ceases for whatever reason to be employed by the company. Attachment No. 2) summarises all the information relating to each stock option and stock grant plan outstanding at 31 December 2018. In particular, as shown in Attachment 2), unexpired stock options that have not to this day been exercised, amount to 5,884,850, representing 1.157% of the share capital of the Company. A description of stock option plans (2002-2010) is provided in the “Information disclosure pursuant to Consob Regulation No. 11971” section. Below we provide a description of the 2011, 2012, 2013, 2014, 2015, 2016, 2017 and 2018 stock grant plans.

2011-2012-2013-2014-2015-2016-2017-2018 Stock Grant Plans The Board Meetings held on 20 April 2011, 23 April 2012, 27 June 2013, 16 April 2014, 23 April 2015, 21 April 2016, 26 July 2017 and 26 April 2018, availing themselves of the authority granted to them by the Shareholders’ Meeting held on the same date, with the exception of the 2013 Shareholders’ Meeting, held by contrast on 18 April 2013, and the 2017 Shareholders’ meeting held on 27 April 2017, respectively resolved the approval of the 2011 stock grant plan, the 2012 stock grant plan, the 2013 stock grant plan, the 2014 stock grant plan, the 2015 stock grant plan, the 2016 stock grant plan, 2017 stock grant plan and 2018 stock grant plan, as per the proposal of the Appointments and Remuneration Committee to be reserved for the Man- aging Director of the Company (exclusively with reference to the 2011, 2012 and 2018 stock grant plans) and the employees of the Parent Company and its subsidiaries. The exercise price is determined in relation to the provisions of Article 9, paragraph IV of the Consolidated Tax Law which makes reference to the simple arithmetic mean of official stock market prices of the company’s shares in the month that precedes the assignment of the options. On 20 April 2011, a total of 1,410,000 Units were assigned, divided up between Time-based Units (705,000) and Performance Units (705,000) at a price of €1.81. The Time-based Units have accrued with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 21 April 2013. The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets were achieved, were never accrued. At 31 December 2018 as per the regulations, 146,723 Time-based Units were in circulation. 152 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

On 23 April 2012, a total of 1,897,500 Units were assigned, divided up between Time-based Units (948,750) and Performance Units (948,750) at a price of €0.98. The Time-based Units have accrued with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 24 April 2014. The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets were achieved, had accrued in part, and not accrued for the remaining part. At 31 December 2018 as per the regulations, 340,781 Time-based Units were in circulation along with 138,927 Performance Units. On 27 June 2013, a total of 1,395,000 Units were assigned, divided up between Time-based Units (697,500) and Performance Units (697,500) at a price of €0.83. The Time-based Units have accrued with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 28 June 2015. The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets were achieved, had accrued in part, and not accrued for the remaining part. At 31 December 2018 as per the regulations, 262,819 Time-based Units were in circulation along with 176,903 Performance Units. On 16 April 2014, a total of 1,450,000 Units were assigned, divided up between Time-based Units (725,000) and Performance Units (725,000) at a price of €1.70. The Time-based Units have accrued with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 16 April 2016. The Performance Units that should have accrued at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets were achieved, had accrued in part, and not accrued for the remaining part. At 31 December 2018 as per the regulations, 312,808 Time-based Units were in circulation along with 51,252 Performance Units; 24,684 Time-based Units have been exercised; 490,000 Performance Units were cancelled during the period. On 23 April 2015, a total of 1,420,000 Units were assigned, divided up between Time-based Units (710,000) and Performance Units (710,000) at a price of €1.2355. The Time-based Units accrued and will accrue, with the corresponding right of the Beneficiar- ies to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 23 April 2017. The Performance Units not yet accrued at the reporting date, will accrue at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets are achieved. At 31 December 2018 as per the regulations, 397,302 Time-based Units were in circulation along with 525,000 Performance Units; 72,380 Time-based Units have been exercised during the period. On 21 April 2016, a total of 1,315,000 Units were assigned, divided up between Time-based Units (657,500) and Performance Units (657,500) at a price of €0.9531. The Time-based Units accrued and will accrue, with the corresponding right of the Benefi- ciaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 21 April 2018. The Performance Units will not accrue, as the conditions stipulated in the Plan were not achieved. At 31 December 2018 as per the regulations, 507,186 Time-based Units were in circulation; 47,814 Time-based Units have been exercised during the period. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 153

On 26 July 2017, a total of 1,465,000 Units were assigned, divided up between Time-based Units (732,500) and Performance Units (732,500) at a price of €0.7785. The Time-based Units accrued, with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 26 July 2019. The Performance Units will accrue at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets are achieved. At 31 December 2018 as per the regulations, 707,500 Time-based Units were in circulation along with 707,500 Performance Units. On 26 April 2018, a total of 1,865,000 Units were assigned, divided up between Time-based Units (932,500) and Performance Units (932,500) at a price of €0.4401. The Time-based Units accrued, with the corresponding right of the Beneficiaries to receive the related shares, free of charge, in quarterly tranches equal to 12.5% of the related total, starting from 26 April 2020. The Performance Units will accrue at the same vesting date envisaged for the Time-based Units, but only on condition that share performance targets are achieved. At 31 December 2018 as per the regulations, 932,500 Time-based Units were in circulation along with 932,500 Performance Units.

*****

Stock option plans adopted by the Group were valued according to the binomial tree method. This method is commonly used in the valuation of financial options according to the stochastic approach, and makes reference to discreet “binomial” models elaborated from 1979 by Cox, Rubinstein and Ross with the intent of providing a general application of the Black-Scholes model. The main assumptions used in determining the fair value of stock option plans are summarised in the table below.

2006 Plan Tranche II Average strike price 3.96 Expected volatility* 16.56% Risk-free rate 4.10% Fair value 0.6938 * Three-month implicit volatility (official estimate of the Italian Stock Exchange) 154 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

While the main assumptions used in determining the fair value of 2018 stock option plans are summarised in the table below.

Extraordinary plan 2009 Ordinary Plan 2009 Ordinary Plan 2010 Tranche I Tranche II Tranche III Tranche IV Tranche I Tranche II Tranche I Tranche II Average strike price 3.84 3.60 2.22 1.37 1.00 1.86 2.25 1.58 Expected volatility* 38.98% 38.98% 38.98% 38.98% 38.98% 38.98% 33.23% 29.98% Risk-free rate 2.90% 2.90% 2.90% 2.90% 2.90% 2.90% 3.19% 2.60% Fair value 0.1596 0.1699 0.2404 0.2404 0.5431 0.8927 0.5361 0.3815 * Three-month implicit volatility (official estimate of the Italian Stock Exchange)

2011 Stock Grant Time based Units Performance Units Opening value 1.81 1.81 Expected volatility 40.81% 40.81% Risk-free rate 3.63% 3.63% Average fair value 1.8357 1.6627 * Three-month implicit volatility (official estimate of the Italian Stock Exchange)

2012 Stock Grant Time based Units Performance Units Opening value 0.98 0.98 Expected volatility 40.00% 40.00% Risk-free rate 1.62% 1.62% Average fair value 0.7546 0.6718 * Three-month implicit volatility (official estimate of the Italian Stock Exchange)

2013 Stock Grant Time based Units Performance Units Opening value 0.83 0.83 Expected volatility 35.00% 35.00% Risk-free rate 1.42% 1.42% Average fair value 0.7875 0.6631 * Three-month implicit volatility (official estimate of the Italian Stock Exchange)

2014 Stock Grant Time based Units Performance Units Opening value 1.70 1.70 Expected volatility 40.00% 40.00% Risk-free rate 1.04% 1.04% Average fair value 1.5785 1.4501 * Three-month implicit volatility (official estimate of the Italian Stock Exchange) Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 155

2015 Stock Grant Time based Units Performance Units Opening value 1.24 1.24 Expected volatility 40.00% 40.00% Risk-free rate 0.5% 0.5% Average fair value 1.1900 0.8861 * Three-month implicit volatility (official estimate of the Italian Stock Exchange)

2016 Stock Grant Time based Units Performance Units Opening value 0.95 0.95 Expected volatility 39.6% 39.6% Risk-free rate 0.18% 0.18% Average fair value 0.9840 0.7508 * Three-month implicit volatility (official estimate of the Italian Stock Exchange)

2017 Stock Grant Time based Units Performance Units Opening value 0.78 0.78 Expected volatility* 40.00% 40.00% Risk-free rate 0.18% 0.18% Average fair value 0.7681 0.5782 * Three-month implicit volatility (official estimate of the Italian Stock Exchange)

2018 Stock Grant Time based Units Performance Units Opening value 0.44 0.44 Expected volatility* 40.00% 40.00% Risk-free rate 0.25% 0.25% Average fair value 0.4320 0.3282 * Three-month implicit volatility (official estimate of the Italian Stock Exchange)

At 31 December 2018, the total cost of stock option plans recorded in the financial statements amounted to €780 thousand (€734 thousand at 31 December 2017).

Minority interests (15) 31/12/2017 31/12/2018 GEDI News Network SpA 373 367 Mo-Net Srl 129 213 TOTAL MINORITY INTERESTS 502 580 156 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Financial debt (16)

Non-current financial debt maturing maturing 31/12/2017 31/12/2018 1-5 years after 5 years Bonds 87,906 - - - Bank loans 7,745 3,507 3,507 - TOTAL NON-CURRENT FINANCIAL DEBT 95,651 3,507 3,507 -

Current financial debt 31/12/2017 31/12/2018 Bonds 5,795 98,884 Bank overdrafts 51 90 Payables to banks for loans 1,101 2,842 Due to other providers of finance 76,244 75,950 TOTAL CURRENT FINANCIAL DEBT 83,191 177,766

At 31 December 2018, the value of the equity linked Bond issue amounted to €98,884 thousand in total. At 31 December 2017, the total amount of the liability amounted to €93,701 thousand. For further information on the characteristics of the loan and classification, reference is made to Note 11. Financial leasing and other financial payables to leasing companies and other lendersmainly include the payables on the financing granted with recourse on factoring and without recourse (but recognised as with recourse as shown in Note 11) for securitisation transactions on trade receivables. As from 2014, the Group’s advertising concession holder in fact consolidated Fac- toring transactions with leading credit institutions as follows: • UniCredit Factoring SpA, for a credit facility of €30 million utilised at 31 December 2018 for €17,279 thousand, with an annual rate equal to the 3-month Euribor plus 1.1%, in addition to flat commission of 0.258% on the value of the factored portfolio, for an unspecified duration with the faculty to withdraw without notice. • Société Général Factoring SpA, for a credit facility of €20 million utilised at 31 December 2018 for €19,752 thousand, with an annual rate equal to the 3-month Euribor plus 1% in addition to flat commission of 0.18% on the value of the factored portfolio, for an unspecified duration with the faculty to withdraw without notice. • Aosta Factor SpA, for a credit facility of €25 million utilised at 31 December 2018 for €10,722 thousand, with an annual rate equal to the 3-month Euribor plus 0.9% in addition to flat commission of 0.15% on the value of the factored portfolio, for an unspecified duration with the faculty to withdraw without notice.

Due to other providers of finance also include payables to Diamante SPV S.r.l. €29,367 thousand related to the securitisation transaction referred to in Note 11. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 157

Bond Bank Other financial Total financial issue loans debt* liabilities Balance at 31/12/2016 88,920 - 27,913 116,833 Cash flow - (467) 20,009 19,542 Other changes: Acquisition of ITEDI - 9,313 - 9,313 Change in the fair value and amortised cost 4,781 - - 4,781 Balance at 31/12/2017 93,701 8,846 47,922 150,469 * Due for Factoring net of related receivables.

Bond Bank Other financial Total financial issue loans debt* liabilities Balance at 31/12/2017 93,701 8,846 47,922 150,469 Cash flow - (2,497) 27,214 24,717 Other changes: Change in the fair value and amortised cost 5,183 - - 5,183 Balance at 31/12/2018 98,884 6,349 75,136 180,369 * Due for Factoring net of related receivables.

Provisions for risks and losses (17) The table below illustrates the total movements in provisions, as well as movements broken down into the current and non-current portions.

Legal Social Early Sundry risks Total of which: of which: proceedings security retirement and contract provisions current non-current litigation incentives renewals portion portion Opening balance 15,114 3,917 10,342 27,235 56,608 27,456 29,152 Uses/releases (5,030) (779) (6,196) (5,277) (18,955) (15,263) (3,692) Current/non-current transfers - - - - - 2,412 (2,412) Provisions 1,235 - 17,385 1,147 21,440 20,153 1,287 Change due to discounting back 194 - - - 194 - 194 Closing balance 11,513 3,138 21,531 23,105 59,287 34,758 24,529 158 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Non-current portion Legal Social Early Sundry risks Total proceedings security retirement and contract provisions litigation incentives renewals Opening balance 9,149 3,917 - 16,086 29,152 Uses/releases (2,912) (779) - (1) (3,692) Current/non-current transfers (2,185) - - (227) (2,412) Provisions 1,094 - - 193 1,287 Change due to discounting back 194 - - - 194 Closing balance 5,340 3,138 - 16,051 24,529

Current portion Legal Social Early Sundry risks Total proceedings security retirement and contract provisions litigation incentives renewals Opening balance 5,965 - 10,342 11,149 27,456 Uses/releases (2,118) - (6,196) (5,276) (15,263) Current/non-current transfers 2,185 - - 227 2,412 Provisions 141 - 17,385 954 20,153 Closing balance 6,173 - 21,531 7,054 34,758

Excluding the provision for legal proceedings (discounted at the legal rate of interest), the non-current components of provisions for risks and charges were discounted at a 5% rate (unchanged with respect to 31 December 2017), gross of the related tax effect. Provisions for legal proceedings and labour litigation include risks deriving from libel suits, common to all publishers, risks connected with trade and labour litigation, and those connected with social security audits. The provision for early retirement incentives relates to the provision of costs expected to be incurred in the reorganisation of some Group companies. In particular, at 31 December 2018 provisions were made for €17.6 million relating to the trade union agreements signed at the end of 2018 regarding the editorial reorganisation of the publications La Repubblica and L’Espresso, which will result in significant benefits for journalist costs in 2019. Of these fees, about 50% refers to single agreements already finalised at the start of 2019, while the remaining 50% refers to the estimate for disbursements related to future exits, once again within the scope of the aforementioned collective bargaining agreements signed at the end of 2018. The provision for sundry risks consists of tax provisions made in previous years, and of accruals for risks on tax litigation and other risks. As extensively outlined in the Financial Statements at 31 December 2017, whilst reiterating its belief regarding the statutory tax-related legitimacy of the transactions subject to censure by the Tax Authorities, the Parent Company during 2017 resolved to make use of the option provided under the Decree so as to settle the aforementioned dispute. This arrangement will involve a payment for the Parent Company of €175.3 million, of which €140.2 million was already paid during 2017, with the remaining €35.1 paid in accordance with the deadlines set by legislation, on 2 July 2018. The risk provision had already been reduced in 2017 by €20.8 million for the portion “utilised” to settle the dispute. The risk provision at 31 December 2018 amounted to €14.7 million. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 159

Other information On 21 March 2018, GEDI Gruppo Editoriale SpA was informed that criminal proceedings had been brought for the alleged aggravated complicity in the crime pursuant to Art. 640, paragraph 2, no. 1 in respect of the pro-tempore CEO, Central Human Resources Manager and General Manager National Press, and the crime under Art. 24 of Italian Legislative Decree 231/2001 (subsequent to an offence committed by natural persons in the interest of the entity) against the Company and some of its subsidiaries. The investigation conducted by the Public Prosecutor in Rome refers to presumed fraud against INPS regarding the alleged irregular access by certain employees over the period between 2012 and 2015 to the extraordinary redundancy fund (CIGS) aimed at early retirement in terms of Law 416/81. Knowing that it has always complied with applicable regulations, which is also corroborated by internal audits focusing on checking compliance with the procedures required by relevant legislation and based on an authoritative labour law opinion, the Company notes that for objective reasons, it currently is not in a position to be able to assess the specific conduct that allegedly would be applicable in terms of the crime, nor the number of former employees that unlawfully had access to early retirement, and consequently neither the possible tax that would need to be refunded. No legal deeds and/or supplementary or amendment notices have been received in respect of those already received on 21 March 2018. This situation therefore makes it impossible to assess the level of risk and consequently quantify the amount, as required by IAS 37. In the case of a conviction for the administrative crimes pursuant to Art. 24 of Italian Legisla- tive Decree 231/2001, the administrative pecuniary sanctions applicable would be those stipulated under the combined provisions under articles 10, 11 and 24 of the Decree. It is noted that currently no deeds have been formalised in respect of the companies or current directors and employees of the latter.

Employee termination indemnity and other retirement benefits (18) Defined benefit plans Provisions for Employee Termination Indemnity accrued up until 31 December 2006 by companies with more than 50 employees and those accrued at 31 December 2018 by all other companies, in addition to the Indemnity for managers of newspapers, fall within the defined benefit plan category and are therefore determined according to actuarial methods. Both Plans represent the present value of the future legal obligation.

Benefits are calculated based on the following assumptions:

The amounts recorded in the Statement of Financial Position were determined as follows. 160 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Provisions for Employee Termination Indemnity 31/12/2018 Opening balance 50,952 Provision for employment in the period (service cost) 29 Actuarial gains (losses) from experience (156) Actuarial gains (losses) from exchange rate (970) Increase due to interest (interest cost) 641 Benefits paid (3,090) Closing balance 47,406

Other retirement benefits 31/12/2018 Opening balance 8,245 Provision for employment in the period (service cost) 354 Actuarial gains (losses) from experience 236 Actuarial gains (losses) from exchange rate (115) Increase due to interest (interest cost) 64 (Benefits paid) (1,376) Closing balance 7,408

The average number for the year and the actual number of employees are shown in the table below.

Average number of employees Number of employees at year-end 31/12/2017 31/12/2018 31/12/2017 31/12/2018 Journalists 972 1,108 1,111 1,097 Manual workers 185 185 195 159 Office workers 922 992 997 987 Executives 67 70 67 71 Fixed-term employees 68 67 75 45 TOTAL 2,214 2,422 2,445 2,359 Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 161

Trade payables (19) 31/12/2017 31/12/2018 Payables to suppliers of: • paper 6,009 9,390 • printing services 5,915 6,889 • transport and distribution 2,096 3,721 • investments 5,095 4,299 • promotions 4,328 4,771 • add-on products 4,776 6,019 • freelance work 3,768 3,925 • other editorial costs 2,476 3,161 • utilities and maintenance 3,049 3,489 • other suppliers 70,718 62,160 Advances received 2,221 146 Payables to Group companies 2,743 3,184 TOTAL TRADE PAYABLES 113,194 111,154

Payables to Group companies, amounting to €3,184 thousand, refer to trade payables due to companies consolidated under the equity method (Le Scienze, Altrimedia, HuffingtonPost Italia and Persidera). For details, see the table in Note 14.4. Terms of payment for trade payables normally range between 60 and 90 days.

Tax payables (20) 31/12/2017 31/12/2018 IRAP payables 1,507 2,239 IRES payable from Parent Company - 1 Payables for withholding tax and IRPEF 8,631 9,121 VAT payable 683 277 Other tax payables 35,108 (40) TOTAL TAX PAYABLES 45,929 11,598

Other payables (21) 31/12/2017 31/12/2018 Social Security payables 20,343 19,223 Payables to personnel for holidays 8,449 8,198 Other payables to personnel 12,366 13,669 Payables to Directors and Auditors 183 328 Accrued liabilities 2,066 2,409 Payables for subscriptions 4,729 7,842 Payables for grants pursuant to Italian Law No. 62/2001 93 31 Other payables 10,548 7,776 TOTAL OTHER PAYABLES 58,777 59,476 162 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

13. Notes to the Income Statement

Revenues (22) 2017 2018 Circulation revenues 293,810 311,465 Advertising revenues 303,105 317,956 Printing services provided to others 4,939 5,558 Sale of rejects and returns 1,936 1,818 Sale of internet and mobile services 2,231 1,527 Rights and trademark royalties 512 457 Sale of contents 2,192 426 Sale of other services 7,090 9,514 Sale of other products and services 19 15 TOTAL REVENUE 615,834 648,736

Revenues for €648,736 thousand, recorded a 5.3% increase compared to 2017 (€615,834 thousand). For more information on revenue trends, reference is made to the Management Report. The comparative data in the 2017 Income Statement was restated to reflect the retrospective application of the international IFRS 15 accounting standard. It is noted that the application of the new standard has had no impact on the operating profit, profit for the period or the Group’s shareholders’ equity, with differing accounting treatment only in certain items. As mentioned, the details regarding the effects of applying IFRS 15 are explained under paragraph 5 of the Notes to the Financial Statements.

Other operating income (23) 2017 2018 Grants 143 102 Rentals receivable 2 1 Capital gains on disposal of assets 580 3,269 Extraordinary gains 7,148 5,330 Other income 2,919 6,843 TOTAL OTHER OPERATING INCOME 10,792 15,545

In 2018, capital gains on disposal of assets refers to the sale of a property used as editorial offices in Trieste.

Costs for purchases (24) 2017 2018 Paper for newspapers, periodicals and add-on products 34,494 41,571 Materials for printing 12,116 13,203 Purchase of add-on products 4,015 4,977 Consumables 1,863 2,120 Other goods 191 155 Change in raw material and merchandise inventories 1,577 2,206 TOTAL PURCHASES 54,256 59,820 Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 163

Costs for services (25) 2017 2018 Printing and other work carried out by third parties 17,591 17,264 Distribution 86,653 93,591 Reproduction rights SIAE and other copyright costs 8,024 7,117 Promotions 15,454 18,343 Agent and agency fees 26,271 25,876 Editing costs 49,495 53,002 Radio and TV productions 561 231 Advisory 11,550 9,597 Travelling expenses 7,969 7,941 Telephone and data transmission 2,707 2,905 Maintenance and utilities 17,017 17,444 Technical equipment operation 7,941 8,885 Rentals payable 16,678 18,140 Security, cleaning and refuse disposal 2,966 3,139 Other costs for services 22,916 24,846 TOTAL SERVICE COSTS 293,793 308,321

Other operating charges (26) 2017 2018 Provision for risks and charges 4,558 1,385 Taxes and duties 2,061 2,220 Public relations and gifts 452 410 Membership fees 2,564 2,863 Settlements and reimbursements 228 691 Extraordinary losses 2,091 2,675 Write-downs of and losses on receivables 2,105 2,508 Capital losses on disposal of assets 12 1 Other operating charges 425 591 TOTAL OTHER OPERATING CHARGES 14,496 13,344

Based on the provisions under IFRS 9 regarding transactions to free up receivables, the financial expenses referring to these transactions are stated under operating charges. The figures referring to 2017 have been recalculated for €454 thousand to provide a better comparison.

Personnel costs (27) 2017 2018 Wages and salaries 194,671 214,452 Provisions for employee termination indemnities 10,705 11,667 Provisions for retirement benefits 201 354 Provision for paid leave costs (1,082) (1,133) Stock Grant 734 780 Early retirement incentives 2,807 21,572 Other personnel costs 3,295 2,163 TOTAL PERSONNEL COSTS 211,331 249,855 164 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Provisions for early retirement incentives for 2018 refer for €17.6 million to the trade union agreements signed at the end of 2018 regarding the editorial reorganisation of the publications La Repubblica and L’Espresso, which will result in significant benefits for journalist costs in 2019. Of these costs, about 50% relate to retirements already agreed in the first months of 2019, and the remaining 50% relates to future retirement forecasts.

Depreciation, amortisation and write-downs (28) 2017 2018 Intangible assets amortisation 2,900 4,501 Tangible assets depreciation 13,316 14,139 Write-downs of intangible assets 1 24,247 Write-downs of property, plant and equipment 8,353 1,266 TOTAL DEPRECIATION, AMORTISATION AND WRITE-DOWNS 24,570 44,153

As stated previously, write-downs were made during 2018 following the impairment test verifications for €24,247 thousand. For greater details, please see Note 12.1.

The write-downs of property, plant and equipment refer during both financial periods to the write- downs of printing plants in the context of rationalising the production structure in industrial centres.

Financial income (expense) (29) 2017 2018 Dividends - - Interest received on current accounts and short-term deposits 154 56 Foreign-exchange gains 55 11 Other financial income 42 53 Financial income 251 120 Accessory banking expenses (744) (1,201) Interest on bonds issued (7,399) (7,799) Interest on loans and financing (113) (790) Foreign-exchange losses (44) (53) Financial charges on application of IAS (820) (899) Other financial charges (53) (181) Financial expense (9,173) (10,923) Capital gains on disposal of investments 208 68 Revaluations of investments 28 - Charges from cash flow hedge IFRS9 - 2 Write-downs and losses on investments - (12,026) Charges from cash flow hedge IFRS9 - (32) TOTAL FINANCIAL INCOME (EXPENSE) (8,686) (22,791) Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 165

As stated previously, write-downs for €12,026 thousand were made in 2018 on the shareholdings held in Persidera and Editoriale La Libertà. For further information, please see Note 12.3.

Taxes (30) 2017 2018 Current taxes (1,773) (2,213) Deferred and prepaid taxes 5,834 780 Loss carry-forwards (154,573) 2,525 TOTAL TAXATION (150,512) 1,092

In 2017, this item included the effects of the tax dispute settlement (reference is made to the comment under the risks provision): specifically, taxation was at €175,341 thousand (of which €128,233 thousand for taxes and €47,108 referred to interest). The settlement released the provisions that had previously been established for a total of €20,847 thousand. An additional €78 thousand was also provided to cover the interest accrued on the tax risk. The deduction of the interest portion for €47,108 thousand had an overall positive effect for €11,304 thousand, of which €2,322 thousand referred to current taxes and €8,984 to prepaid taxes. During 2018, prepaid taxes were recognised for €3,355 thousand based on the favourable outcome to the appeals submitted pursuant to Art. 107 TUIR relating to the utilisation of Prior Losses contributed by companies in the ITEDI SpA Group exceeding the limits envisaged by the aforementioned article 107. On 30 January 2019, 3 judgements were handed down by the Court of Cassation (the relevant hearings held on 11 December 2018), in which Gedi News Network was successful. Previously, the Company had been unsuccessful in the second level judgement, and had paid the entire amount pending in accordance with applicable legislation. The Supreme Court judgement referred to declared the tax assessment notice invalid; the credit that will be applied for as a refund was therefore recognised, with a positive effect on the Income Statement for €1,390 thousand. A reconciliation between the theoretical tax charge calculated with IRES at 27.5% and IRAP at 3.9% and the effective tax charge, is presented in the following table. 166 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

2017 2018 1) Pre-tax profit as per the financial statements 27,256 (33,150) 2) a. Theoretical income taxes (IRES) (at national tax rate) 6,541 (7,956) b. Tax effect relating to non-deductible costs 2,906 11,446 c. Dividends 349 326 d. Non-taxable income/grants (5,048) (2,155) f. Current and deferred taxes relating to previous years 9 (11) f. Tax effect related to previous years losses - (3,354) that resulted in deferred taxes receivable in the period g. Net effect on dispute settlement 143,188 - 3) Income taxes (IRES) 147,945 (1,704) 4) IRAP 2,489 3,137 5) Loss carry-forwards for previous periods 78 (2,525) 6) Total taxation as per financial statements 150,512 (1,092) Effective average tax rate n.s. 3.29% Theoretical tax rate 27.90% 27.90%

Minority interests (31) These refer to the portion of profits attributable to the minority shareholders GEDI News Network SpA and Mo-Net Srl.

Earnings per share (32) Basic earnings per share are calculated by dividing the net profit for the period pertaining to the Group by the weighted average number of ordinary shares in circulation in the period (excluding own shares). The diluted earnings per share are calculated by dividing the net profit for the period attributed to ordinary shareholders by the weighted average number of ordinary shares in circulation in the period, adjusted for the diluting effect of stock options. The table that follows shows income per share and other information used in the calculation of the diluted earnings per share.

2017 2018 Group net profit (123,336) (32,153) Weighted average number of shares in circulation (’000) 438,514 486,722 Earnings per share (0.281) (0.066)

2017 2018 Group net profit (123,336) (32,153) Weighted average number of shares in circulation (’000) 438,514 486,722 No. of options (’000) 60,419 59,173 Diluted earnings per share (0.247) (0.059) Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 167

Dividends paid (33) No dividends were distributed in 2018.

14. Other information

14.1 Net financial position The net financial position of the Group is shown in the table below, based on Consob Communication Dem/6064293 of 28 July 2016.

31/12/2017 31/12/2018 Financial receivables from Group companies 173 174 Cash and deposits 63,345 77,105 Bank overdrafts (51) (90) Cash and cash equivalents 63,467 77,189 Marketable securities and other financial assets 222 814 Bond issue (93,701) (98,884) Other bank debt (8,846) (6,349) Other financial debt (76,244) (75,950) Other financial assets (liabilities) (178,569) (180,369) NET FINANCIAL POSITION (115,102) (103,180)

The net financial position at 31 December 2018 was negative for €103,180 thousand improv- ing by €11,922 thousand compared to the €115,102 thousand at 31 December 2017. On 2 July 2018, the third and final instalment was paid relating to the tax dispute settlement for €35,089 thousand.

14.2 Significant non-recurrent events and operations There were no significant non-recurring operations in 2018.

14.3 Transactions deriving from atypical or unusual operations In compliance with Consob Communication dated 28 July 2006, we acknowledge that during the period, the Group did not carry out atypical and/or unusual operations, as defined in said Communication.

14.4 Related-party transactions Transactions carried out by the Company, including transactions with related parties, are carried out in the normal course of business and are settled at market rates. It is to be noted that the conclusion of operations with related parties is subject to a specific procedure approved by the Board of Directors, which is described in the annual report on Cor- porate Governance included in a specific section of these Financial Statements at 31 December 2018, available for consultation both on the Company’s site and with Borsa Italiana SpA. In particular, GEDI Gruppo Editoriale SpA, holds with its subsidiaries and affiliated companies both trade relationships and relationships involving the provision of operational and financial services and consulting. The most significant trade transactions included those with the subsidiaries A. Manzoni & C. SpA concessionaire for advertising sales, those with GEDI Distribuz- ione SpA for the management of distribution at national level, with GEDI Digital SpA for the 168 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

management of sites, and with GEDI Printing SpA for printing services. The Company also manages centralised cash management service in which all the subsidiaries participate. GEDI Gruppo Editoriale SpA receives in turn from its Parent Company CIR SpA, services and consulting on strategic, administrative, financial and tax matters. It is to be noted that the provision of such services on the part of the Parent Company is deemed as preferable to the provision of the same on the part of third parties thanks, among other things, to the wide knowledge and experience CIR SpA has acquired over time on the company and the segment in which GEDI Gruppo Editoriale SpA operates. Since the 2004 financial year, GEDI Gruppo Editoriale SpA and the majority of its subsidiaries participate in the Parent Company’s CIR tax consolidation procedure. In June 2016, participation in the consolidated tax regimen was extended for the three-year period 2016-2018. Due to the capital increase resolved by the Shareholders’ Meeting of 27 April 2018 and released with the ITEDI SpA deed of transfer dated 27 June 2018, CIR lost the controlling right of GEDI, and consequently the Group’s tax consolidation that the Company had subscribed to then lapsed. With the CIR tax consolidation having lapsed, it was decided to adopt a tax consolidation at the level of GEDI SpA and its subsidiaries. The application of this regimen required that the holding company and each of the companies it controls jointly exercise a specific option, in terms of Art, 120 of the TUIR. The option is valid for the three-year period 2017-2019. GEDI Gruppo Editoriale SpA and most subsidiaries have continued to avail themselves of the specific Group VAT system. Lastly, as regards compensation plans on financial instruments reserved for directors and employees of Group companies, refer to Note 12.14 (Reserves). The data (expressed in thousands of euro) regarding the economic, equity and financial relations of GEDI Gruppo Editoriale SpA with its related companies is set forth below.

GEDI Gruppo Editoriale SpA transactions with related companies

Costs Revenues Tax Tax Financial Financial Tax Tax Guarantees expense income expense income* financial receivables commercial financial payables commercial provided SUBSIDIARIES Ksolutions SpA (in liquidation) - - - - - 2 174 - - - - 9 - ASSOCIATED COMPANIES Le Scienze SpA 206 1,201 - - - 19 - - 325 - - 1,203 - Persidera SpA 960 113 - - - 3,231 - - 92 - - 235 - HuffingtonPost Italia Srl 1,561 206 ------192 - - 564 - Editoriale Libertà SpA - 65 - - - 350 - - 17 - - - - Altrimedia SpA 436 135 - - - 53 - - 64 - - 227 - PARENT COMPANIES CIR SpA 800 312 ------70 - - 800 - Cofide SpA 132 14 ------146 - OTHER RELATED COMPANIES Sogefi SpA - 12 ------

* This item includes dividends received from subsidiaries

Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 169

14.5 Risk management

Risks connected with the general performance of the economy and publishing sector For the publishing sector, 2018 was once again critical, with an additional drop in advertising collections on print and circulation figures that confirm the erosion seen in recent years. The general Italian economic context has further recorded recessionary figures, with a contrac- tion in GDP over the last two quarters of 2018 (-0.1% and -0.2% respectively in the third and fourth quarters). This strategic context is one of the main risks that the GEDI Group is exposed to, given the high concentration in the printing services sector. The current uncertain outlook for the short and medium term, which is resulting in a negative performance for advertising and circulation revenues for the print segment, has therefore made it difficult to estimate future performance and cash flow projections. These uncertainties reflect inter alia, on cash flow projections, which are used in the determination of the value in use of Cash Generating Units to assess the retrievability of the book value of intangible assets with an indefinite useful life and that of investments (with reference to the financial statements). The ongoing difficulties in the advertising market and specifically, the printing services sector, has meant that it was necessary for the Group to commit to additional and constant cuts in costs, transversal to all the business areas, and thus also for the purpose of more fully ensuring the continuity and development of its mediums. If the macroeconomic and financial context should change contrary to estimates and the assumptions made by management when preparing the 2019 Budget and 2019-2021 Three-year Plan, or if the Group’s companies’ ability to generate cash flows should worsen in respect of the provisions that the impairment test was based on, it could become necessary to make adjustments to the book value of the intangible assets recognised in the consolidated financial statements, with the consequent recording of the write-downs on these assets in the Income Statement.

Financial risks Costs Revenues Tax Tax Financial Financial Tax Tax Guarantees Financial risk management is governed by a Group policy based on prudence and limited risk expense income expense income* financial receivables commercial financial payables commercial provided criteria in the choice of financial and investment policies, and which completely prohibits any SUBSIDIARIES speculative operations. The policy outlines the objectives, strategies, guidelines and operating Ksolutions SpA (in liquidation) - - - - - 2 174 - - - - 9 - procedures. ASSOCIATED COMPANIES The Company essentially uses two channels to raise financial resources: the international bond Le Scienze SpA 206 1,201 - - - 19 - - 325 - - 1,203 - market and the factoring of receivables of the concession holder A. Manzoni & C. SpA. based Persidera SpA 960 113 - - - 3,231 - - 92 - - 235 - on specific Factoring and securitisation contracts. For additional information on the convertible HuffingtonPost Italia Srl 1,561 206 ------192 - - 564 - equity-linked bond issue, please refer to Note 11. Editoriale Libertà SpA - 65 - - - 350 - - 17 - - - - In addition, on 16 April 2018 the Parent Company finalised the signing of a (committed) four- Altrimedia SpA 436 135 - - - 53 - - 64 - - 227 - year Revolving Credit Facility with a pool of banks, aimed at guaranteeing the financial re- PARENT COMPANIES sources to repay the bond issue falling due on 9 April 2019. The contract envisages compliance CIR SpA 800 312 ------70 - - 800 - with a financial covenant based on the ratio between Net Financial Debt and EBITDA. Cofide SpA 132 14 ------146 - With the above operations, the Group ensured long-term financial resources so as to prevent OTHER RELATED COMPANIES liquidity risks: were it however to be in need of additional financial resources in addition to Sogefi SpA - 12 ------those provided by the operating cash flow, the Group will be in a position to draw on a number of uncommitted credit lines which are currently not utilised. To manage finances/treasury, the Parent Company GEDI Gruppo Editoriale SpA manages and 170 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

coordinates a centralised intragroup current account, in which all subsidiaries take part, so as to obtain economic advantages in relationships with financial counterparts and stronger operating efficiency. Centralisation in fact allows for more efficient planning and control of cash flows, ensures higher consistency in financing and investment choices, optimises the overall risk profile of the Group and, above all, strengthens its contractual power with the banking system.

Price risk As it is active in the publishing segment, the Group acquires large quantities of paper. To achieve a more efficient management of paper purchases and to strengthen its bargaining position with counterparts, thus promoting competition among suppliers, the management of paper purchases for the Group was centralised. In the past, the Group stipulated a number of paper swap contracts on a portion of its paper needs. As, however, it assessed their ineffectiveness over the medium term, the Group has decided to discontinue the use of such instruments.

Credit risk The credit risk exposure of the Group relates to trade and financial receivables. Due to the sector in which it operates, the Group is not subject to significant credit risk on trade receivables. Though there are no significant concentrations of such risks, the Group however adopts operating procedures that bar the sale of products or services to customers that do not possess an adequate risk profile or provide collateral guarantees. With regard to financial receivables, investments in short-term financial instruments and trading in derivatives are carried out only with banks that possess a high credit standing. Additional information on risks relating to operations and risks connected with the general performance of the economy are provided in the relevant section of the Report of the Board of Directors.

*****

Observing the matters required by the IFRS 7 accounting standard, tables are presented below in which (i) the financial assets and liabilities are divided up by class/category, (ii) financial -as sets are reported by maturity, and (iii) the contractual maturities of the financial liabilities are indicated. Furthermore, in relation to the financial instruments recorded in the Consolidated statement of financial position at fair value, the hierarchical level of the fair value valuation is shown. Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 171

Categories of financial assets and liabilities stated in the financial statements

Items Amount Assets at FV Assets at FV Loans Investments Available Fair Equity Shareholders’ in FS in FS through P&L through P&L and held to for sale value effect equity effect designated as classified as receivables maturity assets +/(-) +/(-) 2017 FINANCIAL PERIOD such from initial held for trading FINANCIAL ASSETS recognition Non-current assets Other investments (4) 10,258 - - - - 10,258 10,258 236 - Other receivables* (5) 1,400 - - 1,400 - - 1,400 63 - Current assets Trade receivables* (8) 208,277 - - 208,277 - - 208,277 (2,812) - Other receivables* (11) 25,079 - - 25,079 - - 25,079 (161) - Securities (9) 16,333 - - - - 16,333 16,333 - - Financial receivables** (9) 1,158 - - 1,158 - - 1,158 - - Cash and cash equivalents (12) 63,518 - - 63,518 - - 63,518 91 -

Items Amount Liabilities at FV Liabilities at Liabilities Fair Equity Shareholders’ in FS in FS through P&L FV through at amortised value effect equity effect designated as P&L classified cost +/(-) +/(-) 2017 FINANCIAL PERIOD such from initial as held for FINANCIAL LIABILITIES recognition trading Non-current liabilities Bond issues (16) (87,906) - - (87,906) (100,694) - - Other financial debt (16) (7,745) - - (7,745) (1,476) - - Current liabilities Bank overdrafts (16) (51) - - (51) (51) - - Bond issues (16) (5,795) - - (5,795) (5,795) (7,399) - Other financial debt (16) (94,614) - - (94,614) (93,938) (524) - Trade payables* (19) (113,194) - - (113,194) (113,194) - - * The item does not include prepaid expenses or tax receivables ** The fair value of the financial receivables for derivatives in 2014 is classified in “Level 2” IFRS 7, section 27A.

Items Amount Assets at FV Assets at FV Loans Investments Available Fair Equity Shareholders’ in FS in FS through P&L through P&L and held to for sale value effect equity effect designated as classified as receivables maturity assets +/(-) +/(-) 2018 FINANCIAL PERIOD such from initial held for trading FINANCIAL ASSETS recognition Non-current assets Other investments (4) 10,244 - - - - 10,244 10,244 68 - Other receivables* (5) 1,159 - - 1,159 - - 1,159 1 - Current assets Trade receivables* (8) 187,207 - - 187,207 - - 187,207 (2,772) - Other receivables* (11) 17,959 - - 17,959 - - 17,959 (154) - Securities (9) ------Financial receivables** (9) 814 - - 814 - - 814 - - Cash and cash equivalents (12) 77,279 - - 77,279 - - 77,279 28 - 172 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Items Amount Liabilities at FV Liabilities at Liabilities Fair Equity Shareholders’ in FS in FS through P&L FV through at amortised value effect equity effect designated as P&L classified cost +/(-) +/(-) 2018 FINANCIAL PERIOD such from initial as held for FINANCIAL LIABILITIES recognition trading Non-current liabilities Bond issues (16) ------Other financial debt (16) (3,507) - - (3,507) - - - Current liabilities Bank overdrafts (16) (90) - - (7) (7) - - Bond issues (16) (98,884) - - (98,884) (99,594) (7,799) - Other financial debt (16) (78,792) - - (78,792) (78,792) (790) - Trade payables (19) (111,154) - - (45,982) (45,982) - - * The item does not include prepaid expenses or tax receivables ** The fair value of the financial receivables for derivatives in 2014 is classified in “Level 2” IFRS 7, section 27A.

Contractual maturities of financial liabilities

2017 FINANCIAL YEAR <6 months > 0,5 <1 > 1 <2 > 2 <3 > 3 <4 > 4 <5 >5 TOTAL Bond issue 1,298 1,319 100,403 - - - - 103,020 Other financial debt: 94,064 550 2,662 1,951 1,387 1,745 - 102,359 - Bank loans 551 550 2,662 1,951 1,387 1,745 - 8,846 - Due to other providers of finance 93,513 ------93,513 Bank overdrafts 51 ------51 Trade payables 113,194 ------113,194 TOTAL 208,607 1,869 103,065 1,951 1,387 1,745 - 318,624

2018 FINANCIAL YEAR <6 months > 0,5 <1 > 1 <2 > 2 <3 > 3 <4 > 4 <5 >5 TOTAL Bond issues 100,986 ------100,986 Other financial debt: 77,492 1,385 1,820 891 907 - - 82,495 - Bank loans 1,542 1,385 1,820 891 907 - - 6,545 - Due to other providers of finance 75,950 ------75,950 Bank overdrafts 90 ------90 Trade payables 98,759 12,395 - - - - - 111,154 TOTAL 277,327 13,780 1,820 891 907 - - 294,725 Notes to the Consolidated Financial Statements | GEDI Gruppo Editoriale | 173

Ageing of financial assets

Reporting Total Falling Matured 0 - 30 31 - 60 61 - 90 oltre 90 Expiry Write-downs 2017 FINANCIAL PERIOD in FS receivables due at > d d d d negotiated Non-current assets Other receivables (5) 1,400 1,400 ------Current assets Trade receivables (8) 208,277 93,315 114,962 53,244 32,760 7,527 21,431 - - Gross receivable 226,122 101,106 125,016 54,569 33,793 7,763 28,891 - - Provision for doubtful accounts (17,845) (7,791) (10,054) (1,325) (1,033) (236) (7,460) - (2,812) Other receivables (11) 25,079 25,079 ------Gross receivable 28,497 28,307 190 - - - 190 - - Provision for doubtful accounts (3,418) (3,228) (190) - - - (190) - (161) TOTAL 234,756 119,794 114,962 53,244 32,760 7,527 21,431 - (2,973) * * The item other receivables does not include prepaid expenses or tax receivables

Reporting Total Falling Matured 0 - 30 31 - 60 61 - 90 oltre 90 Expiry Write-downs 2018 FINANCIAL PERIOD in FS receivables due at > d d d d negotiated Non-current assets Other receivables (5) 1,159 966 193 - - - 193 - - Current assets Trade receivables (8) 187,207 121,677 65,530 35,195 7,788 4,201 18,346 - - Gross receivable 205,016 126,690 78,326 40,343 8,127 4,339 25,517 - - Provision for doubtful accounts (17,809) (5,013) (12,796) (5,148) (339) (138) (7,171) - (2,772) Other receivables (11) 17,959 17,959 ------Gross receivable 21,257 21,257 ------Provision for doubtful accounts (3,298) (3,298) ------(154) TOTAL 206,325 140,602 65,723 35,195 7,788 4,201 18,539 - (2,926) * * The item other receivables does not include prepaid expenses or tax receivables

14.7 Commitments At 31 December 2018, the Group had commitments amounting to €24,113 thousand relating to: • guarantees provided by the Parent Company to companies that are part of the VAT pool for €19,396 and guarantees provided by Elemedia SpA to third parties for €369 thousand; • contracts for the purchase of plant and other printing equipment for €146 thousand for the Parent Company; • other guarantees amounting to €4,202 thousand, referring mainly to sureties pertaining to the Parent Company and the subsidiaries GEDI New Network S.p.A., North East Division and A. Manzoni & C. SpA.

14.8 Disclosure pursuant to Art. 1, paragraph 125 of Italian Law No. 124 of 4 August 2017 During 2018, the Group benefited from indirect grants in the form of tariff concessions on the relevant telephone expenses for €481 thousand (€500 thousand in 2017), as provided for publishing companies under Art. 28 of Italian Law No. 416 of 5 August 1981. The Group did not receive publishing related direct grants during 2018; nonetheless there are direct grants recorded in the accounts until 2009 pursuant to Art. 5 of Italian Law 62/2001, as well as tax receivables in terms of Art. 8 of Italian Law 62/2001. There were no additional forms of direct or indirect grants received from Public Administration offices, recorded during the period. 174 | GEDI Gruppo Editoriale | Notes to the Consolidated Financial Statements

Annexes

Annexes | GEDI Gruppo Editoriale | 177

Summary statement of group companies

ATTACHMENT NO. 1 Company name Office Share % Shares held and business activities capital by the company PARENT COMPANY - GEDI Gruppo Editoriale SpA Rome 76,304 CIR SpA publishing SUBSIDIARIES CONSOLIDATED UNDER THE LINE-BY-LINE METHOD - A. Manzoni & C. SpA Milan 21,934 68.39 GEDI Gruppo Editoriale SpA advertising concessionaire 31.61 GEDI News Network SpA - Elemedia SpA Rome 25,000 100 GEDI Gruppo Editoriale SpA radio, internet and satellite television - GEDI News Network SpA Turin 195,045 99.85 GEDI Gruppo Editoriale SpA publishing - Mo-Net Srl Rome 36 83 GEDI Digital Srl internet - GEDI Printing SpA Rome 33,637 100 GEDI News Network SpA printing - GEDI Distribuzione SpA Milan 678 100 GEDI Gruppo Editoriale SpA services - GEDI Digital Srl Rome 279 82.07 GEDI Gruppo Editoriale SpA internet services 17.93 GEDI News Network SpA AFFILIATED COMPANIES CONSOLIDATED UNDER THE EQUITY METHOD - Altrimedia SpA Piacenza 517 35 GEDI News Network SpA advertising concessionaire - Editoriale Corriere Romagna Srl Forlì 1,757 49 GEDI News Network SpA publishing - Editoriale Libertà SpA Piacenza 1,000 35 GEDI News Network SpA publishing - HuffingtonPost Italia Srl Rome 250 49 GEDI Gruppo Editoriale SpA publishing - Le Scienze SpA Rome 103 50 GEDI Gruppo Editoriale SpA publishing - Persidera SpA Rome 21,429 30 GEDI Gruppo Editoriale SpA network operator N.B. Figures in thousands of euro, unless stated otherwise 178 | GEDI Gruppo Editoriale | Annexes

Company name Office Share % Shares held and business activities capital by the company SUBSIDIARIES AND AFFILIATED COMPANIES VALUED UNDER THE COST METHOD - Club DAB Italia - Società Consortile SpA Milan 240 37.50 Elemedia SpA broadcasting services - Ksolutions Srl (in liquidation) Massa 100 100 GEDI Digital Srl internet services -Liguria Press Srl Genoa 240 20 GEDI News Network SpA distribution services OTHER COMPANIES VALUED UNDER THE COST METHOD - Agenzia ANSA Soc. Coop. a r.l. Rome 10,783 3.68 GEDI Gruppo Editoriale SpA printing agency 20.59 GEDI News Network SpA - Radio Italia SpA Milan 580 10.00 GEDI Gruppo Editoriale SpA radio, internet and satellite television - Agenzia Informativa Adriatica d.o.o. Koper 13 19 GEDI News Network SpA news production and transmission (Slovenia) - Audiradio Srl (in liquidation) Milan 258 7.50 A. Manzoni & C. SpA market research - Consorzio Edicola Italiana SpA Milan 22 16.67 GEDI Gruppo Editoriale SpA digital publishing services 16.67 GEDI News Network SpA - Consuledit Società Consortile a r.l. (in liquidation) Milan 20 9.18 GEDI News Network SpA market research 6.64 GEDI Gruppo Editoriale SpA - C.S.E.D.I Consorzio Milan 103 11.11 GEDI Distribuzione SpA distribution services - Fidimpresa Liguria Soc.Consortile p.A. Genoa 15,480 0.01 GEDI News Network SpA credit guarantee services - D-Share Srl Modugno 111 10.96 GEDI Digital Srl internet services (BA) - Immobiliare Editori Giornali Srl Rome 830 7.96 GEDI News Network SpA real estate - Premium Publisher Network consorzio Milan 9 16.96 GEDI Gruppo Editoriale SpA internet services 7 GEDI News Network SpA - Presto Technologies Inc. (not operational) Cambridge 7,664 7.83 GEDI Digital Srl internet services (USA - MA) (000) $ USA - Tavolo Editori Radio Srl Milan 10 12.5 Elemedia SpA market research - Telelibertà SpA Piacenza 2,200 4.32 GEDI News Network SpA television broadcasting services - Trento Press Service Srl Gardolo di Trento 260 1.6 GEDI News Network SpA distribution services (TN) N.B. Figures in thousands of euro, unless stated otherwise Annexes | GEDI Gruppo Editoriale | 179 3.60 1.37 1.00 1.86 2.25 1.58 2.22 1.80 Weighted Weighted for the period average price

end of period Number of options 338,850 598,100 1,608,500 1,752,500 1,586,900 5,884,850 Options exercisable at

- - 0.75 1.25 1.75 2.25 1.54 0.25 (years) Average Average expiration

- - 1.00 1.86 2.25 1.58 1.80 1.37 Weighted Weighted for the period average price

- -

Options in circulation at the end of period Number 338,850 598,100 of options 1,608,500 1,752,500 1,586,900 5,884,850

------Weighted Weighted for the period average price

------Number Options expired of options during the period

------exercised price at date Average market Average

------Weighted Weighted for the period average price

during the period Options exercised ------Number of options

- - 3.60 1.86 2.25 2.22 1.58 3.78 Weighted Weighted for the period average price

- - - - -

Number 927,500 during the period of options Options cancelled 1,990,000 1,062,500

------Weighted Weighted for the period average price

------Number Options assigned during the period of options

1.00 1.86 2.25 1.58 2.07 2.22 3.60 1.37 Weighted Weighted for the period average price

Number 338,850 927,500 598,100 of options beginning of period 1,608,500 1,752,500 1,586,900 7,874,850 1,062,500 Options in circulation at

Extraord. Stock option plan 2009 - III tranche III - 2009 plan option Stock Extraord. Extraord. Stock option plan 2009 - II tranche tranche IV - 2009 plan option Stock Extraord. Ord. Stock Option Plan 2009 - Tranche I Tranche - 2009 Plan Option Stock Ord. Ordinary stock option plan 2009 Tranche II Tranche 2009 plan option stock Ordinary I Tranche 2010 plan option stock Ordinary II Tranche 2010 plan option stock Ordinary TOTAL Employee stock option plans at 31 December 2018 NO. 2 ATTACHMENT 180 | GEDI Gruppo Editoriale | Annexes - - - 1.81 0.83 0.83 1.70 0.98 0.98 1.24 Weighted Weighted Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period for the period for the period average price average price average price average price average price - - - Number of Units Number of Units Number of Units Number of Units Number of Units Units exercisable at Units exercisable at Units exercisable at Units exercisable at Units exercisable at 146,723 262,819 176,903 312,808 340,781 138,927 331,719 the end of period the end of period the end of period the end of period the end of period - - - 1.81 0.83 0.83 1.70 0.98 0.98 1.24 Weighted Weighted Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period for the period for the period average price average price average price average price average price - - - Number of Units Number of Units Number of Units Number of Units Number of Units period (inclusive of UA) period (inclusive of UA) period (inclusive of UA) period (inclusive of UA) period (inclusive of UA) Units accrued during the Units accrued during the Units accrued during the Units accrued during the 613,799 597,508 419,417 541,252 868,750 543,000 Units accrued during the 459,417 - 1.70 1.81 0.83 0.83 1.70 0.98 0.98 1.24 1.24 Weighted Weighted Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period for the period for the period average price average price average price average price average price - Number of Units Number of Units Number of Units Number of Units Number of Units 51,252 the end of period the end of period the end of period the end of period the end of period Units in circulation at Units in circulation at Units in circulation at Units in circulation at Units in circulation at 146,723 262,819 176,903 312,808 340,781 138,927 397,302 525,000

------1.70 1.24 Weighted Weighted Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period for the period for the period average price average price average price average price average price ------Units exercised Units exercised Units exercised Units exercised Units exercised during the period during the period during the period during the period during the period Number of Units Number of Units Number of Units Number of Units Number of Units 24,684 72,380

------1.70 Weighted Weighted Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period for the period for the period average price average price average price average price average price Units expired Units expired Units expired Units expired ------Units expired - - Number of Units Number of Units Number of Units Number of Units Number of Units during the period during the period during the period during the period during the period 490,000

------Weighted Weighted Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period for the period for the period average price average price average price average price average price ------Units assigned Units assigned Units assigned Units assigned Units assigned Number of Units Number of Units Number of Units Number of Units Number of Units during the period during the period during the period during the period during the period - 1.81 0.83 0.83 1.70 1.70 0.98 0.98 1.24 1.24 Weighted Weighted Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period for the period for the period average price average price average price average price average price - Number of Units Number of Units Number of Units Number of Units Number of Units beginning of period beginning of period beginning of period beginning of period beginning of period 146,723 262,819 176,903 337,492 541,252 340,781 138,927 469,682 525,000 Units in circulation at Units in circulation at Units in circulation at Units in circulation at Units in circulation at Time-Based Units Time-Based Performance-Based Units Units Time-Based Performance-Based Units Units Time-Based Performance-Based Units Units Time-Based Performance-Based Units Time-Based Units Time-Based Performance-Based Units Employee stock grant plans at 31 December 2018 2011 Stock Grant 2012 Stock Grant 2013 Stock Grant 2014 Stock Grant 2015 Stock Grant Annexes | GEDI Gruppo Editoriale | 181 ------0.95 1.24 Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period average price average price average price for the period average price ------Number of Units Number of Units Number of Units Number of Units Units exercisable at Units exercisable at Units exercisable at Units exercisable at 160,326 the end of period the end of period the end of period 331,719 the end of period ------0.95 1.24 Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period average price average price average price for the period average price ------Number of Units Number of Units Number of Units Number of Units period (inclusive of UA) period (inclusive of UA) period (inclusive of UA) period (inclusive of UA) Units accrued during the Units accrued during the Units accrued during the 208,140 Units accrued during the 459,417 - 0.95 0.78 0.44 0.78 0.44 1.24 1.24 Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period average price average price average price for the period average price - Number of Units Number of Units Number of Units Number of Units the end of period the end of period the end of period the end of period Units in circulation at Units in circulation at Units in circulation at 507,186 707,500 932,500 707,500 932,500 Units in circulation at 397,302 525,000

------0.95 1.24 Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period average price average price average price for the period average price ------Units exercised Units exercised Units exercised Units exercised during the period during the period during the period Number of Units Number of Units Number of Units during the period Number of Units 47,814 72,380

------Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period average price average price average price for the period average price Units expired Units expired Units expired ------Units expired - - Number of Units Number of Units Number of Units during the period during the period during the period Number of Units during the period

------Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period average price average price average price for the period average price ------Units cancelled Units cancelled Units cancelled Units cancelled Number of Units Number of Units Number of Units during the period during the period during the period Number of Units during the period

------0.44 0.44 Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period average price average price average price for the period average price ------Units assigned Units assigned Units assigned Units assigned Number of Units Number of Units Number of Units Number of Units during the period during the period during the period during the period 932,500 932,500 - - - 0.95 0.78 0.78 1.24 1.24 Weighted Weighted Weighted Weighted Weighted Weighted for the period for the period for the period average price average price average price for the period average price - - - Number of Units Number of Units Number of Units Number of Units beginning of period beginning of period beginning of period beginning of period 555,000 707,500 707,500 469,682 525,000 Units in circulation at Units in circulation at Units in circulation at Units in circulation at Time-Based Units Time-Based Performance-Based Units Units Time-Based Performance-Based Units Units Time-Based Performance-Based Units Time-Based Units Time-Based Performance-Based Units 2016 Stock Grant 2017 Stock Grant 2018 Stock Grant

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Certification of the consolidated financial statements pursuant to Article 154-bis of Italian Legislative Decree No. 58 of 24 February 1998

| GEDI Gruppo Editoriale | 185

Certification of the consolidated financial statements pursuant to Article 154-bis of Italian Legislative Decree No. 58 of 24 February 1998 1) The undersigned Laura Cioli, Managing Director, and Gabriele Acquistapace, Executive appointed to draw up the company accounting documents of GEDI Gruppo Editoriale S.p.A., certify, having considered the provisions of art. 154-bis, paragraphs 3 and 4 of Italian Legislative Decree no. 58 of 24 February 1998:

• the adequacy in relation to the characteristics of the company and • the effective application of the administrative and accounting procedures used in the preparation of the consolidated financial statements during 2018.

2) It is also certified that:

2.1) the consolidated financial statements at 31 December 2018:

a) were prepared in accordance with International Financial Reporting Standards as adopted by the European Union pursuant to Regulation (EC) No. 1606/2002 of the European Parliament and Council dated 19 July 2002, as well as with the provisions issued in implementation of Article 9 of Italian Legislative Decree No. 38 of 28 February 2005; b) correspond with the results of the accounting records and entries; c) fairly and correctly represent the financial condition, result of operations and cash flows of the Company and of the Group companies included in the consolidation; 2.2) the report of on operations includes a reliable analysis of the performance and the result of operations as well as the situation of the issuer and all the companies included in the scope of consolidation, together with the description of the main risks and uncertainties to which they are exposed.

Laura Cioli Gabriele Acquistapace

Rome, 01 March 2019

GEDI Gruppo Editoriale S.p.A. Share Capital € 76,303,571.85 fully paid-up — Economic and Administrative Via Cristoforo Colombo, 90 - 00147 Rome Index (R.E.A.) Rome no.192573 VAT no. 00906801006 Tel. +39 06/84781 Fax. 06/84787371 Tax ID code and registration Rome Companies’ Register No. 00488680588 www.gedispa.it Company subject to the management and coordination of CIR S.p.A.

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Independent Auditors’ Report of the Consolidated Financial Statements

KPMG S.p.A. Revisione e organizzazione contabile Via Ettore Petrolini, 2 00197 ROMA RM Telefono +39 06 80961.1 Email [email protected] PEC [email protected]

(Translation from the Italian original which remains the definitive version)

Independent auditors’ report pursuant to article 14 of Legislative decree no. 39 of 27 January 2010 and article 10 of Regulation (EU) no. 537 of 16 April 2014

To the shareholders of GEDI Gruppo Editoriale S.p.A.

Report on the audit of the consolidated financial statements

Opinion We have audited the consolidated financial statements of GEDI Gruppo Editoriale S.p.A. (the “parent”) and its subsidiaries (together, the “group” or the “GEDI Group”), which comprise the statement of financial position as at 31 December 2018, the income statement and the statements of comprehensive income, cash flows and changes in equity for the year then ended and notes thereto, which include a summary of the significant accounting policies. In our opinion, the consolidated financial statements give a true and fair view of the financial position of the GEDI Group as at 31 December 2018 and of its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the consolidated financial statements” section of our report. We are independent of the “parent in accordance with the ethics and independence rules and standards applicable in Italy to audits of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the consolidated financial statements of the current year.

Società per azioni Capitale sociale Euro 10.345.200,00 i.v. Ancona Aosta Bari Bergamo Registro Imprese Milano e Bologna Bolzano Brescia Codice Fiscale N. 00709600159 Catania Como Firenze Genova R.E.A. Milano N. 512867 Lecce Milano Napoli Novara Partita IVA 00709600159 KPMG S.p.A. è una società per azioni di diritto italiano e fa parte del Padova Palermo Parma Perugia VAT number IT00709600159 network KPMG di entità indipendenti affiliate a KPMG International Pescara Roma Torino Treviso Sede legale: Via Vittor Pisani, Cooperative (“KPMG International”), entità di diritto svizzero. Trieste Varese Verona 25 20124 Milano MI ITALIA

GEDI Group Independent auditors’ report 31 December 2018

These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Recoverability of nameplates, trademarks and goodwill Notes to the consolidated financial statements: paragraphs 4.1 “Intangible assets”, 4.7 “Loss in value of assets”, 9.1 “Retrievability of intangible assets with an indefinite useful life”, 12.1 “Intangible assets” and 13.28 “Depreciation, amortisation and write- downs”

Key audit matter Audit procedures addressing the key audit matter The consolidated financial statements at 31 Our audit procedures included: December 2018 comprise intangible assets — gaining an understanding of the process with an indefinite useful life of €577 million, adopted to prepare the impairment tests including nameplates and trademarks of approved by the parent’s board of €432 million and goodwill of €33 million, as directors on 25 January 2019; well as impairment losses of €24 million recognised during the year, of which €21 — gaining an understanding of the process million relating to nameplates and €3 million used to draft the plan; to goodwill. — analysing the criteria used to identify the Assisted by external experts, the directors CGU and tracing the amount of the CGU tested the carrying amount of the cash- assets and liabilities to the relevant generating units (CGU) to which the carrying amounts in the consolidated nameplates, trademarks and goodwill are financial statements; allocated for impairment by comparing it to — comparing the cash flows used for their recoverable amount. The tests were impairment testing to the cash flows approved on 1 March 2019. The directors forecast in the plan and analysing any estimated the recoverable amount based on discrepancies; value in use calculated using the discounted — analysing the main assumptions used by cash flow model. the directors in drafting the plan for As a result of the impairment test, the group reasonableness; recognised impairment losses of €24 million — considering the most significant on certain CGUs. Impairment testing entails discrepancies between past years’ a high level of judgement, especially in estimates and actual figures, in order to relation to: assess the accuracy of the forecasting — the expected cash flows, calculated by process; taking into account the general — involving experts of the KPMG network economic performance and that of in the assessment of the group’s sector and the actual cash flows reasonableness of the impairment generated by the CGU in recent years; testing model and related assumptions, — the financial parameters to be used to including by means of a comparison with discount the above cash flows. external data and information; Moreover, the 2019-2021 business plan (the — examining the comparison of the CGU’s “plan”) that the parent’s directors approved net assets to the group’s market on 25 January 2019 and that is the basis for capitalisation prepared by the directors the cash flow estimates is not only affected as part of their second level impairment by the uncertainties inherent in any forecast, testing; but also by the current uncertainty about the — checking the sensitivity analysis short and medium term performance of the presented in the notes in relation to the national and local newspaper market. key assumptions used for impairment For the above reasons, we believe that the testing; recoverability of the nameplates, trademarks — assessing the appropriateness of the and goodwill is a key audit matter. disclosures provided in the notes about the recoverability of nameplates, trademarks and goodwill.

2 GEDI Group Independent auditors’ report 31 December 2018

Recoverability of the investments in Persidera S.p.A. Notes to the consolidated financial statements: paragraphs 4.8 “Investments in associates and joint arrangements”, 8 “Events subsequent to the reference date of the financial report”, 9.2 “Recoverability of investments in associates”, 12.3 “Investments valued at equity” and 13.29 “Financial income (expense)”

Key audit matter Audit procedures addressing the key audit matter At 31 December 2018, the group held an Our audit procedures included: investment in the associate Persidera S.p.A. — gaining an understanding of the process with a carrying amount of €91 million, net of adopted to prepare the impairment tests an impairment loss of €11 million recognised approved by the parent’s board of during the year. directors on 25 January 2019; Assisted by external experts, the directors — analysing the reasonableness of the tested this equity investment for impairment assumptions underlying the associate’s and checked its recoverability by comparing expected cash flows; its carrying amount to its value in use calculated using the discounted cash flow — comparing the cash flows used for model. The test was approved on 1 March impairment testing to those forecast in 2019. the 2019-2021 business plan approved by the associate’s directors on 19 As a result of the impairment test, the group February 2019 and analysing the recognised an impairment loss of €11 million. reasonableness of any discrepancies; Impairment testing entails a high level of judgement, especially in relation to — analysing the most significant discrepancies between past years’ — the associate’s expected cash flows, estimates and actual figures, in order to calculated by taking into account the check the accuracy of the estimation general economic performance and that process adopted by the associate’s of associate’s sector and the actual cash directors; flows in recent years; — involving experts of the KPMG network — the financial parameters to be used to in the assessment of the discount the above cash flows. reasonableness of the impairment For the above reasons and considering the testing model and related assumptions, materiality of the carrying amount, we including by means of a comparison with believe that the recoverability of the external data and information; investment in Persidera S.p.A. is a key audit — analysing the events after the reporting matter. date; — checking the sensitivity analysis presented in the notes in relation to the key assumptions used for impairment testing; — assessing the appropriateness of the disclosures provided in the notes about the recoverability of the investment in Persidera S.p.A..

3 GEDI Group Independent auditors’ report 31 December 2018

Assessment of the possible effects of judicial investigations on the consolidated financial statements Notes to the consolidated financial statements: paragraph 4.20 “Provisions for risks and charges, potential assets and liabilities” and section 7 “Events subsequent to the reference date of the financial report”

Key audit matter Audit procedures addressing the key audit matter The consolidated financial statements at 31 Our audit procedures included: December 2018 include specific disclosure — updating the analysis of the about the judicial investigations notified on reasonableness of the assumptions 21 March 2018 to the parent’s then CEO, underlying the directors’ assessment of general manager and group head of human the possible effects of the judicial resources, to the parent itself and some of its investigations, based on the subsidiaries. documentation about the alleged crime The judicial authorities are investigating an and discussions with the main internal alleged fraud against the Italian social departments, the board of statutory security institution (INPS) in relation to the auditors (“Collegio Sindacale”) and the participation of certain employees in the supervisory body as per Legislative government-sponsored lay-off scheme to decree no. 231/2001; access the early retirement procedure as per — examining the legal advisors’ opinions Law no. 416/81 from 2012 to 2015. on the possible effects of the pending Assisted by their legal advisors, the directors investigations; assessed the effects of the investigations on — obtaining information, by written the consolidated financial statements. The requests and interviews, from the legal assessment is, by its very nature, complex advisors; and highly uncertain. — assessing the appropriateness of the For the above reasons, we believe that the disclosures provided in the notes about assessment of the possible effects of the the pending investigations and their pending judicial investigations is a key audit possible effects. matter.

Responsibilities of the parent’s directors and Collegio Sindacale for the consolidated financial statements The directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05 and, within the terms established by the Italian law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The directors are responsible for assessing the group’s ability to continue as a going concern and for the appropriate use of the going concern basis in the preparation of the consolidated financial statements and for the adequacy of the related disclosures. The use of this basis of accounting is appropriate unless the directors believe that the conditions for liquidating the parent or ceasing operations exist, or have no realistic alternative but to do so. The Collegio Sindacale is responsible for overseeing, within the terms established by the Italian law, the group’s financial reporting process.

4 GEDI Group Independent auditors’ report 31 December 2018

Auditors’ responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA Italia will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISA Italia, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: — identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; — obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control; — evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors; — conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the group to cease to continue as a going concern; — evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation; — obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance, identified at the appropriate level required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

5 GEDI Group Independent auditors’ report 31 December 2018

We also provide those charged with governance with a statement that we have complied with the ethics and independence rules and standards applicable in Italy and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are, therefore, the key audit matters. We describe these matters in our auditors’ report.

Other information required by article 10 of Regulation (EU) no. 537/14 On 21 April 2016, the parent’s shareholders appointed us to perform the statutory audit of its separate and consolidated financial statements as at and for the years ending from 31 December 2016 to 31 December 2024. We declare that we did not provide the prohibited non-audit services referred to in article 5.1 of Regulation (EU) no. 537/14 and that we remained independent of the parent in conducting the statutory audit. We confirm that the opinion on the consolidated financial statements expressed herein is consistent with the additional report to the Collegio Sindacale, in its capacity as audit committee, prepared in accordance with article 11 of the Regulation mentioned above.

Report on other legal and regulatory requirements

Opinion pursuant to article 14.2.e) of Legislative decree no. 39/10 and article 123-bis.4 of Legislative decree no. 58/98 The parent’s directors are responsible for the preparation of the group’s directors’ report and report on corporate governance and ownership structure at 31 December 2018 and for the consistency of such reports with the related consolidated financial statements and their compliance with the applicable law. We have performed the procedures required by Standard on Auditing (SA Italia) 720B in order to express an opinion on the consistency of the directors’ report and the specific information presented in the report on corporate governance and ownership structure indicated by article 123-bis.4 of Legislative decree no. 58/98 with the group’s consolidated financial statements at 31 December 2018 and their compliance with the applicable law and to state whether we have identified material misstatements. In our opinion, the directors’ report and the specific information presented in the report on corporate governance and ownership structure referred to above are consistent with the group’s consolidated financial statements at 31 December 2018 and have been prepared in compliance with the applicable law. With reference to the above statement required by article 14.2.e) of Legislative decree no. 39/10, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have nothing to report.

6 GEDI Group Independent auditors’ report 31 December 2018

Statement pursuant to article 4 of the Consob regulation implementing Legislative decree no. 254/16 The directors of GEDI Gruppo Editoriale S.p.A. are responsible for the preparation of a non-financial statement pursuant to Legislative decree no. 254/16. We have checked that the directors had approved such non-financial statement. In accordance with article 3.10 of Legislative decree no. 254/16, we attested the compliance of the non- financial statement separately.

Rome, 28 March 2019

KPMG S.p.A.

(signed on the original)

Benedetto Gamucci Director of Audit

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Financial Statements of GEDI Gruppo Editoriale SpA at 31 December 2018 Statement of Financial Position and Income Statement

Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 199

Statement of Financial Position ASSETS 31 December 31 December (euro) Notes 2017 2018 Intangible assets with an indefinite useful life 220,660,859 219,781,859 Other intangible assets 4,726,748 6,076,892 Intangible assets (1) 225,387,607 225,858,751 Property, plant and equipment (2) 10,776,234 7,965,252 Equity investments (3) 446,070,519 421,428,519 Non-current receivables (4) 916,867 654,830 Deferred tax assets (5) 16,376,261 21,873,079 NON-CURRENT ASSETS 699,527,487 677,780,431 Inventories (6) 6,305,683 7,387,978 Trade receivables (7) 74,927,822 60,983,210 of which related companies 69,369,237 (92.6%) 56,617,298 (92.8%) Marketable securities and other financial assets - 813,808 Tax receivables (8) 15,489,585 8,156,793 of which related companies 11,376,155 (73.4%) 4,904,314 (60.1%) Other receivables (9) 19,912,206 12,351,074 Cash and cash equivalents (10) 44,217,030 60,045,116 of which related companies 2,316,896 (5.2%) 8,388,782 (14.0%) CURRENT ASSETS 160,852,326 149,737,978 TOTAL ASSETS 860,379,813 827,518,409

LIABILITIES AND EQUITY 31 December 31 December (euro) Notes 2017 2018 Share capital (11) 76,303,572 76,303,572 Reserves (12) 153,489,876 152,747,716 Retained earnings (losses) (12) 367,808,322 251,371,772 Net profit (loss) (116,571,803) (32,158,365) SHAREHOLDERS’ EQUITY 481,029,967 448,264,696 Financial debt (13) 87,906,595 - Provisions for risks and charges (14) 18,018,910 17,719,323 Employee termination indemnity and other retirement benefits (15) 19,666,116 18,535,842 Deferred tax liabilities (5) 61,559,598 61,804,426 NON-CURRENT LIABILITIES 187,151,218 98,059,591 Financial debt (13) 65,822,849 185,248,799 of which related companies 60,027,652 (91.2%) 86,207,946 (46.5%) Provisions for risks and charges (14) 11,055,954 23,922,291 Trade payables (16) 54,731,938 45,982,007 of which related companies 21,258,370 (38.8%) 12,852,366 (28.0%) Tax payables (27) 40,286,568 5,843,125 of which related companies 1,759,554 (4.4%) 2,471,185 (42.3%) Other payables (18) 20,301,318 20,197,900 CURRENT LIABILITIES 192,198,627 281,194,122 TOTAL LIABILITIES 379,349,846 379,253,713 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 860,379,813 827,518,409

The notes from page 205 to page 257 represent an integral part of these financial statements. 200 | GEDI Gruppo Editoriale | Financial Statements of the Parent Company

Income Statement

Year 2017 Year 2018 (euro) Notes restated* Revenues (19) 279,635,471 255,712,339 of which related companies 122,384,373 (51.6%) 116,343,547 (45.5%) Change in inventories (6) 44,971 128,302 Other operating income (20) 6,588,257 3,896,858 of which related companies 64,935 (1.0%) 207,348 (5.3%) Purchases (21) (26,598,714) (26,294,059) of which related companies (1,314,395) (4.9%) (1,613,785) (6.1%) Costs for services (22) (168,058,169) (155,105,444) of which related companies (42,332,499) (33.7%) (46,142,810) (29.7%) Other operating charges (23) (6,845,150) (3,796,466) of which related companies (248) (-) (87,429) (2.3%) Personnel costs (24) (85,713,091) (102,457,584) of which related companies (273,313) (0.3%) 17,349 (-) Depreciation, amortisation and write-downs (25) (4,013,100) (7,552,534) Operating profit (4,959,525) (35,468,588) Financial income (expense) (26) 591,310 (33,523,564) of which related companies 231,066 (39.1%) (24,439,797) (72.9%) Dividends received (27) 28,796,972 26,734,332 of which related companies 28,796,972 (100.0%) 26,734,333 (100.0%) Profit (loss) before taxes 24,428,758 (42,257,819) Taxes (28) (141,000,561) 10,099,455 of which related companies 124,501 (-) - (-) NET PROFIT (116,571,803) (32,158,365) Earnings per share, basic (0.27) (0.066) Earnings per share, diluted (0.23) (0.059)

* The Company has applied the international accounting standard IFRS 15 as from 1 January 2018, using the “retrospective method”. The comparative information was therefore restated. The application of the new standard has had no impact on the operating profit, profit for the period or Company’s shareholders’ equity, with differing accounting treatment only in certain items. The details regarding the effects of applying IFRS 15 are explained under paragraph 5 of the Notes to the Financial Statements.

Statement of Comprehensive Income

Year Year (euro) 2017 2018 NET PROFIT (116,571,803) (32,158,365) Other comprehensive income components: Actuarial profit (loss) on personnel provisions (50,958) 477,819 Profit (loss) on restatement of available-for-sale financial assets - - Tax effect of other profit (loss) 12,230 (114,676) Other comprehensive income components, net of tax effect (38,728) 363,142 TOTAL COMPREHENSIVE INCOME (116,610,531) (31,795,223)

The notes from page 205 to page 257 represent an integral part of these financial statements. Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 201

Statement of Cash Flow Year Year (€ thousand) Notes 2017 2018 OPERATING ACTIVITIES Profit (loss) for the period (116,572) (32,158) Adjustments: Depreciation, amortisation and write-downs (25) 4,013 7,552 - Stock option fair value (24) 734 780 - Net change in provisions for personnel costs (15) (686) (1,130) - Net change in provisions for risks and charges (14) (19,781) 12,566 - Losses (gains) on disposal of fixed assets (15) (16) - Losses (gains) on disposal of investments and securities (8,161) - - Adjustments to the value of financial assets - 24,642 - Dividends (received) (28,797) (26,734) Self-financing (169,265) (14,498) Decr. (incr.) non-current receivables 516 262 Incr. liabilities/decr. deferred taxes rec. (8,810) (5,253) Increase in tax payables/Decrease in tax receivables 37,972 (27,112) Decr. (incr.) inventories (38) (1,082) Decr. (incr.) trade and other receivables 5,946 14,506 Incr. (decr.) trade and other payables (10,983) (7,390) Other changes 1,954 3,551 Changes in current assets and other flows 26,557 (22,518) CASH FLOW FROM OPERATING ACTIVITIES (142,708) (37,016) of which: Interest received (paid) (2,293) (3,128) Income taxes received (paid) 5,842 2,454 INVESTING ACTIVITIES Outlay for purchase of fixed assets (5,374) (6,629) Outlay for purchase of investments (9,206) - Collections from sales 4,901 120 (Purchase) sale of securities, available-for-sale assets - (814) Dividends received 28,797 26,734 Cash flow generated by sale of assets 2,000 7,000 CASH FLOW FROM INVESTING ACTIVITIES 21,118 26,411 FINANCING ACTIVITIES (Purchase) sale of own shares (566) 110 Other changes - 135 CASH FLOW FROM FINANCING ACTIVITIES (566) 245 Increase (decrease) in cash and cash equivalents (122,156) (10,360) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 106,346 (15,810) CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (15,810) (26,170)

The notes from page 205 to page 257 represent an integral part of these financial statements. 202

| GEDIGruppoEditoriale

Consolidated Statement of Changes in Equity

Share Share Own Fair value IFRS Res. Stock Equity Retained Profit (loss) Own share € ( thousand) capital Premium shares reserve reserve Option for the period equity |

reserves earnings FinancialStatementsoftheParentCompany Position at 31 December 2016 61,806 2,845 (34,543) - 52,905 12,011 51,213 350,970 17,403 514,611 Movements in net profit ------17,402 (17,402) - Capital increases, capital contributed by shareholders 14,498 69,154 ------83,652 Valuation of stock options - - - - - 734 - - - 734 Own share transactions - - (35) - - - - (531) - (566) Transfers between reserves - - - - - (792) - 792 - - Other changes ------(790) - (790) Comprehensive profit (loss) for the period ------(39) (116,572) (116,611) Position at 31 December 2017 76,304 71,999 (34,578) - 52,905 11,953 51,213 367,805 (116,571) 481,030 Movements in net profit ------(116,572) 116,572 - Capital increases, capital contributed by shareholders ------Valuation of stock options - - - - - 780 - - - 780 Own share transactions - - 110 - - - - (228) - (118) Transfers between reserves ------Effect of adopting IFRS9 - - - - (1,632) - - - - (1,632) Comprehensive profit (loss) for the period ------363 (32,158) (31,795) Position at 31 December 2018 76,304 71,999 (34,468) - 51,273 12,733 51,213 251,369 (32,157) 448,265 APERTURE_SFUMATURA.qxp_impaginato 06/02/19 11:46 Pagina 11

Notes to the annual Financial Statements of GEDI Gruppo Editoriale SpA

Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 205

Notes to the annual Financial Statements of the Parent Company

1. General Information

GEDI Gruppo Editoriale SpA (hereinafter “GEDI” or the “Company”) operates mainly in the publishing sector and more specifically in the newspapers and periodicals segment, that of radio stations, advertising sales and online publishing. GEDI Gruppo Editoriale SpA has its registered office in Italy at Via Cristoforo Colombo 90, Rome. CIR Compagnie Industriali Riunite SpA controls the Company and exercises coordination and management functions pursuant to Article 2497 of the Italian Civil Code. GEDI Gruppo Editoriale stock is listed on the screen-based trading circuit (Mercato Telematico Azionario (MTA) of Borsa Italiana SpA (Reuters code: GEDI.MI, Bloomberg code: Bloomberg GEDI IM). The draft Financial Statements and their circulation were approved by the Board of Directors on 1 March 2019.

2. Form and content of the financial statements and accounting standards

These financial statements for the period, based on the principle of the company as an ongoing concern, were prepared in accordance with international accounting standards (International Accounting Standards, – IAS and International Financial Reporting Standards, – IFRS), as in- tegrated by the related interpretations (Standing Interpretations Committee, – SIC and Inter- national Financial Reporting Interpretations Committee, – IFRIC) issued by the International Accounting Standards Board (IASB) and approved by the European Union. The general principle adopted in the preparation of the financial statements is that of the historical cost for all assets and liabilities, with the exception of derivative instruments and certain financial assets/liabilities, some of which could be accounted for at their fair value. The classification, form, order and nature of items in the financial statements, are unchanged to those in the financial statements approved at 31 December 2017, with the exception of the component referring to the deferred price on the credit portfolio sold in the scope of the securitisation transaction recorded under “Receivables and other financial assets”, which was reclassified among “Financial debt”. The accounting principles adopted were also unchanged, except for the new IFRS9 and IFRS15 standards, referred to under Note 4. The comparative data in the 2017 Income Statement was recalculated to reflect the retrospective application of the international IFRS 15 accounting standard. It is noted that the application of the new standard has had no impact on the operating profit, profit for the period or the Company’s shareholders’ equity, with differing accounting treatment only in certain items. As mentioned, the details regarding the effects of applying IFRS 15 are explained under paragraph 5 of the Notes to the Financial Statements. The classification adopted in the statement of financial position, both for assets and liabilities, is that of “current” and “non-current” as, contrary to the classification by liquidity, such criteria is deemed to provide a better representation of the Company’s financial position. The Statement of Financial Position is divided into two separate facing sections. The order of reporting is assets, shareholders’ equity and liabilities (from the least current to the most current). In order not to make the reporting unnecessarily complex and to use the same format for interim reports, financial statements include only major captions and all sub-classifications (e.g. nature of the 206 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

debtor/creditor, expiration term, etc.) are instead disclosed in the notes. The contents of the Statement of Financial Position are in compliance with minimum requirements established by IAS 1 as, with the exclusion of publications, classified under “Intangible assets with an indefinite useful life”, no significant or particular item was deemed to require separate reporting. Income statement items were classified by nature as, considering the activities of the Company, it has not been deemed that a classification by destination could better represent the operating performance of the Company. In the Cash Flow Statement, prepared according to the “indirect method”, cash flows arising from operating, investing and financing activities, and those arising from discontinued operations are reported separately. The Consolidated Statement of Changes in Equity shows income and charges for the period and other changes in reserves. Unless otherwise specified, amounts reported in the financial statements and tables are stated in thousands of euro, rounded to the nearest unit.

3. Valuation criteria

3.1 Intangible assets Intangible assets are initially recorded at acquisition or production cost. The acquisition cost is represented by the fair value of the price paid for the asset, inclusive of any direct cost incurred for preparing the asset for use. The purchase cost is the equivalent price paid in cash at the time of the acquisition. In case the amount paid for the acquisition is deferred beyond normal payment terms, the difference with respect to the equivalent cash price is recorded as interest over the longer payment term. The cost of intangible assets developed internally is recorded by separating costs incurred in the research phase (not capitalised) and costs incurred in the subsequent development phase (capitalised). In case the two phases cannot be separated, the whole project is accounted for as research. The book value of intangible assets is in line with the amount expected to be retrieved through future use or disposal. At least once a year and in case doubts arise as to the possibility to retrieve the book value of an asset, the latter is subjected to an impairment test, as described in Note 3.5.

Publications and trademarks The useful life of newspaper publications and trademarks allocated to their respective CGU, is considered as undefined. Such assets are not amortised and are instead subjected annually, or any time there is an indication that the asset may have experienced a loss in value, to an impairment test. Any impairment loss is recorded in the income statement under “Depreciation, amortisation and write-downs”.

Goodwill Goodwill represents the premium paid over the fair value of the share of assets and liabilities, including potential ones, at the time of acquisition. Goodwill arising from the acquisition of affiliated companies is included in the value of the related investments. Goodwill purchased for a cost is not subject to amortisation but to an impairment test at least once a year. Accordingly, goodwill is allocated from the date of acquisition to one or more cash generating units(cash generating unit - CGU). Reductions in value resulting from an impairment test do not give rise to adjustments in subsequent years and are recorded in the income statement under “Depreciation, amortisation and write-downs” and are not reinstated in subsequent years. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 207

3.2 Property, plant and equipment Property, plant and equipment at the beginning are recognised at purchase price or at production cost. Cost includes associated expenses and any direct and indirect costs incurred to make the asset ready for use. The capitalisation of costs for the upgrade, update or improvement of structural elements owned or leased from third parties is carried out exclusively when the same fulfil the requisites that allow their separate classification as assets or part of assets. Ordinary maintenance costs are charged to the income statement. After the initial recording, property, plant and equipment are carried at cost, net of accumulated depreciation (with the exception of land) and any losses in value. The depreciable value of each significant component of a tangible asset having a different useful life is calculated on a straight line over its expected useful life. Amortisation criteria, the useful life of assets and their residual value are reviewed and redefined at least at the end of each financial period to take into account possible significant changes. Capitalised costs relating to leasehold improvements are depreciated over the shorter term between the residual term of the lease and the residual useful life of the asset to which the leasehold improvement relates. The book value of property, plant and equipment is in line with the amount expected to be retrieved through future use. In case doubts arise as to the possibility of recovering the net book value of an asset, the latter is subjected to an impairment test, as described in Note 3.5. The original value is reinstated when the reasons that gave rise to the impairment cease to exist.

3.3 Grants Grants are recorded when there exists, regardless of the formal granting of the amount, reasonable certainty that the company will meet the conditions for the entitlement to the grant and that the same will actually be received. Capital grants are recorded in the statement of financial position as deferred revenue. The grant is credited to the income statement based on the useful life of the asset for which it is granted by discounting it so as to net out the related amortisation recorded. Grants receivable as compensation for expenses and costs already incurred or aimed at providing immediate financial help to the company not correlated to future costs are recorded as income in the year in which they become receivable.

3.4 Financial expense Financial expenses incurred for an investment in assets which normally require a certain period of time to be prepared for use or for sale, are capitalised and amortised over the life of the assets to which they relate. All other financial charges are recorded in the income statement in the year in which they are incurred.

3.5 Loss in value of assets A loss in value of an asset originates whenever the book value of an asset is higher than the 208 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

amount expected to be retrieved from the same. At each accounting date, the presence of factors indicating a possible loss in value is assessed. Whenever one of these factors is present, the retrievable value of the asset is assessed through an impairment test and the write-down is recorded where appropriate. Assets not yet available for use, those recorded in the financial statements in the current financial year, intangible assets having an indefinite useful life and goodwill are subject at least annually to an impairment test, independently from the presence of factors indicating possible loss in value. The retrievable value of an asset is the higher between its fair market value, net of costs to sell, and its value in use. The retrievable value is calculated with reference to each individual asset, unless said asset is able to generate positive cash flows deriving from ongoing use independently from positive cash flows generated by other assets or groups of assets, in which case the test is carried out at the level of the smallest Cash Generating Unit that includes said asset. The original value of the asset is restored whenever the reasons for the write-down cease to exist, with the exception of goodwill whose original value is not restored.

3.6 Investments Investments are recorded at cost, adjusted downwards for losses in value.

3.7 Inventories Inventories are recorded at the lower of the acquisition or production cost, determined by applying the weighted average cost method, and the presumed net realisable value. The cost is represented by the fair value of the price paid and any other cost that may be attributed, with the exception of interest expenses. The net realisable value is represented by the estimated sale price under normal conditions, net of completion costs and costs to sell. Write-downs are reversed in subsequent years when the reasons for their recording cease to exist.

3.8 Trade receivables Trade receivables are recorded at the fair value of future cash flows, written-down for losses in value.

3.9 Cash and cash equivalents Cash and cash equivalents are represented by short-term investments in highly liquid assets that may be easily converted into known amounts of cash posing a minimal risk of fluctuation in value, and by transactions carried out in the context of centralised treasury management. For the purposes of the cash flow statement, cash and cash equivalents consist of cash, demand deposits with banks, other highly liquid short-term financial assets with an original maturity generally not exceeding 3 months, and bank overdrafts. For the purposes of the statement of financial position, the latter are included among financial debt under current liabilities.

3.10 Share capital The share capital is represented by capital underwritten and paid-up. Costs strictly correlated with the issue of shares are recorded as a reduction of the share capital, provided they are directly attributable to operations involving the same. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 209

3.11 Own shares Own shares are recorded in a specific Shareholders’ Equity reserve. Gains or losses on the purchase, sale, issue or cancellation of own shares are not recorded in the income statement.

3.12 Fair value reserves Fair value reserves include changes in the fair value, net of the related tax effect, of items recorded at fair value with compensation in the Shareholders’ Equity.

3.13 Other reserves Other reserves are represented by specific capital reserves.

3.14 Retained earnings (losses) “Retained earnings (losses)” includes the part not distributed and not accrued to the mandatory reserve (in case of profits) or not balanced (in case of losses), of profits and losses accrued. The item also includes transfers from other equity reserves freed-up, in addition to the effect of the change in accounting standards and relevant errors.

3.15 Employee benefits Short-term benefits Short-term employee benefits are recorded in the income statement over the period in which the employment takes place.

Post-retirement benefits As from 1 January 2007, Italian Law No. 296/2006 (2007 Budget Law) and related implementation regulations introduced substantial changes in norms regarding Employee Termination Indemnities (TFR), including the choice left to workers as to the destination of individual indemnities accruing from such date. In particular, new norms provide for the payment by the company of indemnities accrued to the pension fund of choice or, in case the worker has opted to maintain accrued benefits with the company and the company has less than 50 employees, into a treasury account set-up with INPS – the national Social Security Fund. These regulatory changes resulted in a new accounting treatment of Employee Termination Indemnities. Before the reform introduced with Italian Law No. 296/2006, under international accounting principles Employee Termination Indemnities were considered as a “defined benefit plan”, while now only indemnities accrued up to 31 December 2006 by companies with more than 50 employees continue to qualify as such, and indemnities accrued after such date are treated as a “defined contribution plan”. All obligations of the company are thus now fulfilled with the periodic payment of a contribution to other entities. The amount recorded in the Income Statement is therefore no longer that of discounted back indemnities, but the amounts actually paid to the pension fund of choice of the employee or the INPS treasury account, calculated pursuant to Article 2120 of the Italian Civil Code.

Defined benefit plans Employee termination indemnities (limited to the share accrued up to 31 December 2006 by companies with more than 50 employees) and Fixed indemnity for managers of newspapers are determined by independent actuaries to estimate the amount of the future benefits that the employees have accrued at the statement of financial position date. All the possible actuarial 210 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

effects are recorded under Shareholders’ Equity and included in the statement of comprehensive income.

Defined contribution plans The Company participates in defined contribution plans contributing to mandatory, contractual or voluntary public or private pension plans. As already mentioned, Employee Termination Indemnities accrued by companies with more than 50 employees, calculated pursuant to Article 2120 of the Italian Civil Code, are paid out to the various pension plans or to the separate treasury service offered by INPS, as determined by individual employees. The payment of contributions extinguishes the obligation of the Company towards its employees. Contributions constitute therefore costs for the period in which they are due.

Benefits based on financial instruments The Company recognises additional benefits to certain top managers through plans based on financial instruments. Plans adopted by the Company over time provide for the awarding of rights to participate in the share capital of the Parent Company (Stock Options and Stock Grants).

Stock Options – Stock Grants (bonus assignment of shares) The cost of these operations involving shares, recorded in the income statement among personnel costs, is calculated based on the fair value of such instruments at the time at which they are assigned. The cost is recorded in the period included between the date on which the options are assigned and that at which they become exercisable, and is also recorded under Shareholders’ Equity. The fair value of the options thus determined is not updated or reviewed at the end of each accounting period. When options or rights are exercised before or at expiration, the respective value recorded under Shareholders’ Equity is reclassified under the “Share premium reserve”. Whenever options expire unexercised, on the contrary, the related amount is reclassified under “Retained earnings (losses)”. In the transition to IFRS, the Company took advantage of a specific waiver and has not applied the above standards to stock option plans assigned before 7 November 2002.

3.16 Provisions for risks and charges, potential assets and liabilities Provisions for risks and charges are accrued against possible liabilities whose amount and/or timing is uncertain and whose fulfilment requires the use of financial resources. Provisions are made exclusively when an actual obligation, either legal or implicit exists towards third parties that requires the use of financial resources, and whenever a reliable estimate of the obligation can be made. The provision recorded represents the best estimate of the liability relating to the fulfilment of the obligation at the date of the financial statements. Provisions made are reviewed at each accounting date and adjusted to the best available estimate. Where the payment of the obligation takes place beyond normal payment terms and the discounting effect is relevant, the amount accrued is represented by the present value of expected future payments needed to extinguish the obligation. Potential gains and losses are not recorded in the financial statements, though adequate information about the same is provided. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 211

3.17 Financial liabilities Financial liabilities are recorded initially at the fair value of amounts received, net of transaction costs incurred, and subsequently carried at amortised cost using the effective interest rate approach. Convertible bond issues are recognised as compound financial instruments, made up of two components, which are dealt with separately only if significant: a liability and a conversion option. The liability corresponds to the current value of the future cash flows, based on the current interest rates as of the date of issue for an equivalent non-convertible bond issue. The value of the option is defined as the difference between the net amount received and the amount of the liability and is recorded under shareholders’ equity. The value of the conversion option is not changed in subsequent periods.

3.18 Cost and revenue recognition Revenues represent the gross flows of economic benefits for the period, deriving from the performance of ordinary activities. The process of recognising revenues follows the “five steps” model established in the IFRS 15 standard: - Identification of the contract; - Identification of the performance obligations; - Determination of the price; - Allocation of the price to the performance obligations in the contract; - The criteria for recognising revenue when the entity satisfies each performance obligation. Revenues from the disposal of assets are valued at fair value. In particular, revenues are recorded in accordance with the following criteria: • Revenues from the sale of publications are recorded at the time of shipping, net of related returns; • Revenues from the sale of advertising are recorded at the time of publication.

3.19 Taxes Income taxes are calculated based on expected taxable income and current tax regulations. Deferred and prepaid taxes arising from timing differences between the profit reported in the financial statements and that reported for tax purposes, and the carry-forward of losses and tax credits not retrieved, are also recorded, provided their retrieval (elimination) reduces (increases) future tax payments with respect to the amount that would be payable in the future in case such retrieval (elimination) did not have a tax effect. The tax effect of operations or other events are recorded in the income statement or directly under shareholders’ equity in the same manner as operations or events that originate a tax liability and on the basis of tax rates applicable at the statement of financial position date. In case of changes in said tax rates, the book value of deferred tax assets and liabilities is adjusted and entries are made in the income statement or under Shareholders’ Equity as appropriate. Since the 2004 financial year, GEDI Gruppo Editoriale SpA and the majority of its subsidiaries participate in the Parent Company’s CIR “tax consolidation” procedure pursuant to Art. 117/129 of the Consolidated Tax Law (T.U.I.R.). In June 2016, participation in the consolidated tax regimen was extended for the three-year period 2016-2018. Nonetheless, due to the capital increase resolved by the Shareholders’ Meeting of 27 April and released with the ITEDI SpA deed of transfer dated 27 June, CIR lost the controlling right of GEDI SpA, and consequently 212 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

the Group’s tax consolidation that the Company had subscribed to for the three-year period 2017-2019 lapsed. With the CIR tax consolidation having lapsed, it was decided to adopt a tax consolidation at the level of GEDI SpA and its subsidiaries. The application of this regimen required that the holding company and each of the companies it controls jointly exercise a specific option, in terms of Art, 120 of the TUIR. The option is valid for the three-year period 2017-2019. Each company subscribing to the national tax consolidation transfers its tax income or losses to the consolidating company; the consolidating company records a receivable in respect of companies that contribute taxable amounts equalling the IRES payable (payable for the consolidated company). On the other hand, for companies that contribute tax losses, the consolidating company records a payable equalling IRES on the portion of the loss effectively offset at Group level (receivable for the consolidated company). The portion of consolidated companies’ tax losses exceeding the possible offset in the period at the tax consolidation level is recorded by the consolidated company as a receivable for prepaid taxes, taking into account the probability of these being realised in the future in the scope of the tax consolidation. Companies subscribing to the tax consolidation with net non-deductible financial expenses can benefit from tax surpluses available in other participating companies (thus making these expenses deductible).

3.20 Foreign currencies Financial statement items are recorded in the currency of the primary economic environment in which the company operates (“functional currency”). The annual financial statements have been drawn up in euro. Transactions denominated in other currencies are translated into the reporting currency at the exchange rate at the date of the transaction. Foreign-exchange gains and losses arising from the settlement of these transactions and the translation of assets and liabilities denominated in currencies other than the functional currency are recorded in the income statement.

3.21 Changes in accounting estimates A change in the accounting estimate must be recognised by adjusting the book value of the asset, liability, shareholders’ equity items in the period in which the change took place, to the extent that a change gives rise to changes in value of the assets and liabilities concerned, or refers to a shareholders’ equity item. The forecast recognition of the effect of a change in the accounting estimate means that the change is applied to the transactions, other events and circumstances which have taken place as from the date of the estimate change. A change in the accounting estimate may influence just the economic result for the current year, or the economic result for the current year and for future years. A change in the estimated useful life or the methods envisaged for the use of the economic benefits referring to an asset which can be amortised/depreciated influences the amortisation/depreciation charge for the current year and each future year of the residual useful life of said asset. The effect of the change relating to the current year is recognised as income or expense in the same year. The impact, if it exists, on future years is recognised as income and expense in future years. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 213

4. New IFRS and IFRIC interpretations

Standards, amendments and interpretations applied as from 1 January 2018.

- IFRS 15 standard On 28 May 2014, the IASB published IFRS 15 – Revenue from Contracts with Customers which combined with additional comments published on 12 April 2016, replaced IAS 18 – Revenue and IAS 11 – Construction Contracts, as well as the IFRIC interpretations IFRIC 13 – Customer Loyalty Programmes, IFRIC 15 – Agreements for the Construction of Real Estate, IFRIC 18 – Transfers of Assets from Customers and SIC 31 – Revenues-Barter Transactions Involving Advertising Services. The standard introduces a new model for recognising revenue, which applies to all contracts entered into with customers, with the exception of those falling within the scope of application of other IAS/IFRS standards, such as leasing, insurance contracts and financial instruments. The basic steps for the recognition of revenue according to the new standard are as follows: - identification of the contract with the customer; - identification of the performance obligations stipulated in the contract; - determining the price; - allocation of the price to the performance obligations in the contract; - the criteria for recognising revenue when the entity satisfies each performance obligation. The Company represents the Agent/Principal as follows. Repercussions have been identified for the recording of revenues referring to the circulation business, where the Publisher recognises the revenue based on the cover price gross of all the fees paid to the distribution chain, including the portion paid to newsagents. Pursuant to IFRS 15, the Publisher is considered the Principal in the execution of the performance obligations because the risk of not selling and the price are under the former’s control, including the portion payable to newsagents. Consequently contrary to the previous accounting treatment, this fee will also be recorded as a distribution cost, and not as a reduction in revenue. Unit revenue with the aforementioned characteristics are therefore recognised as the result of copies sold, calculated at the cover price. Consequently, the application of IFRS 15 on the Financial Statements at 31 December 2018 resulted in an increase on circulation revenues for €37.7 million (€42.5 million in 2017) and a corresponding increase for the same amount in distribution costs under the costs for services, with no impact found however for shareholders’ equity or the operating profit and profit for the period. The “Company has applied the international accounting standard IFRS 15 as from 1 January 2018, using the “retrospective method”. The comparative information was therefore restated. As mentioned, the application of the new standard has had no impact on the operating profit, profit for the period or Company’s shareholders’ equity, with differing accounting treatment as mentioned only in certain items.

- IFRS 9 standard

On 24 July 2014, the IASB published the final version of IFRS 9 - Financial Instruments. The document contains the results of the IASB project aimed at replacing IAS 39. 214 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

The standard introduces new criteria for the classification and measurement of financial assets and liabilities. In particular, with regard to financial assets, the new standard uses a single approach based on the management methods for financial instruments and on the characteristics of the contract cash flows from the financial assets themselves in order to determine the assessment criteria, replacing the different rules set by IAS 39. Regarding financial liabilities on the other hand, the main change refers to the accounting treatment of changes to the fair value of a financial liability designated as a financial liability measured at fair value in the Income Statement, in the case that these changes are due to a change in the issuer of the liability’s credit worthiness. Based on the new principle, these changes must be recognised under “Other comprehensive income” and no longer in the Income Statement. Furthermore, for non-substantial changes to liabilities, the economic effects of the renegotiation on the residual term of the debt thus changing the effective interest rate to that date, can no longer be spread, but instead the relevant effect must be recognised in the Income Statement. The new standard for impairment requires that the estimate of losses on receivables is carried out based on the expected losses model (and not on the incurred losses model utilised by IAS 39), using available information that includes historic, current and forecast data, without incurring any unreasonable charges or effort. The standard requires that this impairment model is applied to all the financial instruments, i.e. the financial assets measured at amortised cost, to those measured at fair value through other comprehensive income, to receivables from rental contracts and to trade receivables. Finally, the standard introduces a new hedge accounting model so as to correspond with the requirements of the current IAS 39 that were sometimes considered very stringent and unsuited to reflect the risk management policies of companies. The main changes to the document refer to: • the increase in the types of transactions eligible for hedge accounting by also including the risks of non-financial assets/liabilities that are eligible to be managed under hedge accounting; • the change in the process for recognising forward contracts and options when included in a hedge accounting relationship so as to reduce the volatility of the Income Statement; • changes to the effectiveness test with the current procedures based on the 80-125% parameter replaced with the principle of “economic relationship” between the item hedged and the hedging instrument; in addition, a retrospective effectiveness evaluation will no longer be required on the hedging relationship. The increased flexibility with the new accounting rules is counterbalanced by added disclosure requirements on the Company’s risk management activities. The table below provides a summary of the effects of adopting IFRS 9 on opening balances, and the recording of the relevant deferred taxes. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 215

ASSETS (€ thousand) Intangible assets - Property, plant and equipment - Investments valued at equity - Investments valued at cost - Non-current receivables (77) Deferred tax assets 515 Non-current assets 438 Assets held for sale - Inventories - Trade receivables (1,940) Financial receivables - Tax receivables (26) Other receivables (38) Cash and cash equivalents (66) Current assets (2,070) Total Assets (1,632)

LIABILITIES AND EQUITY (€ thousand) Share capital - Reserves - Retained earnings (losses) (1,632) Net profit (loss) - Shareholders’ Equity (1,632) Minority interests - Shareholders’ Equity (1,632) Non-current liabilities - Current liabilities - Total liabilities - Liabilities and Shareholders’ Equity (1,632)

The effect of applying IFRS 9 on financial assets at 1 January 2018 refers only to the new provisions regarding the losses due to a reduction in value, detailed hereunder. The table below sets out the gross tax effect for the original assessment categories envisaged under IAS 39 and those introduced by IFRS 9 for each of the Company’s financial asset types at 1 January 2018: 216 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Original IAS 39 New classification Financial assets 1 January classification pursuant to IFRS 9

Non-current receivables Cost Classification and measurement: €77 Fixed assets, Amortised cost Impairment: none

Trade receivables Amortised Classification and measurement: €198 (Receivables vs distribution cost Trade receivables, Amortised cost customers) Impairment: counterparty expected loss risk

Trade receivables Amortised Classification and measurement: €881 (net advertising receivables) cost Trade receivables, Amortised cost Impairment: counterparty expected loss risk

Trade receivables Amortised Classification and measurement: €861 (sundry receivables) cost Trade receivables, Amortised cost Impairment: counterparty expected loss risk

Tax receivables Cost Classification and measurement €26 Tax receivables, Amortised cost Impairment: none except for receivables requested as reimbursement (counterparty expected loss risk)

Other receivables Cost Classification and measurement €38 Tax receivables, Amortised cost Impairment: none except for receivables requested as reimbursement (counterparty expected loss risk)

Cash and cash Amortised cost Classification and measurement: €66 equivalents Cash and cash equivalents, Amortised cost Impairment: counterparty default expected loss risk

TOTAL €2,147

The impact of the Income Statement at 31 December 2018 was positive for €70 thousand; there was no direct impact for the Statement of comprehensive income.

Accounting principles, amendments and interpretations not yet applicable for which the Com- pany has not opted for early application The Company has assessed the possible effects arising from the application of the following principles: Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 217

- IFRS 16 standard The new IFRS 16 standard - Leases, (published on 13 January 2016), destined to replace IAS 17 - Leases, provides a new definition of leases and introduces a criterion based on the control (right of use) of an asset to distinguish leasing contracts from services contracts, identifying the following as being determining: the identification of the asset, the right to replace the latter, the right to obtain all the economic benefits referring to the use of the asset, and the right to supervise the use of the asset underlying the contract. The standard sets a single model for the recognition and measurement of leasing contracts for the lessee, which requires the recording of the asset under the lease under assets with a contra-entry under financial liabilities. It also makes provision for contracts referring to low-value assets and leasing with contract terms equal to or less than 12 months not to be recognised as leasing. The standard does not however envisage any significant changes for the lessor. The standard will be applicable as from 1 January 2019, but early application is permitted only in the case of companies that had already applied IFRS 15 - Revenue from Contracts with Customers. With regard to the effects from the adoption of the new standard, the Group has undertaken a study of contracts and gathered information relating to leases that are operational pursuant to the current IAS 17- Leases. The impact will be estimated once the Company has completed this study. The approach that needs to be adopted during the transition stage will also be decided once the study is completed. The main impact on the Company’s consolidated financial statements, which are currently being finalised, and which are significant on the assumption of the amended retroactive approach being applied, with the option in the case of certain contracts of assuming equal usage rights to future liabilities. The main impacts are summarised below: - Statement of Financial Position: higher non-current assets due to the recognition of “asset usage rights”, with a contra-entry of higher financial liabilities; consequently, a negative impact is expected on net financial debt for approximately €23.8 million at the date of first application. - Income Statement: different nature, qualification and classification of expenses (amortisation of “the right to use the asset” and “financial expenses from interest” regarding “Costs for the

use of third party assets”) with a consequent positive impact on the Gross Operating Profit. Furthermore, the combination of the amortisation in consistent portions for “right to use the asset” and the effective interest rate method applied to leasing payables result in higher costs for the Income Statement during the contract’s initial years and then decreasing costs over the last years. - Cash Flow Statement: the payment of fees for the capital portion of the debt repayment will be reclassified from “cash flows from operations” to “cash flows from financing activities”. Considering the contract clauses stipulated in the current financing contract, detailed under paragraph 8 of this document, the adoption of IFRS 16 will not influence the ability to comply with the financial covenant based on the relationship between Net Financial Debt and EBITDA. The Company is also assessing the possible effects arising from the application of the following principles and interpretations effective as from 1 January 2019:

- IFRIC 23 (Uncertainty over income tax treatments); - Amendments to IFRS 9 (Prepayment features with negative compensation); - Amendments to IAS 28 (Long-term Interest in associates and Joint Ventures); - Amendments to IAS 19 (Plan Amendments, Curtailment or Settlement); - Improvements to the IFRS 2015-2017 cycle amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23); - IFRS 9 Insurance contract. 218 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

5. Changes in accounting principles, errors and adjustments to estimates

Accounting standards adopted are modified from one financial year to the next only in case the change is required by an accounting standard or it contributes to provide more reliable and relevant information on the effect of transactions carried out on the financial position, economic performance or cash flows of the entity involved. The changes in accounting principles are recorded retrospectively under shareholders’ equity for the first accounting year, with the exception of IFRS 9, which was applied as from 1 Janu- ary 2018 as permitted by this standard. For additional information, reference is made to paragraph 4 “New IFRS and IFRIC interpretations”. Comparative information has been adapted accordingly. This approach is adopted only when it is impractical to restate the accounts for comparative purposes. The application of a new or modified accounting principle is accounted for as required by the same principle. In case the principle does not provide for the transition, the change is accounted for under the retrospective method or, when this is impractical, through the use of projections. In case of relevant errors, the method described in the paragraph above with reference to accounting standards applies. In case of immaterial errors, the recording is carried out in the income statement in the period in which it is detected. Changes in estimates that have an impact exclusively on the income statement are accounted for through the use of projections in the same year in which the review takes place in case changes affect only such year, or in the year in which the review takes place and in subsequent years in case the change has an impact also in subsequent accounting periods.

6. Events subsequent to the reference date of the financial report

Events occurring after the date of the financial statements are events occurring between said date and the date on which the publication of the same is authorised. The date of approval for the publication of the financial statements is the date when the Board of Directors approves them. This date is indicated in Note 1. Subsequent events relate to facts that provide evidence of situations existing at the date of the financial report (subsequent events that imply adjustments) or facts providing evidence of situations after the statement of financial position date (subsequent events that do not require adjustments). The effect related to the first is recorded in the financial statements and the appropriate note is adjusted accordingly, while in the second case only suitable information is provided in the Notes, where relevant. Subsequent to the close of the year, the Company received (indirectly through the other shareholder TIM SpA) a non-binding offer to acquire shares in Persidera SpA, in which it holds a 30% stake. The bidder was granted an exclusivity period, during which to conduct the necessary assessments with a view to formalising a subsequent binding offer. This exclusivity period was still valid at the date to approve GEDI Gruppo Editoriale S.p.A. draft financial statements. Based on the above, there are currently no indications that would make the sale of the shareholding seem at all likely over the short term, even in the absence of a binding offer.

7. Main causes of uncertainty over estimates

With the application of IFRS-EU, the drafting of the annual financial statements requires that Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 219

management makes assumptions and estimates that could affect the value of revenues, costs, assets and liabilities in the balance sheet and the relevant disclosures, as well as potential asset and liabilities at the reporting date. Management estimates and assumptions are based on prior experience and on aspects deemed reasonable according to the matter under consideration. Estimates and assumptions are reviewed on a periodic basis, and the effects of any changes are reflected according to the reference accounting standards applicable from time to time. Effective results could therefore differ from these estimates. For the Company, estimates are made primarily in the context of recording impairments in the value of intangible assets and investments in associates, to estimate returns, provisions for bad accounts, employee benefits, taxes and other provisions and reserves.

7.1 Retrievability of intangible assets with an indefinite useful life The annual financial statements include intangible assets with an indefinite useful life with a significant value, referring to publications. As stated previously, at least on an annual basis, management conducts impairment tests to identify possible losses due to reductions in a CGU’s value, which has been assigned intangible assets with an indefinite useful life. In the case of publications, these impairment tests are based on the value of use that is determined by discounting back expected cash flows. This method is characterised by a high component of estimates, with special reference to the expected cash flows and financial parameters to be used to discount back the aforementioned cash flows. With regard in particular to the current uncertain outlook for the short and medium term, which is resulting in negative performance for advertising and circulation revenues for the print segment, this has made it difficult to estimate future performance and cash flow projections. Therefore, it cannot be excluded in the near future that the generation of results will differ from estimates. Circumstances and events that may affect future performance will be monitored closely by Company management, which will assess on an ongoing basis possible losses in the value of assets and, where necessary, adjust the book value of the same accordingly.

7.2 Recoverability of investments in subsidiaries and associates The Company has significant investments in subsidiaries and associates, and of particular relevance among these is the investment in the subsidiary Persidera SpA. Management has conducted an impairment test in this respect to identify possible losses due to impairment. In these tests, the recoverable value for subsidiaries was based mainly on the value of uses estimated using the method of discounting back future expected cash flows, which as stated above, is characterised by utilising estimates, which by their nature are uncertain and subjective relating to the expected cash flows for the subsidiaries and the financial parameters to be used to discount back said financial flows.

7.3 Legal risks and tax disputes The Company is involved in various legal disputes relating to its publishing business. Given the nature of these disputes, the estimates made by directors are based on the weighting of historic trends referring to the previous three-year period, which essentially show a linear trend. With regard to the other legal and tax disputes, it is not always objectively possible to foresee their final outcome, some of which may even close with an unfavourable outcome. Provisions have been made to cover all significant liabilities in cases where lawyers envisage the possibility of an unfavourable outcome, based on a reasonable estimate of the loss. 220 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

7.4 Estimate of returns Estimates of returns for publications and the related add-on products are carried out monthly and constantly updated through the use of statistical methods applied to up-to-date information on sales.

8. Information relating to financial instruments

On 1 April 2014, GEDI placed an equity linked Convertible Bond issue for a total of €100 million, with an envisaged 5 year duration (maturity date 9 April 2019), and repayment with an interim coupon at the fixed rate of 2.625% per annum. The Convertible Bond Issue and related interest payments are unsecured and do not include covenants. The Convertible Bond Issue regulation provides the bondholder with the possibility of converting the bond into a specific number of shares of the issuer company, which on the basis of a formal document (deed poll) signed on 28 January 2015, is not entitled to redeem the convertible bonds (in the event of exercising the conversion right), by means of cash payment instead of payment in ordinary shares. Based on the bondholder’s option call, the instrument was recorded by splitting the instrument into its two components: one relating to the call option and one to the debt component. The option’s fair value for €4,290 thousand was classified under Shareholders’ Equity. On 16 April 2018, the Parent Company GEDI Gruppo Editoriale S.p.A. signed a loan contract for €100 million, on a four-year term with four primary banks. The contract envisages compliance with a financial covenant based on the ratio between Net Financial Debt and EBITDA. This served to already refinance the Company in view of the repayment of the convertible bond loan issued in 2014 for €100 million and due in April 2019.

9. Notes to the statement of financial position items assets

Assets

Intangible assets (1) The breakdown of the category is shown below.

31/12/2017 31/12/2018 Publications 220,661 219,782 Concessions and licenses 4,727 6,077 TOTAL INTANGIBLE ASSETS 225,388 225,859

of which: Intangible assets with an indefinite useful life 220,661 219,782 Intangible assets with a defined useful life 4,727 6,077

There are no intangible assets generated internally. Research and Development costs were not capitalised and no revaluation of intangible assets was carried out. The breakdown of intangible assets and changes in the period are shown in the tables that follow. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 221

Intangible assets with an indefinite useful life

Publications 31/12/2018 Opening balance Original cost 220,661 Write-downs - Opening balance 220,661 ADJUSTMENTS TO ORIGINAL COST Increases (879) Decreases - Closing balance Original cost 220,661 Write-downs (879) Closing balance 219,782

Assets defined as having an indefinite useful life include the publication la Repubblica whose book value, €219,782 thousand, came down by €879 thousand with respect to 31 December 2017. The impairment test carried out on the CGU, of which “la Repubblica” is a significant part, confirmed losses in value to be recorded in the financial statements. The expected retrievable value of assets was estimated based on fair value less costs to sell and value in use. In the case in question, this was the value in use. The impairment test carried out on the CGU, of which “la Repubblica” is a significant part, confirmed losses in value to be recorded in the financial statements for €879 thousand. The expected retrievable value of assets was estimated based on fair value less costs to sell and value in use. In the case in question, this was the value in use.

Determination of value in use of the Cash Generating Unit The value in use of the Cash Generating Units (CGU) was determined by discounting back, at an appropriate rate, future cash flows, both positive and negative, generated by the unit in its productive phase and upon disposal. In other terms, the value in use was estimated by applying the Discounted Cash Flow model using the unlevered (or asset side) version that applies a formula that includes the discounting back of cash flows analytically expected during the period of the anticipatory plans and the expected terminal value of the cash generating unit. In order to correctly estimate the value in use of a Cash Generating Unit, it was necessary to care- fully estimate the cash flows expected from it over time; expectations regarding possible fluctuations in the amount and timing of cash flows; the discounting back rate to be applied, and other possible risk factors inherent in the long-term nature of the investment made in the unit. The approach selected to calculate the value of use and the discounting back rate is the “post- tax” method. This approach is recognised by IFRS standards, the Italian Accounting Board (OIC) and the Italian Valuation Foundation (OIV - “Organismo Italiano di Valutazione”) and exceeds the limits of the “pre-tax” approach, which is the subject of debate amongst professionals due to the simplification of the estimate for the tax shield effects. The discounting back rate is estimated net of taxes, on a consistent basis with the configurations of the flows to be discounted. In the specific case the discounting rate adopted was the average cost of invested capital (wacc for the GEDI Group at 31 December 2018, equal to 7.04%. 222 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

The impairment tests carried out at 31 December 2018 are based on the forecast of the cash flows expected from the related CGU, which can be taken from the 2019 Budget and the 2019-2021 Three-year Plan approved by the Board of Directors meeting held on 25 January 2019. No extension of the explicit period was envisaged, in accordance with the impairment test carried out at 31 December 2017. Specifically, once again at the previous reporting date, the tests were based on the forecast of the cash flows expected from the related cash generating units, which can be taken from the 2018 Budget and the 2018-2020 Three-year Plan, which were approved by the Board of Directors on 26 January 2018. It was not necessary to extrapolate forecast data per additional subsequent years, because the strategic measures will be implemented by 2021. Therefore the last year in the explicit forecast contained in the approved industrial plan (e.g. 2021) is deemed representative of a normalised situation that could be used to estimate the terminal value. Based on the above, for this period it was therefore assumed that the terminal value was estimated by taking as a reference a terminal (or “fully operational”) flow, or rather the normalised income determined on the basis of the gross operating profit expected in the last year of the analytical forecast period (2021), from which the outlays for normalised investments were deducted, together with taxes on operating income. The change in working capital was taken as zero in the terminal flow, in line with common practice. In addition, it is noted that on the assumption of an ongoing concern, and according to the method for calculating the terminal value, the value for amortisation corresponds with the investment value. It is also assumed that the growth rate "g" was zero.

The determination of fair value less costs to sell of the Cash Generating Unit IAS 36 establishes that the fair value less costs to sell of an asset or a group of assets (for example a Cash Generating Unit) is best expressed through a price “set” in a binding sale offer between independent parties, net of direct costs incurred in the disposal of the asset. In case such evidence does not exist, the fair value net of costs to sell can be determined making reference, in order of importance, to the following values: the current price negotiated in an active market; the price recorded in previous similar transactions; the price estimated on the basis of other information gathered by the company. In the case in point, the fair value less costs to sell was calculated with reference to direct valuation multipliers; this approach was necessary due to the lack of an active transfer market for similar cash generating units, as well as the difficult comparability of the transactions struck on the market by units similar to those being evaluated. To determine the fair value less the sales cost of the cash generating unit, the following entity side multiples, either of the trailing (historical/punctual multiples) or leading (expected/average multiples) indicator type, were used: Enterprise Value/Sales, Enterprise Value /Ebitda e Enter- prise Value /Ebit. The multipliers used are taken from the estimates reported by Bloomberg with reference to the average multiples relating to a panel of companies that are comparable to the GEDI Group, consistent with the panel used to calculate the beta and financial structure in the discounting rate (WACC) and refer to the time frame 2018-2020. Compared to last year, where the average was taken between the actual 2017 and the next three-year period 2018-2020, with the absence of an appropriate number of economic forecasts for comparable companies for 2021 (forecasts are only available for one comparable company), the current calculation has excluded this year from the calculation. The panel of comparable companies was continued in the same way as the previous years, similarly to the source of data underly- Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 223

ing the calculation (Bloomberg). The calculation referred to the average multiples relating to the time frame 2018-2020, so as to consider both the current multiples (trailing) and forecast multiples (leading) and thus reduce the variability associated with using forecast figures (characterised by an estimate). With regard to the related business magnitudes relating to the cash generating unit, the following are considered, on a consistent basis with the type of multiple to be applied: the turnover (Sales), gross operating profit (Ebitda) and operating profit (Ebit); in detail, with regard to the values for the publications at the reference date for the impairment test, the related business dimensions were determined as the average for the 2018-2020 period, following the multiple time frame. In order to establish the fair value less cost to sell, account was therefore taken of the average value resulting from the application of the three multipliers mentioned before, in line with what had been applied in previous years.

Main assumptions on which the 2019-2021 anticipatory plans are based The impairment tests carried out at 31 December 2018 are based on the forecast of the cash flows expected from the related cash generating unit, which can be taken from the 2019 Budget and the 2019 - 2021 Three-year Plan approved by the Board of Directors meeting held on 25 January 2019. Furthermore, you are reminded that in line with the recommendations issued by Consob jointly with the Bank of Italy and ISVAP in Documents No. 2 dated 6 February 2009 and No. 4 dated 3 March 2010, the impairment test procedure adopted by the GEDI Group underwent prior examination and valuation by the Audit and Risk Committee and the Board of Statutory Auditors, and was approved by the Board of Directors on 25 January 2019; subsequently, the impairment test document was subject to the approval of the Board of Directors in a previous and separate point on the agenda of the Board meeting during which the financial report is approved. The main hypotheses underlying the forecast plans of the “la Repubblica” CGU are summarised below, with reference to the performance of the advertising and circulation revenues, the contribution deriving from the add-ons attached to the newspapers and the evolution of the costs.

Advertising revenues With regard to 2019, it is assumed that the advertising market will remain substantially stable compared to 2018, with this based on the contained growth envisaged in GDP. The advertising market is assumed to remain stable for subsequent years in the plan. With regard to the individual media, a change is envisaged to be substantially in line with the aspects observed in previous years, which would lead: for the press, to a further drop in its percentage weighting and consequently a further reduction in investments; with regard to the internet, improved market performance is envisaged. The market trends were therefore reflected in the forecast plans for 2019-2021 for the “La Repubblica” CGU, hypothesising a drop in advertising on the hard copy publication (newspaper and supplements) and growth in revenues in the internet, essentially in line with the trend envisaged for the market. 224 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Circulation revenues The hypotheses formulated for the 2019 Budget relating to the trend in news stand sales for the newspaper “la Repubblica” are based on the observance of the market data between 2007 and 2018. In this period, on the basis of the ADS figures, news stand and subscription sales of newspapers fell 56.0% (-7.2% annual average), dropping from 4.8 to 2.1 million average daily copies. By segment, the national information and sporting newspapers reported a more negative trend, losing 65.7% (-9.3% annual average) and 62.0% (-8.4% annual average) respectively as from 2007, while local newspapers lost 49.3% (-6.0% a year). This negative has however acceler- ated over the last few years. The latest figures available at the time of drawing up the 2019 Budget (ADS through November) indicated an overall drop in news stand and subscription sales of 7.4% for 2018 (-8.3% for national newspapers and -6.7% for local newspapers). Taking into account these trends, the Budget envisages that the evolution of the market in 2019 will be similar to that in 2018; forecasting a drop of 7.5% in the subsequent years of the plan (2020-2021); the Budget then continues to assume a drop of 7.5%. Alongside the structural decrease in hard copies, the plan presumes growth in revenue from the digital edition of the newspapers on PCs, mobile phones and tablets, and more specifically, an increase in subscriptions to premium content for all publications. In conclusion, the 2019-2021 plans envisage an increase of €0.10 in the cover price, which makes it possible to balance the effect of the sales revenue deriving from the drop in copies sold.

Add-on products The 2019 Budget and the subsequent years plan envisage stability in the margins of the add-on initiatives sold together with newspaper.

Costs With regard to the evolution of the costs, the 2018-2020 forecast plans take into account a series of savings measures: • reduction in the printing run and the foliation further to the expected drop in circulation and the advertising revenues; • additional rationalisation of the industrial structure of printing centres; • reduction in payroll costs for printing staff; • reduction in the editing costs by means of containing costs for bordereau, photos and agencies as well as with measures vis-à-vis costs for the journalistic workforce; • optimising yields and efficiencies in the distribution process; • reduction of all the main items of the general costs (rents, consulting, telephone, travel. etc.).

Sensitivity analysis For the “La Repubblica” CGU, taking the assumptions for the 2019-2021 plan as valid, the impairment loss value would decrease with the reduction in WACC applied for the purposes of the test, coming down to zero, assuming a discount rate on expected cash flows at 6.73% instead of 7.04% used in the base scenario. A sensitivity analysis was also done on the main variables that could influence economic results and expected operational cash flows, identified in advertising revenues and circulation revenues. This analysis shows that the impairment loss for the “La Repubblica” CGU is zero, assuming an annual average drop in 2019-2021 of 4.6% Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 225

for hard-copy advertising revenues and 4.0% for hard-copy circulation revenues, which appear better than those included in the plan.

Other intangible assets The category “Concessions and licenses” has been amortised at 33.3%, since the useful life of the same is estimated as 3 years.

The breakdown and changes in intangible assets is shown below.

Concessions and licenses 31/12/2018 Opening balance Original cost 30,897 Accumulated amortisation and write-downs (26,170) Opening balance 4,727 ADJUSTMENTS TO ORIGINAL COST Increases 3,927 Decreases - ADJUSTMENTS TO PROVISIONS Increases (2,576) Decreases - Closing balance Original cost 34,823 Accumulated amortisation and write-downs (28,746) Closing balance 6,077

The investments made during the year in intangible assets amounted to €3,927 thousand and were incurred in the “Concessions, licences and trademarks” category. Purchases mainly refer for €1,155 thousand to the Business Continuity project, for €1,389 thousand to the editorial system, for €1,383 thousand to Group projects (specifically, former Itedi synergies, e-invoicing and digital subscriptions).

Property, plant and equipment (2) The breakdown of the category is shown below.

31/12/2017 31/12/2018 Industrial and civil buildings 217 167 Leasehold improvements 4,792 4,051 Plant and machinery 3,275 1,617 Furniture, fixtures and vehicles 2,409 2,084 Assets under construction 83 47 Other assets - - TOTAL PROPERTY, PLANT AND EQUIPMENT 10,776 7,966 226 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

In view of the homogeneity of assets recorded in the statement of financial position, the expected useful life of assets by category is as follows.

A breakdown of property, plant and equipment owned is included in the tables that follow.

Industrial and civil buildings 31/12/2018 Opening balance Original cost 400 Accumulated amortisation and write-downs (183) Opening balance 217 ADJUSTMENTS TO ORIGINAL COST Increases - Decreases - ADJUSTMENTS TO PROVISIONS Increases (50) Decreases - Closing balance Original cost 400 Accumulated amortisation and write-downs (233) Closing balance 167

Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 227

Leasehold improvements 31/12/2018 Opening balance Original cost 30,216 Accumulated amortisation and write-downs (25,424) Opening balance 4,792 ADJUSTMENTS TO ORIGINAL COST Increases 328 Decreases - ADJUSTMENTS TO PROVISIONS Increases (1,069) Decreases - Closing balance Original cost 30,544 Accumulated amortisation and write-downs (26,493) Closing balance 4,051

Plant and machinery 31/12/2018 Opening balance Original cost 58,917 Accumulated amortisation and write-downs (55,643) Opening balance 3,274 ADJUSTMENTS TO ORIGINAL COST Increases 234 Decreases - ADJUSTMENTS TO PROVISIONS Increases (1,892) Decreases - Closing balance Original cost 59,151 Accumulated amortisation and write-downs (57,535) Closing balance 1,616 228 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Furniture, fixtures and vehicles 31/12/2018 Opening balance Original cost 47,415 Accumulated amortisation and write-downs (45,006) Opening balance 2,410 ADJUSTMENTS TO ORIGINAL COST Increases 827 Decreases (129) ADJUSTMENTS TO PROVISIONS Increases (1,086) Decreases 62 Closing balance Original cost 48,114 Accumulated amortisation and write-downs (46,030) Closing balance 2,084

Assets in progress 31/12/2018 Opening balance Original cost 83 Accumulated amortisation and write-downs - Opening balance 83 ADJUSTMENTS TO ORIGINAL COST Increases - Decreases (36) ADJUSTMENTS TO PROVISIONS Increases - Decreases - Closing balance Original cost 47 Accumulated amortisation and write-downs - Closing balance 47 Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 229

Other assets 31/12/2018 Opening balance Original cost 1,722 Accumulated amortisation and write-downs (1,722) Opening balance - ADJUSTMENTS TO ORIGINAL COST Increases - Decreases - ADJUSTMENTS TO PROVISIONS Increases - Decreases - Closing balance Original cost 1,722 Accumulated amortisation and write-downs (1,722) Closing balance -

The investments made during the year in property, plant and equipment amounted to €1,389 thousand and were mainly incurred in the “Leasehold improvements” for €328 thousand, “Fur- niture, equipment and vehicles” category for €827 thousand, and “Plant and machinery” category for €234 thousand. The main increases in “Leasehold improvements” referred to the restructuring undertaken at the editorial office in Rome. In the “Furniture, equipment and vehicles” category, the main purchases concerned electronic equipment related to the Business Continuity project (€707 thousand) and the furnishings for the Rome office for €75 thousand. The main increases in “Plant and machinery” referred to the editorial office in Rome for €161 thousand. 230 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Investments (3) The breakdown and changes in the item are shown below. 31/12/2018 Opening balance Original cost 491,656 Write-downs (45,586) Opening balance 446,070 ADJUSTMENTS TO ORIGINAL COST Increases - Decreases - ADJUSTMENTS TO PROVISIONS Increases - Decreases (24,642) Closing balance Original cost 491,656 Write-downs (70,228) Closing balance 421,428

At 31 December 2018, the balance of investments amounted to €421,428 thousand (at 31 December 2017 the value of investments amounted to €446,070 thousand). In order to check the recoverability of the book value of significant investments with respect to the value of the shareholders’ equity, the Company took steps to carry out an estimate of the value in use of the investee, for the investments with a negative difference with respect to the book value, using the same assumptions of the plans adopted for the purpose of the impairment test, revealing losses for the subsidiary Persidera SpA for €19.1 million and the subsidiary A. Manzoni & C. SpA for €5.6 million. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 231

Ownership percentage Shareholders’ Equity Book value 31/12/2017 31/12/2018 31/12/2017 31/12/2018 31/12/2017 31/12/2018 INVESTMENTS IN SUBSIDIARIES GEDI News Network SpA 99.85% 99.85% 257,746 259,493 260,416 260,416 Manzoni & C SpA 68.39% 68.39% 17,241 17,465 28,557 23,008 Elemedia SpA 100.00% 100.00% 70,918 70,465 33,390 33,390 GEDI Digital Srl 82.07% 82.07% 3,964 4,488 2,707 2,707 GEDI Distribution SpA 100.00% 100.00% 1,879 1,421 841 841 TOTAL SUBSIDIARIES 351,748 353,332 325,911 320,362 Investments in associates Persidera SpA 30.00% 30.00% 29,996 31,110 110,588 91,495 Le Scienze SpA 50.00% 50.00% 108 93 1,361 1,361 Huffington Post Italia Srl* 49.00% 49.00% 395 n.d 1,092 1,092 Total associated companies 30,499 n.d 113,042 93,948 OTHER INVESTMENTS * Radio Italia SpA 10.00% 10.00% 1 n.d 6,500 6,500 Ag. ANSA Società Coop. a r.l. 3.68% 3.68% 484 n.d. 454 454 Premium Publisher Network Consorzio 16.96% 16.96% 1 n.d. 14 14 Consorzio Edicola Italiana 16.67% 16.67% 3 n.d 10 10 Consuledit Società Consortile a r.l. 6.64% 6.64% (3) n.d. 1 1 TOTAL OTHER INVESTMENTS 486 n.s 6,979 6,979 Equity instruments* 4 Baby Srl - - 326 n.d 139 139 TOTAL INVESTMENTS 383,059 n.d 446,070 421,428 *Last set of available financial statements of the companies is at 31 December 2017.

The essential reclassified figures of the financial statements at 31 December 2018 of the subsidiary companies are shown in section 11.8.

Other information on related-party transactions is illustrated in section 11.4. The financial year of the above companies coincides with that of GEDI Gruppo Editoriale SpA.

At 31 December 2018 the equity investments held in subsidiaries and associates were subjected to an impairment test, using for the determination of both the fair value and the value in use methods and assumptions similar to those adopted for the Group CGUs taking into account the specific business sectors of each company. In greater detail, the recoverable value of the investments term of comparison for ascertaining the presence of impairment losses has been assessed under IAS 36 as the higher between the fair value net of costs to sell and the value in use: the first was estimated by making reference to the market multiples relating to a panel of comparable companies; the second was quantified on the basis of the flows expected from the investee company, on the basis of the 2019-2021 forecast plans. With regard to the determination of the value in use of the investments in the subsidiary company A. Manzoni & C. SpA, management deemed it necessary to extrapolate the prospective data for a further two financial years; considering that the benefit forecast and, in particular, the recovery of margins, connected to the specific strategic measures to contain costs and develop business in respect of third parties, will not be entirely manifested by 2021. The recoverable amount evaluation method for all investments was therefore based on the value of use, as it was higher than the fair value net of sales costs. 232 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

The methods and assumptions used to determine the cash flows for the shares held in GEDI News Network SpA with regard to the value for use were similar to those described in Note 12.1 of the consolidated financial statements, including those relating to the discounting back rate (wacc 7.04%) and the trend in revenue and costs. The calculation of the fair value for the interest held in A. Manzoni & C. SpA value is based on a 30% discount of the equity value obtained by applying the market multiples, because the company’s business is limited to the advertising concession (in respect of publishing sector comparables) and in consideration of the latter’s size factor. Contrary to last year when a discount of 30% was applied to all multiple categories (EV/Sales, EV/Ebitda, EV/Ebit), the current calculation excluded the discount from the EV/Sales multiple, because subsequent to the Company’s application of IAS/IFRS standards during the year, revenues are recognised on the basis of the company as an “Agent” and therefore only reflect intermediation revenues. There was no impact on the other hand on the gross operating profit or operating income due to the different accounting treatment. With regard to the interest held in Persidera SpA, on the other hand, the 2019-2021 forecast plan approved by Persidera SpA’s Board of Directors on 19 February 2019 was used. The discounting back rate for assumed flows is at 8.02% and incorporates an execution risk of 0.5% which considers the underlying risk to the new economic-financial forecasts prepared by the management of Persidera with specific reference to the changes in technology (“ switch off”) envisaged as from 2020, the variability in the costs and investments needed to undertake this technology change and also results for 2018 that were lower than the budget forecasts drawn up the previous year. A check on the recoverability of the book value compared to the attributable value was done regarding the investment in Radio Italia SpA, taking into account the empiric price/users multiples, noting the transfer prices for similar frequencies in relation to public data on the population reached by the signal. The impairment tests done at the close of 2018 on the investments showed the following write- downs that needed to be recognised in the financial statements: • €5.6 million relating to the “Manzoni” CGU; • €19.09 million relating to the “Persidera” CGU.

Sensitivity analysis The estimates done on the recoverable value for the investments in GEDI News Network SpA showed recoverable values that were essentially in line with the book value. With regard to this investment considered relevant for the purposes of the annual financial statements, a sensitivity analysis of results of the impairment test was also carried out in relation to the base assumptions. This analysis showed that for the interest in GEDI News Network SpA, the value of use would be equal to the book value, assuming with all other conditions being equal, a discount rate on expected cash flows(wacc of 7.10%, instead of the 7.04% used. For the investment in A. Manzoni & C. SpA, taking the assumptions for 2019-2021 as valid, and the additional projections done by management for 2022-2023, with a change in WACC of +/- 50bp, the loss in value would stand at €8.9 mn and €1.9 mn respectively. With regard to the investment in Persidera SpA, assuming the assumptions of the aforementioned plan to be valid, with the change in WACC of +/- 50bp, the loss in value would stand at €16.6 mn and €5 mn respectively. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 233

Non-current receivables (4) The breakdown of the item is shown below. 31/12/2017 31/12/2018 Long-term security deposits 20 124 Other non-current receivables 897 531 TOTAL NON-CURRENT RECEIVABLES 917 655

Non-current receivables came in at €655 thousand, compared to €917 thousand in 2017.

Deferred tax assets and deferred tax liabilities (5) The table that follows shows changes in deferred tax assets/liabilities. The changes in these items are commented on in the notes on taxation in the income statement (28).

Prepaid taxes

Taxable prepaid tax assets 31/12/2017 31/12/2018 On personnel provisions 6,857 20,882 On risk provisions 6,254 4,804 On write-down of current assets 13,538 15,726 On write-down of non-current assets 2,899 4,384 On previous years’ tax losses 37,433 44,048 TOTAL 66,980 89,843

Deferred tax assets 31/12/2017 31/12/2018 On personnel provisions 1,646 5,012 On risk provisions 1,710 1,323 On write-down of current assets 3,251 3,776 On write-down of non-current assets 785 1,190 On previous years’ tax losses 8,984 10,572 TOTAL 16,376 21,873 234 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Deferred taxes Taxable deferred tax 31/12/2017 31/12/2018 On lower valuation of personnel provisions 1,510 1,571 On higher valuation of non-current assets 222,522 221,626 TOTAL 224,032 223,198

Deferred tax liabilities 31/12/2017 31/12/2018 On lower valuation of personnel provisions 362 377 On higher valuation of non-current assets 61,197 61,427 TOTAL 61,560 61,804

31/12/2017 31/12/2018 Deferred taxes credited/charged 120 630 TOT. DIRECT RECOGNITION UNDER EQUITY 120 630

Inventories (6) At 31 December 2018, inventories amounted to €7,388 thousand in total and increased by €1,083 thousand with respect to last year (an increase of €955 thousand relating to paper especially due to pricing, €14 thousand relating to products and €114 thousand relating to add-on products). The breakdown is presented in the following table.

31/12/2017 31/12/2018 Gross Write-downs Net Gross Write-downs Net Inventories inventories inventories inventories Paper (raw materials) 5,933 (57) 5,876 6,880 (49) 6,831 Printing materials (raw materials) ------Publications (finished products) 129 - 129 143 - 143 Add-on and multimedia products (finished products) 2,020 (1,720) 300 3,042 (2,628) 414 TOTAL INVENTORIES 8,082 (1,777) 6,305 10,065 (2,677) 7,388 Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 235

Trade receivables (7)

31/12/2017 31/12/2018 News stands and distributors 14,590 12,388 Other trade receivables 4,305 4,980 Receivables from Group companies 56,033 43,494 TOTAL TRADE RECEIVABLES 74,928 60,983

Trade receivables, which at year ended amounted to €60,983 thousand, decreased in total by €13,945 thousand when compared with 2017. For greater details on receivables from Group companies and for the analysis of the maturities, please see section 11.4 “Related-party transactions” and section 11.5 “Risk management”. At 31 December 2018, the provision for doubtful accounts amounted to €6,600 thousand (€5,659 thousand at 31 December 2017). The effects of the first application of IFRS 9 can be quantified at €2,148 thousand.

The breakdown and changes are shown below.

31/12/2018 Opening balance 5,659 Write-down of receivables IFRS 9 2,148 Write-downs 247 Uses/releases (1,454) Closing balance 6,600

Tax receivables (8)

31/12/2017 31/12/2018 Corporate income tax (Ires) and regional tax on business activities (IRAP) receivables 6,876 5,998 IRES receivable from Parent Company 6,837 - Ires/Irap to be reimbursed 2 2 VAT receivable 269 1,923 VAT receivable from Group companies 1,504 234 Other tax receivables 1 - TOTAL TAX RECEIVABLES 15,490 8,157

Overall, tax receivables, which at the year end amounted to €15,490 thousand, decreased by €7,333 thousand mainly due to the effect of the lower IRES credits and from the refund of receivables referring to the application submitted in 2013 pursuant to Art. 2 of Italian Legislative Decree 201/2011 (IRES deductible from the IRAP portion relating to labour costs): this was received by CIR SpA in its capacity as the consolidating company at the time. It should be noted that this tax was collected based on credit “factoring”, which had been decided by CIR. 236 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Other receivables (9)

31/12/2017 31/12/2018 Security deposits within 12 months 136 38 Advances to suppliers and agents 19 16 Social security receivables 403 434 Receivables from employees and associates 162 61 Receivables for disposals of fixed assets and investments 7,000 - Other receivables 9,932 10,407 Prepayments 2,260 1,395 TOTAL OTHER RECEIVABLES 19,912 12,351

The item Other receivables and prepayments includes the items relating to the rights pertaining to future years and the instalments for leases paid in advance. The deferred price on the sale of the All Music Spa investment by Discovery Italia Srl was collected in full.

Cash and cash equivalents (10)

31/12/2017 31/12/2018 Cash on hand 22 15 Current account deposits 41,878 51,641 Financial receivables and accruals from Group companies 2,317 8,389 TOTAL CASH AND CASH EQUIVALENTS 44,217 60,045

Current account deposits with banks and the post office represent highly liquid short-term financial investments that are readily convertible into known cash amounts and not subject to relevant fluctuations in value. These deposits were made in relation to the Group’s financial requirements and were remunerated at a previously agreed fixed rate. Cash and cash equivalents increased by €15,950 thousand on the previous year. The cash flow from current operations, the increase in financial debt in respect of Group companies, the collection of the deferred price on the sale of the All Music Spa investment by Discovery Italia Srl and the refund of the credit relating to the refund application submitted in 2013 pursuant to Art. 2 of Italian Legislative Decree 201/2011 more than compensated for the payment of the last instalment of €35.1 million based on the option provided under Art. 11 of Italian Legislative Decree No. 50/2017, converted by Italian Law No. 96/2017, which the Company had resolved to make use of (in this regard, reference is made to Note 14 for additional information). Financial receivables and accruals from Group companies are analytically broken down in the statement shown in section 11.4. “Related-party transactions” and comprise transactions serving the centralised treasury management. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 237

Liabilities and Equity

Shareholders’ Equity The analysis of the composition of shareholders’ equity with reference to availability and possibility to distribute the same is illustrated below.

Nature/Description Total Possibility Portion Uses in the last 3 years amount of use available Covering of losses others SHARE CAPITAL 76,304 - - - Share Premium 71,999 B 71,999 - - Capital contribution reserves 17,857 ABC 17,857 - - Res. Dividend equalisation 3,869 ABC 3,869 - - Res. Reserve as per Italian Law 413/91 786 ABC 786 - - Merger surplus 354 ABC 354 - - EQUITY RESERVES 94,864 - 94,864 - - Legal reserve 13,033 B 13,033 - - Voluntary reserve 30,179 - - - Voluntary reserve 5,960 B 5,960 - - Voluntary reserve 217,933 ABC 217,933 118,948 - Retained earnings 1,627 ABC 1,855 6,862 - Actuarial gains reserve (1,152) - - - Reserve as per Italian Law No. 675/1977 490 ABC 490 - - Res. Capital gains reserve as per Art. 54 934 ABC 934 - - Merger surplus 9,602 ABC 9,602 - - INCOME RESERVES 278,606 - 249,579 125,810 - Increases 52,904 - - - Decreases (1,632) - - - Retained earnings (losses) (3,175) - - IFRS RESERVE 48,097 - - - Reserve for own shares (34,469) - - - Reserve for stock options 12,732 - - - Bond loan option rights 4,290 - - - TOTAL OTHER RESERVES (17,447) - - - - TOTAL 480,423 - 344,443 125,810 -

Key: A – available for capital increases B – available for loss coverage C – available for distribution to shareholders

At 31 December 2018 available reserves amounted to €344,443 thousand, of which €253,452 thousand can be distributed. 238 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Share capital (11) At 31 December 2018, the share capital amounted to €76,303,571.85 and was made up of 508,690,479 shares with a par value of €0.15 each.

31/12/2017 31/12/2018 No. of shares resolved 568,614,904 566,624,904 No. of shares issued 508,690,479 508,690,479 of which: No. of own shares: 21,850,609 21,968,231

Reserves (12)

The breakdown of reserves and changes occurred in the period are reported in the “Statement of Changes in the Consolidated Shareholders’ Equity”. As resolved by the Shareholders’ Meeting, authorising the Parent Company’s Board of Direc- tors to acquire ordinary shares of GEDI Gruppo Editoriale SpA., during 2018, 262,500 shares were acquired for at total of €118,106 thousand. Considering the acquisitions in previous years, own shares held by the Company at 31 December 2018 amounted to 21,968,231, representing 4.319% of the share capital. Based on the resolution of the Board of Directors dated 21 January 2015 and the consequent signing of a formal document (deed poll) on 28 January 2015, the Company unilaterally waived the option of redeeming the convertible bonds, in the event of exercise of the conversion right, by means of cash payment instead of payment in ordinary shares. On 28 January 2015 the fair value of the option (calculated using the same model applied as at 31 December 2014) came to €4,290 thousand. From the time of the deed poll signing, which has a similar effect as an amendment to the loan, with the Company irrevocably waiving its Option Call right, finally and unconditionally, thus creating a compound rather than a hybrid instrument, the Compa- ny reclassified the above option amount (€4,290 thousand) under Shareholders' Equity in the "2014 Convertible Bond call option reserve" with effect from 28 January 2015. The effects of the first application of IFRS 9 can be quantified at €1,632 thousand, and was classified under “Other Reserves”. For additional information, reference is made to paragraph 4 “New IFRS and IFRIC interpretations”.

Benefits based on financial instruments The Group recognises additional benefits to certain employees who cover top positions, through plans based on financial instruments. The stock option and stock grant plans outstanding at 31 December 2018, as well as the related characteristics, are described in the comments on the consolidated financial statements. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 239

At 31 December 2018, the total cost deriving from stock option and stock grant plans amounted to €780 thousand (€734 thousand in 2017), of which €483 thousand recharged to the Group companies for the stock grants assigned to the respective employees (€461 thousand in 2017).

Financial debt (13)

Non-current financial debt maturing maturing maturing 31/12/2017 31/12/2018 1-2 years 2-5 years after 5 years Bonds 87,907 - - - - Bank loans - - - - - Other financial debt - - - - - TOTAL NON-CURRENT FINANCIAL DEBT 87,907 - - - -

Current financial debt 31/12/2017 31/12/2018 Bonds 5,795 98,884 Bank loans - 7 Financial payables to Group companies 60,028 86,358 TOTAL CURRENT FINANCIAL DEBT 65,823 185,249

At 31 December 2018, the value of the Bond issue amounted to €98,884 thousand in total. At 31 December 2017, the total amount of the liability amounted to €93,702 thousand. For further information on the characteristics of the loan and classification, reference is made to Note 8. The significant increase of €26,180 thousand in financial payables to Group companies is mainly attributable to the increased debt in relation to A.Manzoni&C. SpA for €5,594 thousand, to GEDI Printing SpA for €9,572 thousand and to GEDI Digital SpA for €13,344 thousand, which was only partially offset by the reduction in respect of Gedi Distribuzione SpA for €2,601 thousand.

Bank Total financial Bond Other loans liabilities issue financial debt Balance at 31/12/2017 93,702 - - 93,702 Cash flows - - - - Other changes: Change in the fair value and amortised cost 5,331 - - 5,331 Balance at 31/12/2018 99,033 - - 99,033 240 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Provisions for risks and losses (14) The table below illustrates the total movements in provisions, as well as movements broken down into the current and non-current portions.

Social Early Sundry risks of which: of which: Legal security retirement and contract Total current non-current proceedings litigation incentives renewals provisions portion portion Opening balance 4,782 - 3,394 20,899 29,075 11,056 18,019 Uses/releases (1,634) - (3,004) (1,753) (6,391) (6,154) (236) Current/non-current transfers - - - - - 1,169 (1,169) Provisions 951 - 17,703 150 18,804 17,851 953 Change due to discounting back 153 - - - 153 - 153 Closing balance 4,252 - 18,093 19,297 41,642 23,922 17,719

Non-current portion Legal Social security Early retirement Sundry risks Total proceedings litigation incentives and contract renewals provisions Opening balance 3,328 - - 14,691 18,019 Uses/releases (236) - - - (236) Current/non-current transfers (1,169) - - - (1,169) Provisions 953 - - - 953 Change due to discounting back 153 - - - 153 Closing balance 3,029 - - 14,691 17,719

Current portion Legal Social security Early retirement Sundry risks Total proceedings litigation incentives and contract renewals provisions Opening balance 1,453 - 3,394 6,209 11,056 Uses/releases (1,397) - (3,004) (1,753) (6,154) Current/non-current transfers 1,169 - - - 1,169 Provisions (2) - 17,703 150 17,851 Closing balance 1,223 - 18,093 4,606 23,922

The non-current components of provisions for risks and charges were discounted at a 5% rate, gross of the related tax effect.

Provisions for legal proceedings and labour litigation include risks deriving from libel suits, common to all publishers, risks connected with trade and labour litigation, and those connected with social security audits.

The provision for early retirement incentives relates to the provision for the corporate reorganisation. Of these fees, about 50% refers to single agreements already finalised at the start of 2019, while the remaining 50% refers to the estimate for disbursements related to future exits, once again within the scope of the aforementioned collective bargaining agreements signed at the end of 2018. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 241

The provision for sundry risks consists of provisions for previous years' taxes, and other risks. The Company made use of the option provided under Art. 11 of Italian Legislative Decree No. 50/2017, converted by Italian Law No. 96/2017 (hereinafter the “Decree”) to define the fiscal litigation referred to under judgement no. 64/9/2012 by the Rome Regional Tax Commission referring to 1991. This dispute related to the 1991 IRPEG and ILOR assessments, which gave rise to the following principal findings regarding tax evasion: • the Tax Authorities dispute the tax benefits deriving from the corporate reorganisation transactions of Gruppo Editoriale L’Espresso consequent to the division of the Mondadori Group (in detail, the benefits emerging from the merger via incorporation of Editoriale La Repubbli- ca SpA in Cartiera di Ascoli SpA, which subsequently undertook the name); • benefits were also disputed relating to beneficial share interest transactions with foreign parties, specifically those relating to the tax credit on dividends and the related withholdings made, along with the accrued interest. With regard to this latter aspect, beneficial interest on shares, the Tax Authorities also disputed the same benefit in respect of the next three tax years. Having regarded the risk as “probable”, during previous years the Company had made specific provisions: at 31 December 2017 the provision in this regard amounted to €14.7 million. You are hereby reminded that, during 2012, following the favourable sentence of the Court of Cassation by means of which the proceedings were extinguished, steps were taken to release the provision relating to 1992. On the first count, with regard only to 1991, the Regional Tax Commission upheld the position of the Tax Authorities relating to the most significant dispute in economic terms, concerning the corporate reorganisation transactions, while it rejected the dispute relating to the beneficial interests. On the basis of the opinions updated at 31 December 2016, this sentence would give rise to a maximum risk in terms of amount of €376.6 million (including additional taxes assessed for €121.4 million, interest for €121.4 million and fines for €133.8 million). Whilst reiterating its belief regarding the statutory tax-related legitimacy of the transactions subject to censure by the Tax Authorities, the Company during 2017 resolved to make use of the option provided under the Decree so as to settle the aforementioned dispute. This arrangement will involve a payment for the Company of €175.3 million, of which €140.2 million was already paid during 2017, with the remaining €35.1 paid in accordance with the deadlines set by legislation, on 2 July 2018. The risk provision had already been reduced in 2017 by €20.8 million for the portion “utilised” to settle the dispute. The risk provision at 31 December 2018 amounted to €14.7 million.

Knowing that it has always complied with applicable regulations, which is also corroborated by internal audits focusing on checking compliance with the procedures required by relevant legislation and based on an authoritative labour law opinion, the Company notes that for objective reasons, it currently is not in a position to be able to assess the specific conduct that allegedly would be applicable in terms of the crime, nor the number of former employees that unlawfully had access to early retirement, and consequently neither the possible tax that would need to be refunded. No legal deeds and/or supplementary or amendment notices have been received in respect of those already received on 21 March 2018. This situation therefore makes it impossible to assess the level of risk and consequently quantify the amount, as required by IAS 37. In the case of a conviction for the administrative crimes pursuant to Art. 24 of Italian Leg- islative Decree 231/2001, the administrative pecuniary sanctions applicable would be those stipulated under the combined provisions under articles 10, 11 and 24 of the Decree. It is noted that currently no deeds have been formalised in respect of the companies or current directors and employees of the latter.

Employee termination indemnity and other retirement benefits (15) Defined benefit plans Provisions for Employee termination indemnity accrued up until 31 December 2006, in addition to the indemnity for managers of newspapers, fall within the defined benefit plan category and are therefore determined according to actuarial methods. Both provisions represent the present value of the future legal obligation. Benefits are calculated based on the following assumptions:

EMPLOYEE TERMINATION INDEMNITIES OTHER PROVISIONS Yearly technical discounting back rate 1.57% 1.57% Yearly inflation rate 1.5% 1.5% Yearly rate of increase in remuneration* 1-1.5% 1.5% Revaluation rate of Employee Termination Indemnities 2.625% - Advances expected to be paid-out annually** 3-7% - * on the basis of the category ** on the basis of length of service

The amounts recorded in the Statement of Financial Position, which total €18,535 thousand (down by €1,130 thousand with respect to 2017) are determined as follows.

Provisions for Employee Termination Indemnity 31/12/2018 Opening balance 16,371 Provision for employment in the period (service cost) - Actuarial gains (losses) from experience (285) Actuarial gains (losses) from exchange rate (268) Increase due to interest (interest cost) 207 Benefits paid (705) Closing balance 15,320 Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 243

Other retirement benefits 31/12/2018 Opening balance 3,296 Provision for employment in the period (service cost) - Actuarial gains (losses) from experience 125 Actuarial gains (losses) from exchange rate (50) Increase due to interest (interest cost) 29 (Benefits paid) (239) Other changes 54 Closing balance 3,215

The main actuarial hypotheses adopted for the calculation of future obligations were the inflation rate, salary increase, turnover rate and discounting back rate. Therefore, the sensitivity analysis was carried out on each significant actuarial hypothesis, disclosing the effect which would have taken place following reasonably possible changes in these hypotheses at year end. The Company has always been able to meet any short-term liabilities and has financial resources such as to ensure the acquittal of any future obligations.

The average number for the year and the actual number of employees are shown in the table below.

Average number of employees Number of employees at year-end 2017 2018 31/12/2017 31/12/2018 Journalists 439 439 438 430 Manual and office workers 275 274 277 273 Executives 16 18 15 19 Fixed-term employees 14 11 10 5 TOTAL 743 742 740 727

Trade payables (16) 31/12/2017 31/12/2018 Payables to suppliers of:: • paper 3,641 5,616 • printing services 5,642 4,673 • transport and distribution 137 124 • utilities and telephone 622 832 • investments 3,844 2,531 • promotions 2,859 2,333 • add-on products 4,215 5,532 • freelance work 1,707 1,481 • other editorial costs (photos, investigations and agencies) 2,020 1,880 • other suppliers 8,777 8,128 Trade payables to Group companies 21,268 12,852 TOTAL TRADE PAYABLES 54,732 45,982

Trade payables, normally settled between 60 and 90 days, decreased in total by €8,750 thousand with respect to the previous year. Trade payables to Group companies are analytically broken down in section 11.4 “Related-party transactions”. 244 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Tax payables (17) 31/12/2017 31/12/2018 Payables for withholding tax and IRPEF 3,192 3,209 VAT payable 245 148 Group VAT payable 1,760 2,471 Other tax payables 35,090 15 TOTAL TAX PAYABLES 40,287 5,843

Tax payables amount to €5,843 thousand, decreasing by €34,444 compared to 2017, due almost exclusively to the payment of the last instalment of €35.1 million based relating to the option provided under Art. 11 of Italian Legislative Decree No. 50/2017, converted by Italian Law No. 96/2017, which the Company had resolved to make use of (in this regard, reference is made to Note 14 for additional information).

Other payables (18) 31/12/2017 31/12/2018 Social Security payables 7,871 7,770 Payables to personnel for holidays 3,774 2,527 Other payables to personnel 2,552 4,124 Payables for subscriptions 3,902 3,576 Payables for grants pursuant to Italian Law No. 62/2001 93 31 Other payables 2,110 2,170 TOTAL OTHER PAYABLES 20,301 20,198

Other payables came in at €20,198 thousand, basically in line with the figure at 31 December 2017.

10. Notes to the Income Statement

Revenues (19) 2017 2018 Circulation revenues 155,219 137,242 Advertising revenues 115,261 108,232 Rights and trademark royalties 179 401 Sale of other services 6,440 7,749 Sale of internet services 1,355 1,205 Sale of other products 17 15 Sale of rejects and returns 1,163 869 TOTAL REVENUES 279,635 255,712

Total Company revenues disclosed a decrease of €23,923 thousand (equal to 9.1%) with respect to the previous year’s figures. Circulation revenues came down by €17,977 thousand (equal to 11.6%). The comparative data in the 2017 Income Statement was restated to reflect the retrospective application of the international IFRS 15 accounting standard. It is noted that the application of the new standard has had no impact on the operating profit, profit for the period or the Company’s shareholders’ equity, with differing accounting treatment only in certain items. As mentioned, the details regarding the effects of applying IFRS 15 are explained under paragraph 5 of the Notes to the Financial Statements. Advertising revenues came down by €7,030 thousand (equal to 6.1%). Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 245

Other operating income (20) 2017 2018 Grants 86 62 Capital gains on disposal of assets 14 16 Extraordinary gains 5,019 2,178 Other income 1,469 1,640 TOTAL OTHER OPERATING INCOME 6,588 3,897

The balance of the item Other operating income amounted to €3,897 thousand.

Costs for purchases (21) 2017 2018 Paper for newspapers and periodicals 21,376 20,599 Paper for add-on products and promotions 2,243 2,478 Goods and merchandise purchased 1,985 2,171 Printing materials (11) (9) Consumables 1,005 1,055 TOTAL PURCHASES 26,599 26,294

Costs for services (22) 2017 2018 Printing and other work carried out by third parties 34,320 31,921 Technical equipment operation 17,775 18,155 Editing costs 14,723 13,962 Distribution 50,556 44,944 Reproduction rights SIAE and other copyright costs 4,926 3,784 Promotions 7,788 7,052 Advisory 5,423 4,283 Telephone and data transmission 1,276 1,181 Maintenance and utilities 2,961 3,129 Rent and other costs for the use of third party assets 6,962 7,104 Other services 21,407 19,591 TOTAL SERVICE COSTS 168,058 155,105

Other operating charges (23) 2017 2018 Provision for risks and charges 3,093 1,143 Taxes and duties 552 508 Public relations and gifts 172 136 Membership fees 838 782 Settlements and reimbursements - 18 Extraordinary losses 1,266 939 Write-down of receivables 901 234 Other operating charges 24 36 TOTAL OTHER OPERATING CHARGES 6,845 3,797 246 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Personnel costs (24) 2017 2018 Wages and salaries 58,074 57,589 Social Security 20,274 20,138 Provisions for Employee Termination Indemnities 4,410 4,394 Provisions for retirement benefits 77 54 Reorganisation plan costs 999 19,100 Stock Grant 272 297 Other personnel costs 1,607 886 TOTAL PERSONNEL COSTS 85,713 102,458

Personnel costs decreased by €16,744 thousand compared to 2017, especially as a result of the provisions made to service the corporate reorganisation underway.

The total value incurred during the year for amounts due to executive staff amounted to €0.6 million and €0.1 million for stock grants.

Depreciation, amortisation and write-downs (25) 2017 2018 Intangible assets amortisation 1,612 2,576 Tangible assets depreciation 2,401 2,831 Write-downs of intangible assets - 879 Write-downs of property, plant and equipment - 1,266 TOTAL DEPRECIATION, AMORTISATION AND WRITE-DOWNS 4,013 7,553

Financial income (expense) (26) 2017 2018 Interest received on current accounts and short-term deposits 92 56 Foreign-exchange gains 36 9 Other financial income 276 276 Financial income 405 340 Interest on bank overdrafts - - Accessory banking expenses (50) (76) Interest on bonds issued (7,399) (7,799) Foreign-exchange losses (40) (29) Financial charges on application of IAS (384) (390) Other financial charges (102) (820) Financial expense (7,974) (9,114) Gains (losses) on security trading and investments 8,161 - Write-downs and losses on investments - (24,740) Charges from cash flow hedge - (10) TOTAL FINANCIAL INCOME (EXPENSE) 591 (33,524) Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 247

Financial expenses amounted to €33,524 thousand; at 31 December 2017, whereas financial income stood at €591 thousand. The Convertible Bond issue placed on 9 April 2014, during 2017, generated interest payable for €7,799 thousand, of which €2,617 thousand referred to interest from coupons and €5,182 thousand from the amortised cost.

Dividends (27) 2017 2018 - from subsidiaries GEDI News Network SpA 16,128 11,997 Elemedia SpA 8,505 11,223 GEDI Distribuzione SpA 197 264 - from associated companies Persidera SpA 3,900 3,231 Le Scienze SpA 67 19 TOTAL DIVIDENDS 28,797 26,734

Dividends received in 2018 amount to €26,734 thousand, decreasing by €2,063 thousand with respect to 2017.

Taxes (28) 2017 2018 Current taxes (4,649) (4,605) Deferred and prepaid taxes (8,795) (4,851) Previous years’ taxes (125) (26) Tax payables previous periods 154,572 (617) TOTAL TAXATION 141,001 (10,099)

The significant decrease in taxes compared to the previous year is attributable to the settlement of the tax dispute (reference is made to the comment under the risks provision), which had significantly encumbered the 2017 financial period. A reconciliation between the theoretical tax charge calculated with IRES at 27.5% and IRAP at 3.9% and the effective tax charge, is presented in the following table. 248 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

2017 2018 1) Pre-tax profit as per the financial statements (excl. effect of dispute settlement) 24,429 (42,257) 2) a. Theoretical income taxes (IRES) (at national tax rate) 5,863 (10,142) b. Tax effect relating to non-deductible costs 623 6,542 c. Tax effect on IRES rate decrease - - d. Dividends (6,566) (6,095) e. Non-taxable income/grants (2,650) (214) f. Current and deferred taxes relating to previous years 9 (9) g. Net effect on dispute settlement 143,188 - 3) Income taxes (IRES) 140,467 (9,917) 4) IRAP 455 435 5) Tax payables previous periods 78 (617) 6) Total taxation as per financial statements 141,001 (10,099) Effective average tax rate n.s. 23.9% Theoretical tax rate 27.90% 27.90%

11. Other information

11.1 Net financial position The net financial position of the Parent Company is shown in the table below.

2017 2018 Financial receivables from Group companies 2,317 8,389 Financial payables to Group companies (60,028) (86,208) Cash and deposits 41,900 51,649 Cash and cash equivalents (15,811) (26,170) Marketable securities and other financial assets - 814 Bond issue (93,702) (98,884) Other financial assets (liabilities) (93,702) (98,220) NET FINANCIAL POSITION (109,512) (124,390)

The net financial position changed mainly due to payment of the last instalment for €35.1 million, after exercising the option provided by Italian Legislative Decree 20/2017, whereby the Company opted to settle a tax dispute (reference is made to the comment on the risks provision for additional information).

11.2 Significant non-recurrent events and operations In compliance with Consob Communication dated 28 July 2006, we acknowledge that in the year the Company did not carry out significant non-recurrent operations, as defined in said Communication.

11.3 Transactions deriving from atypical or unusual operations In compliance with Consob Communication dated 28 July 2006, we acknowledge that in the year the Company did not carry out atypical and/or unusual operations, as defined in said Communication. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 249

11.4 Related-party transactions Transactions carried out by the Company, including transactions with related parties, are carried out in the normal course of business and are settled at market rates. It is to be noted that the conclusion of operations with related parties is subject to a specific procedure approved by the Board of Directors, which is described in the annual report on Corporate Governance included in a specific section of these Financial Statements at 31 December 2018, available for consultation both on the Company’s site and with Borsa Italiana SpA. GEDI Gruppo Editoriale SpA, holds with its subsidiaries and affiliated companies both trade relationships and relationships involving the provision of operational and financial services and consulting. The most significant trade transactions included those with the subsidiaries A. Manzoni & C. SpA concessionaire for advertising sales, those with GEDI Distribuzione SpA for the management of distribution of publishing products, with GEDI Digital SpA for the management of sites, GEDI Printing SpA and GEDI News Network SpA for composition and printing services. The Company also manages centralised cash management service in which all the subsidiaries participate. GEDI Gruppo Editoriale SpA receives in turn from its Parent Company CIR SpA, services and consulting on strategic, administrative, financial and tax matters. It is to be noted that the provision of such services on the part of the Parent Company is deemed as preferable to the provision of the same on the part of third parties thanks, among other things, to the wide knowledge and experience CIR SpA has acquired over time on the company and the segment in which GEDI Gruppo Editoriale SpA operates. Since the 2004 financial year, GEDI Gruppo Editoriale SpA and the majority of its subsidiaries participate in the Parent Company’s CIR tax consolidation procedure. In June 2016, participation in the consolidated tax regimen was extended for the three-year period 2016-2018. Due to the capital increase resolved by the Shareholders’ Meeting of 27 April 2017 and released with the ITEDI SpA deed of transfer dated 27 June 2017, CIR lost the controlling right of GEDI, and consequently the Group’s tax consolidation that the Company had subscribed to then lapsed. With the CIR tax consolidation having lapsed, it was decided to adopt a tax consolidation at the level of GEDI SpA and its subsidiaries. The application of this regimen required that the holding company and each of the companies it controls jointly exercise a specific option, in terms of Art, 120 of the TUIR. The option is valid for the three-year period 2017-2019. GEDI Gruppo Editoriale SpA and most subsidiaries have continued to avail themselves of the specific Group VAT system. The data (expressed in thousands of euro) regarding the economic, equity and financial relations of GEDI Gruppo Editoriale SpA with its related companies is set forth below. 250 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

GEDI Gruppo Editoriale SpA transactions with related companies

Tax Tax Financial Financial Financial Financial Guarantees Costs Revenues expense income expense income* commercial receivables tax commercial debt tax provided SUBSIDIARIES GEDI News Network SpA 3,481 3,038 - - - 12,125 2,259 3,208 - 2,738 - 301 135 Elemedia SpA 120 1,232 - - - 11,327 53 5,092 237 375 - - - GEDI Digital Srl 17,564 7,686 - - 6 7 6,735 7 - 133 17,928 - - A. Manzoni & C. SpA 1,873 106,537 - - - 29 35,228 29 - 1,444 43,346 1,656 13,367 GEDI Printing SpA 15,585 569 - - 19 - 573 - - 2,231 21,666 229 2,498 GEDI Distribuzione SpA 13,647 1,410 - - 7 264 24,253 - - 4,929 3,036 209 4,679 Ksolutions SpA (in liquidation) - - - - - 3 - 176 - 9 - - - Mo.Net. Srl 26 1 ------29 231 9 - ASSOCIATED COMPANIES Le Scienze SpA 10 905 - - - 19 259 ------HuffingtonPost Italia Srl 20 99 - - - - 121 - - 20 - - - Persidera SpA - - - - - 3,231 1 ------PARENT COMPANIES - Cofide SpA 132 ------146 - - - CIR SpA ** 800 12 ------800 - - -

* This item includes dividends received from subsidiaries ** The costs item included expenses/income for compliance with the tax consolidation scheme.

11.5 Risk management Financial risks Financial risk management is governed by a Group policy based on prudence and limited risk criteria in the choice of financial and investment policies, and which completely prohibits any speculative operations. The policy outlines the objectives, strategies, guidelines and operating procedures. The Company primarily used the bond market to source funds. On 2 April 2014, the Company placed an equity-linked Convertible Bond issue for a total of €100 million: the Bond grants the bondholder the possibility of converting the bond into a specific number of shares of the issuer company. Upon exercise of a conversion right the company is entitled to deliver shares, or pay an amount of money or deliver a combination of shares and cash. The Bond Issue has a duration of 5 years (maturity 9 April 2019) and a six- monthly coupon at a fixed rate of 2.625% per annum. The bonds may become convertible into ordinary shares of the Company in existence or be newly issued. The Convertible Bond Issue and related interest payments are unsecured and do not include covenants. On 16 April 2018, the Parent Company GEDI Gruppo Editoriale S.p.A. signed a loan contract for €100 million, on a four-year term with four primary banks. The contract envisages compliance with a financial covenant based on the ratio between Net Financial Debt and EBITDA. This served to already refinance the Company in view of the repayment of the convertible bond loan issued in 2014 for €100 million and due in April 2019. Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 251

Should it however to be in need of financial resources in addition to those provided by the operating cash flow, the Company will be in a position to draw on a number of uncommitted credit lines which are currently not utilised. GEDI Gruppo Editoriale S.p.A and coordinates a centralised intragroup current account, in which all subsidiaries take part, so as to obtain economic advantages in relationships with financial counterparts and stronger operating efficiency. Centralisation in fact allows for more efficient planning and control of cash flows, ensures higher consistency in financing and investment choices, optimises the overall risk profile of the Group and, above all, strengthens its contractual power with the banking system.

Price risk As it is active in the publishing segment, the Company acquires large quantities of paper. To achieve a more efficient management of paper purchases and to strengthen its bargaining position with counterparts, thus promoting competition among suppliers, the management of paper purchases for the Group was centralised.

Credit risk The credit risk exposure of the Company relates to trade and financial receivables. Due to the sector in which it operates, the Company is not subject to significant credit risk on trade receivables. Though there are no significant concentrations of such risks, the Company however adopts operating procedures that bar the sale of products or services to customers that do not possess an adequate risk profile or provide collateral guarantees. With regard to financial receivables, investments in short-term financial instruments and trading in derivatives are carried out only with banks that possess a high credit standing. Additional information on risks relating to operations and risks connected with the general performance of the economy are provided in the relevant section of the Report of the Board of Directors. ***** Observing the matters required by the IFRS 7 accounting standard, tables are presented below in which (i) the financial assets and liabilities are divided up by class/category, (ii) financial assets are reported by maturity, and (iii) the contractual maturities of the financial liabilities are indicated. Furthermore, in relation to the financial instruments recorded in the Consolidated statement of financial position at fair value, the hierarchical level of the fair value valuation is shown. 252 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Categories of financial assets and liabilities stated in the financial statements

Items Amount Assets at FV Assets at FV Loans Investments Available Fair Income Shareholders’ in FS in FS through P&L through P&L and held to for sale value statement equity designated as held for receivables maturity assets effect effect 2017 FINANCIAL PERIOD such from initial trading + / (-) + / (-) FINANCIAL ASSETS recognition Non-current assets Other investments (3) 7,119 - - - - 7,119 7,119 - - Other receivables (4) 917 - - 917 - - 917 63 - Current assets Trade receivables (7) 74,928 - - 74,928 - - 74,928 (901) - Other receivables* (9) 17,652 - - 17,652 - - 17,652 - - Cash and cash equivalents (10) 44,217 - - 44,217 - - 44,217 305 - * The item does not include prepayments or amounts due from the Tax Authorities.

Items Amount Assets at FV Assets at FV Loans Investments Available Fair Income Shareholders’ in FS in FS through P&L through P&L and held to for sale value statement equity designated as held for receivables maturity assets effect effect 2018 FINANCIAL PERIOD such from initial trading + / (-) + / (-) FINANCIAL ASSETS recognition Non-current assets Other investments (3) 7,119 - - - - 7,119 7,119 - - Other receivables (4) 655 - - 655 - - 655 1 - Current assets Trade receivables (7) 60,983 - - 60,983 - - 60,983 (234) - Other receivables* (9) 10,956 - - 10,956 - - 10,956 - - Cash and cash equivalents (10) 60,045 - - 60,045 - - 60,045 216 - * The item does not include prepayments or amounts due from the Tax Authorities.

Items Amount Liabilities at FV Liabilities at FV Liabilities Fair Income Shareholders’ in FS in FS through P&L classified as at value statement equity designated as held for amortized effect effect 2017 FINANCIAL PERIOD such from initial trading cost + / (-) + / (-) FINANCIAL LIABILITIES recognition Non-current liabilities Bond issues (13) (87,907) - - (87,907) (100,694) - - Other financial debt (13) ------Current liabilities Bank overdrafts (13) ------Bond issues (13) (5,795) - - (5,795) (5,795) (7,399) - Other financial debt (13) (60,028) - - (60,028) - (44) - Trade payables (16) (54,732) - - (54,732) (54,732) (2) - Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 253

Items Amount Liabilities at FV Liabilities at FV Liabilities Fair Income Shareholders’ in FS in FS through P&L classified as at value statement equity designated as held for amortized effect effect 2018 FINANCIAL PERIOD such from initial trading cost + / (-) + / (-) FINANCIAL LIABILITIES recognition Non-current liabilities Bond issues (13) ------Other financial debt (13) ------Current liabilities Bank overdrafts (13) (7) - - (7) (7) - - Bond issues (13) (98,884) - - (98,884) (99,594) (7,799) - Other financial debt (13) (86,358) - - (86,358) - (760) - Trade payables (16) (45,982) - - (45,982) (45,982) (18) -

Ageing of financial assets

Items Tot. 2017 FINANCIAL YEAR of FS receivables Falling due Matured at 0-30 d 31-60 d 61-90 d over 90 d Write-downs Non-current assets Other receivables (4) 917 917 ------Current assets Trade receivables (7) 74,928 73,386 1,542 897 148 29 467 - - Gross receivables 80,587 75,776 4,811 1,563 416 136 2,694 - - Provision for doubtful accounts (5,659) (2,390) (3,269) (666) (268) (108) (2,227) (901) Other receivables (9) 17,652 17,652 ------Gross receivables 17,842 17,652 190 - - - 190 - - Provision for doubtful accounts (190) - (190) - - - (190) - TOTAL 93,497 91,955 1,542 897 148 29 467 (901)

Items Tot. 2018 FINANCIAL YEAR of FS receivables Falling due Matured at 0-30 d 31-60 d 61-90 d over 90 d Write-downs Non-current assets Other receivables (4) 655 462 193 - - - 193 - - Gross receivables 860 462 398 - - - 398 - - Provision for doubtful accounts (206) - (206) - - - (206) - Current assets Trade receivables (7) 60,983 59,940 1,044 366 226 20 432 - - Gross receivables 67,461 64,780 2,681 379 234 20 2,049 - - Provision for doubtful accounts (6,478) (4,840) (1,638) (12) (8) (1) (1,617) 47 Other receivables (9) 10,956 10,956 ------Gross receivable 10,980 10,980 ------Provision for doubtful accounts (24) 24) - - - - - (114) TOTAL 72,594 71,358 1,236 366 226 20 625 (67) 254 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Contractual maturities of financial liabilities

2017 FINANCIAL YEAR <6 months > 0,5 <1 > 1 <2 > 2 <3 > 3 <4 > 4 <5 >5 TOTAL Bond issue 1,298 1,319 100,403 - - - - 103,020 Other financial debt: 60,028 ------60,028 - Bank loans ------Payables to Group companies 60,028 ------60,028 Bank overdrafts ------Trade payables 54,732 ------54,732 TOTAL 116,057 1,319 100,403 - - - - 217,779

2018 FINANCIAL YEAR <6 months > 0,5 <1 > 1 <2 > 2 <3 > 3 <4 > 4 <5 >5 TOTAL Bond issue 100,986 ------100,986 Other financial debt: 86,253 ------86,253 - Bank loans ------Payables to Group companies 86,253 ------86,253 Bank overdrafts 7 ------7 Trade payables 45,982 ------45,982 TOTAL 233,228 ------233,228

11.6 Commitments At 31 December 2018, the Company had commitments for purchases in place for €146 thousand (amounted to €1,157 thousand in 2017). Guarantees granted amounted to €22,331 thousand (€17,146 thousand in 2017) and refer to sureties for leases payable and prize contests (for €2,935 thousand of which €1,283 thousand in favour of Group companies and €1,652 thousand in favour of third parties), to the payment obligation granted to the Tax Authorities guaranteeing the excess credit generated in the last three years by some companies belonging to the VAT pool for €19,396 thousand (€14,663 thousand in 2017). Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 255

11.7 Statement of highlights of the Parent Company CIR SpA (Article 2497-bis, paragraph 4 of the Italian Civil Code) The company is subject to the management and coordination activities of CIR SpA, as emerges from the documents and company correspondence. Pursuant to Article 2497-bis, paragraph 4 of the Italian Civil Code, a summary statement is presented below with the highlights taken from the last set of approved financial statements. For a correct and complete presentation of CIR SpA’s Statement of Financial Position at 31 December 2017, as well as the economic result achieved, reference is made to the financial statements which, accompanied by the report of the independent auditors’ KPMG SpA, is available at the registered offices and care of Borsa Italiana.

Statement of Financial Position

ASSETS 31 December 31 December (€ thousand) 2016 2017 Intangible assets 75 66 Property, plant and equipment 1,855 1,344 Investment property 14,474 13,891 Investments 809,157 755,762 Sundry receivables 127,319 93,876 of which: related companies 126,634 93,019 Securities 13,300 5,703 Deferred tax 2,425 - NON-CURRENT ASSETS 968,605 870,642 Sundry receivables 45,884 33,571 of which: related companies 28,276 15,080 Cash and cash equivalents 14,291 24,360 CURRENT ASSETS 60,175 57,931 TOTAL ASSETS 1,028,780 928,573

LIABILITIES 31 December 31 December (€ thousand) 2016 2017 Share capital 332,862 328,062 Reserves 402,560 404,902 Retained earnings (losses) 228,399 206,726 Net profit (loss) 14,230 (49,034) SHAREHOLDERS’ EQUITY 978,051 890,656 Deferred taxes 792 468 Personnel provisions 1,262 1,421 NON-CURRENT LIABILITIES 2,054 1,889 Bank overdrafts - - Other payables 36,630 31,077 of which: related companies 32,446 23,434 Provisions for risks and charges 12,045 4,951 CURRENT LIABILITIES 48,675 36,028 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,028,780 928,573 256 | GEDI Gruppo Editoriale | Notes to the annual Financial Statements of the Parent Company

Statement of Comprehensive Income

Year Year (€ thousand) 2016 2017 Sundry revenues and income 3,801 2,861 of which: related companies 1,905 2,102 Costs for services (9,119) (5,679) of which: related companies (49) (70) Personnel costs (5,557) (5,462) of which: related companies (31) (94) Other operating costs (1,752) (1,549) of which: related companies (54) - Depreciation, amortisation and write-downs (648) (1,460) Operating profit (13,275) (11,289) Financial income 1,783 1,398 of which: related companies 1,753 1,395 Financial expense (59) (46) Dividends 23,170 20,161 of which: related companies 21,421 14,821 Revenues from security trading - 2,300 Losses from security trading (514) (8) Adjustments to the value of financial assets (1,009) (66,435) Profit (loss) before taxes 10,096 (53,918) Taxes 4,135 4,884 NET PROFIT GENERATED FROM OPERATIONAL ACTIVITIES 14,231 (49,034) Profit (loss) from discontinued operations and assets - - NET PROFIT 14,231 (49,034)

Net profit 14,231 (49,034) Other comprehensive income components 2,508 (1,025) TOTAL COMPREHENSIVE INCOME 16,739 (50,059)

11.8 Essential reclassified data of the subsidiaries

Shareholders’ Financial Net Revenues Gross Operating Net Equity position invested operating profit profit (€ thousand) capital profit GEDI News Network SpA 259,883 2,892 256,991 252,283 30,143 27,582 16,066 Elemedia SpA 70,465 (4,781) 75,246 61,999 18,531 15,822 11,112 GEDI Digitale Srl 5,468 18,537 (13,069) 31,045 1,374 1,129 791 A. Manzoni & C. SpA 25,537 (25,826) 51,363 69,153 2,792 2,246 942 GEDI Printing SpA 66,203 22,257 43,946 46,654 6,380 (33) 6 GEDI Distribuzione SpA 1,421 7,419 (5,998) 7,316 724 173 113 Mo-Net Srl 1,255 318 937 2,681 999 748 499 Notes to the annual Financial Statements of the Parent Company | GEDI Gruppo Editoriale | 257

11.9 Disclosure pursuant to Art. 1, paragraph 125 of Italian Law No. 124 of 4 August 2017 During 2018, the Company benefited from indirect grants in the form of tariff concessions on telephone expenses for €207 thousand (€395 thousand in 2017), as provided for publishing companies under Art. 28 of Italian Law No. 416 of 5 August 1981. The Company not receive publishing related direct grants during 2018; nonetheless there are direct grants recorded in the accounts until 2009 pursuant to Art. 5 of Italian Law 62/2001, as well as tax receivables in terms of Art. 8 of Italian Law 62/2001. There were no additional forms of direct or indirect grants received from Public Administration offices, recorded during the period.

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Certification of the financial statements pursuant to Article 154-bis of Italian Legislative Decree No. 58 of 24 February 1998

| GEDI Gruppo Editoriale | 261

Certification of the financial statements pursuant to Article 154-bis of Italian Legislative Decree No. 58 of 24 February 1998 1) The undersigned Laura Cioli, Managing Director, and Gabriele Acquistapace, Executive appointed to draw up the company accounting documents of GEDI Gruppo Editoriale S.p.A., certify, having considered the provisions of art. 154-bis, paragraphs 3 and 4 of Italian Legislative Decree no. 58 of 24 February 1998:

• the adequacy in relation to the characteristics of the company and • the effective application of the administrative and accounting procedures used in the preparation of the financial statements during 2018.

2) It is also certified that:

2.1) the financial statements at 31 December 2018:

a) were prepared in accordance with International Financial Reporting Standards as adopted by the European Union pursuant to Regulation (EC) No. 1606/2002 of the European Parliament and Council dated 19 July 2002, as well as with the provisions issued in implementation of Article 9 of Italian Legislative Decree No. 38 of 28 February 2005; b) correspond with the results of the accounting records and entries; c) fairly and correctly represent the financial condition, result of operations and cash flows of the issuer; 2.2) the report on operations includes a reliable analysis of the performance and the result of operations as well as the situation of the issuer, together with the description of the main risks and uncertainties to which they are exposed.

Laura Cioli Gabriele Acquistapace

Rome, 01 March 2019

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Board of Statutory Auditors Report

Board of Statutory Auditors Report| GEDI Gruppo Editoriale | 265

GEDI GRUPPO EDITORIALE S.P.A.

REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS' MEETING

PURSUANT TO ARTICLE 153 OF ITALIAN LEGISLATIVE DECREE NO. 58/1998

(Translation from the Italian original which remains the definitive version)

Dear Shareholders,

This report (hereinafter referred to as the “Report”) outlines the activities carried out by the Board of Statutory Auditors (hereinafter referred to as the “Board”) of GEDI Gruppo Editoriale S.p.A. (hereinafter the “Company” or “GEDI”) during the 2018 financial period, based on the requirements set out in the Consob Communication No. DEM/1025564 of the 6th of April 2001 and subsequent amendments.

The Board of Statutory Auditors carried out the supervisory activities envisaged by law, also taking into account the Code of Conduct for Boards of Statutory Auditors of listed companies, recommended by the Italian National Association of Chartered Accountants and Consob Communication on corporate audits and the activities of the Board of Statutory Auditors.

Specifically, the Board of Statutory Auditors oversaw (i) the observance of the law and the memorandum of association, (ii) the observance of the principles of correct administration, (iii) the adequacy of the organisational structure of the Company with regard to the pertinent aspects, the internal audit system and the administrative/accounting system, as well as the reliability of the latter to correctly represent the operating events, (iv) the methods for effective implementation of the corporate governance rules envisaged by the Code of Conduct of the Committee for the Corporate Governance of listed companies which the Company has adopted and (v) the adequacy of the provisions imparted to subsidiaries, as per article 114, paragraph 2 of the T.U.F. (Italian Consolidated Law on Finance).

Furthermore, in its capacity as the Internal Audit Committee, the Board of Statutory Auditors, pursuant to Art. 19 of Italian Legislative Decree No. 39/2010, held periodic meetings with the Executive appointed to draw up the company accounting documents, the Internal Audit Manager and the managers of the Independent Audit Firm KPMG S.p.A. (hereinafter referred to as “KPMG”).

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The current Board of Statutory Auditors was appointed by the Shareholders’ Meeting held on the 26th of April 2018 to approve the financial statements for the year ended 2017. The Board has successfully verified that its members have the necessary independence prerequisites, as referenced under Art. 148, paragraph 3 of the T.U.F. and the provisions of the Corporate Governance Code for Listed Companies, providing the Company’s Board of Directors with the necessary information in this regard.

During the period, the Company that was already listed on the screen-based trading circuit (Mercato Telematico Azionario [MTA]), was admitted on the 7th of November 2018 to trade its securities on the STAR segment (segment for high requirement shares in terms of transparency of information, liquidity and Corporate Governance). The above being effective from the 15th of November 2018 based on provision no. 8509 issued by Borsa Italiana S.p.A.

On this premise, we provide hereunder the specific information requested in the Consob Communication no. DEM/1025564 of 6 April 2001 and subsequent amendments, following the order indicated therein.

1. The Board of Statutory Auditors oversaw the transactions of greatest economic, financial and equity importance carried out during 2018, which it was made aware of by taking part in the Board of Directors’ meetings, the Shareholders’ Meetings (represented by the previous members of the Board of Statutory Auditors), or by receiving information from the Company’s senior management, deeming the same to be compliant with the law and the memorandum of association. The main transactions in which the Company engaged, included the Company signing a “committed” Revolving Credit Facility on the 16th of April 2018 for € 100 million, on a four-year term with four primary Banks. The contract envisages compliance with a financial covenant based on the ratio between Net Financial Debt and EBITDA. This will allow to refinance the Company in view of the repayment of the convertible bond loan issued in 2014 for € 100 million, falling due in April 2019.

The Board of Statutory Auditors believes that adequate information was acquired on the more significant economic, financial and asset transactions carried out by the Company, as set out in the Report on Operations and the Notes to the period’s Financial Statements.

The Report of the Board of Directors, in the section referring to “Subsequent Events and Outlook” notes that no significant events have taken place since the close of the year.

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It should be remembered that on the 21st of March 2018, the Company was informed that criminal proceedings had been brought for the alleged aggravated complicity in the crime pursuant to Art. 640, paragraph 2, no. 1 in respect of the Managing Director, Central Human Resources Manager and National Press General Manager, and the crime under Art. 24 of Italian Legislative Decree 231/2001 (subsequent to an offence committed by natural persons in the interest of the entity) against the Company and some of its subsidiaries. The investigation conducted by the Public Prosecutor in Rome refers to presumed fraud against INPS regarding the alleged irregular access by certain employees over the period between 2012 and 2015 to the extraordinary redundancy fund (CIGS) aimed at early retirement in terms of Law 416/81.

In this regard, the Company conducted internal audits aimed at checking compliance with the procedural format required by the relevant legislation and requested a legal opinion from a labour law expert. At this time, the Company has noted that it is not in a position to assess either the specific conduct that would allegedly qualify for the assumptions of the crime, nor the number of former employees that allegedly unlawfully had access to early retirement, and consequently neither the possible tax that would need to be refunded. This situation has therefore made it impossible to assess the level of risk and consequently quantify the relevant amount, as required by IAS 37.

The Board has been informed that at the date of this Report, no deeds have been formalised in respect of the Companies or current directors and employees of the latter.

2. During 2018, the Board of Statutory Auditors made no findings of atypical and/or unusual transactions with Group companies, third parties or related parties. The ordinary transactions entered into with Group companies and with related parties, as described by the Directors in the Report on Operations and the Notes to the Financial Statements, to which reference is made insofar as relevant, appear consistent and comply with the interests of the Company.

4. The Board of Statutory Auditors received the Reports from KPMG as required by Art. 14 of Italian Legislative Decree no. 39/2010 and Art. 10 of EU Regulation no. 537/2014, which were issued on the 28th of March 2019 in respect of the Company’s annual and consolidated financial statements at the 31st of December 2018. The Independent Audit Firm issued a positive opinion, without any findings or requests for information, noting the key aspects of the audit and that the Management Report is consistent with the annual and consolidated financial statements and was issued in compliance with legislation.

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In the supplementary Report pursuant to Art. 11 of EU Regulation no. 537/2014, issued on 28 March 2019, KPMG outlined: i) the key aspects of the audit; ii) the levels of significance for the annual and consolidated financial statements; iii) the audit plan; iv) the scope and method of consolidation; v) the audit methodology and measurement methods applied in the consolidated and annual financial statements; vi) the areas of concern referring to the consolidated and annual financial statements; vii) the activities carried out by the audit team. In the same document, KPMG further certified that no significant audit differences were found in the consolidated and annual financial statements, nor were any significant shortcomings identified in the internal audit system relating to financial disclosure, providing a listing of the mandatory disclosures made to the Board of Statutory Auditors, and finally that the checks on whether the accounts were kept correctly and that management events were properly recorded found no significant aspects requiring mention in this report.

Attached to the aforementioned supplementary Report, the Board of Statutory Auditors also received the annual confirmation regarding KPMG’s independence, pursuant to Art. 6, paragraph 2, letter a) of the above EU Regulation.

Furthermore, in the above mentioned Reports, KPMG found that the Directors’ supposition of the Company as an ongoing concern was appropriate, as there were no significant uncertainties noted in this regard.

The Board of Statutory Auditors monitored the preparation of the non-financial consolidated Declaration - 2018 Sustainability Report and verified that the procedures, processes and structures responsible for the drafting, accounting, measurement and representation of results and relevant information were adequate, in addition to having complied with the obligations set by legislation regarding the preparation, publication and issuing of the Report by KPMG pursuant to Italian Legislative Decree No. 254/2016.

5. During 2018 and up to the present date, the Board of Statutory Auditors was informed of a single complaint pursuant to Art. 2408 of the Italian Civil Code. This complaint, dated 29 March 2018, referred to censure by a shareholder for the Company’s failure to provide confirmation regarding an alleged price sensitive indiscretion by a journalist. After examining the case, the Board in office at the time found in this case that the complaint did not stand as the suppositions provided by the shareholder did not apply.

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6. The Board of Statutory Auditors is not aware of any petitions that require noting in this Report.

7. During 2018, as noted by KPMG, the Independent Audit Firm received additional appointments from the Company in addition to the statutory audit (and specifically, the GAP Analysis on the accounting and administrative procedures of GEDI Gruppo Editoriale S.p.A. and its main subsidiaries; a limited review of the non-financial consolidated Declaration conducted in accordance with Art. 3, paragraph 10 of Italian Legislative Decree 254/2016 and the provisions under ISAE 3000; Gap Analysis on the Itedi Group’s ICT structure, focusing on identifying and summarising the technical aspects, remarks, alternative scenarios to investigate and the points that GEDI Gruppo Editoriale S.p.A. management needed to assess and examine from the perspective of standardising sourcing/delivery models. The analysis was conducted by Nolan Norton Italia Srl, a company that is part of the KPMG network), for a total fee of € 135 thousand.

During 2018, the Company paid the Independent Auditing Firm fees for € 199 thousand for the appointments concerning audit services, while the subsidiaries of GEDI paid the same Auditing Firm fees totalling € 469 thousand for appointments once again concerning audit services.

8. Taking into consideration the aforementioned certification issued on the independence of KPMG on the 28th of March 2019, pursuant to Art. 17 of Italian Legislative Decree no. 39/2010, and also considering the amount of the fees paid for the additional appointments with respect to the audits, as well as for the type of activities carried out by KPMG and its Network, the Board of Statutory Auditors believes that no critical aspects emerged with regard to the independence of the Independent Auditing Firm.

9. During 2018, the Board of Statutory Auditors issued the legal opinions and certification required. The content of these opinions does not contrast with the resolutions subsequently adopted by the Board of Directors.

The Board of Statutory Auditors, in compliance with the provisions in the Company's Code of Conduct, also checked:

- the correct application of the assessment standards and procedures adopted by the Board of Directors for assessing the independence of its members on the basis of the criteria envisaged by the law and the Corporate Governance Code;

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- the maintenance of the independence requirements of the Auditors, already checked before their appointment, on the basis of the criteria envisaged by the law and by the Corporate Governance Code, it being understood that, if an Auditor, on their own account or on behalf of a third party, should have an interest in a specific transaction of the Company, the same is obliged to provide prompt and thorough information to the other members of the Board of Statutory Auditors and the Chairman of the Board of Directors with regard to the nature, terms, origin and extent of said interest.

10. During 2018, the Company's Board of Directors met 7 times; the Appointments and Remuneration Committee met 4 times, the Committee for Related Parties met twice, and the Audit and Risks Committee met 9 times (of which, 5 were held jointly with the Board of Statutory Auditors due to the issues dealt with). During the same year, the Board of Statutory Auditors met 10 times (including the meetings held jointly with the Internal Audit and Risk Committee) and participated in all the Board of Directors and Shareholders' Meetings held during the year.

The Board of Statutory Auditors, represented by the Chairman or a Statutory Auditor, also took part in all the meetings of the Appointments and Remuneration Committee and the Audit and Risks Committee (not held jointly) and the Related Parties Committee.

11. In so far as it is responsible, the Board of Statutory Auditors also monitored compliance with the principles of correct administration, by participating at the meetings of the Board of Directors, meeting with the Executive appointed to draw up the company accounting documents, the General Counsel, the Internal Audit Manager, the Risk Management Manager, and by interviewing management and acquiring information.

The Board of Statutory Auditors is of the opinion that the governance tools and structures adopted by the Company as a whole provide adequate control monitoring of the principles of correct administration on an operational level. The Board monitored the decision-making procedures followed by the Board of Directors and verified that management choices complied with applicable regulations (substantive legality), were adopted in the interests of the Company, were compatible with corporate resources and assets and were adequately supported by data, analysis and verification processes.

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The Board of Statutory Auditors monitored compliance with the law and the By-laws regarding the management choices made by the Board of Directors and checked that these were not imprudent, reckless or contrary to the resolutions taken by the Shareholders’ Meeting or in any way contrary to the Company’s interests or such that they would compromise the integrity of corporate assets.

The Board of Statutory Auditors therefore deems that the principles of correct administration have been observed.

12. The Board of Statutory Auditors also monitored the organisational structure of the Company and in light of the regulatory activities performed and insofar as it is responsible, deems this structure as a whole, adequate with respect to GEDI’s requirements.

13. The Board of Statutory Auditors supervised the Company's internal audit system and the activities performed by the Internal Audit department, also interacting and coordinating with the Audit and Risks Committee and the Supervisory Body.

Specifically, the Board of Statutory Auditors notes that, during the year:

- the necessary functional and information-related connection with the Internal Audit Department Manager was maintained regarding the methods used to carry out the audit tasks entrusted to the department, pertinent to verifying that the internal audit and risk management systems were adequate, fully operational and functioning effectively, and as well as with regard to the results of the activities carried out in compliance with the audit plan approved by the Board of Directors;

- in its capacity as the Internal Audit Committee, pursuant to Legislative Decree no. 39/2010, the Board of Statutory Auditors periodically met and exchanged information with the Independent Audit Firm and the Executive appointed to draw up the company accounting documents;

- guaranteed the continued informational flow with the Supervisory Body, also with the continual presence of a Statutory Auditor who serves as an effective member of the Body; in this regard, the Board of Statutory Auditors notes that with regard to the provisions under Italian Legislative Decree 231/2001, during 2018, the Company updated its “Organisation,

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Management and Control Model pursuant to Italian Legislative Decree 231/01” and the Code of Ethics, whereas the Supervisory Body monitored its actual implementation;

- monitored the transactions carried out by the Company with related parties, verifying the efficacy or proper application of the relative Procedure approved by the Board of Directors following the issuing of Consob Regulation no. 17221 of the 12th of March 2010.

In light of the supervisory activities carried out as summarised above, as also ascertained in the meetings of the Audit and Risks Committee, the Board of Statutory Auditors does not have any observations to make regarding the internal audit and risk management system, insofar as it is responsible, which it holds to be suitable for the management characteristics and size of the Company. From the overall exchange of information, no significant aspects emerged that would impact negatively on the overall adequacy and operations of the internal audit and risk management systems.

14. The Board of Statutory Auditors has overseen the administrative/accounting system of the Company and its reliability in correctly representing the operating events by means of gathering information from the Financial Reporting Manager and the heads of the competent divisions and based on the examination of the company documentation and the analysis of the results of the work carried out by the Independent Auditing Firm.

Specifically, the Board of Statutory Auditors reports that during 2018, the Executive appointed to draw up the company accounting documents issued certifications relative to 154-bis of the T.U.F., in particular confirming that the annual and consolidated financial statements provide a true and accurate representation of the Company's equity, economic and financial situation and of the companies included in the consolidation.

Based on the information acquired during its regulatory activities, the Board of Statutory Auditors holds insofar as it is responsible, that the administrative/accounting system is adequate and reliable as regards properly representing management events and has no observations to make in this regard.

15. The Board of Statutory Auditors has monitored the adequacy of the instructions issued by the Company to its subsidiaries pursuant to Art. 114, paragraph 2 of T.U.F. and has no observations to make with regard to the flow of information between the same, holding that the Company has shown itself able to comply with the communication requirements established under the law.

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In order to permit the exchange of information envisaged in article 151, paragraph 2 of the T.U.F., a questionnaire was sent to the audit bodies of subsidiaries, regarding the supervisory activities carried out during 2018, the administration and audit systems adopted and overall company performance. An analysis of these questionnaires, which were duly completed and sent back by the audit bodies of the investee companies, did not indicate or reveal events which need to be mentioned in this report.

16. During the year, the Board of Statutory Auditors met the heads of the Independent Auditing Firm for the purpose of exchanging significant data and information as per article 150, paragraph 3 of the T.U.F.

During these meetings, the Independent Auditing Firm did not communicate any events and/or anomalies which need to be mentioned in this Report.

17. The Company has adopted a corporate governance system, substantially adhering to the recommendations found in the Corporate Governance Code prepared by the Borsa Italiana S.p.A. Corporate Governance Committee for Listed Companies, through the adoption of its own Code of Conduct which complies with the same.

The governance system adopted by the Company is described in detail in the Report on Corporate Governance for 2018, approved by the Board of Directors on 1 March 2018.

The Board has established that the Company has adopted a procedure for the handling and disclosure to the public of confidential documents and information, with particular reference to so-called privileged information. The Company has also established and implemented the Register of individuals who have access to privileged information, which records the individuals who, due to their work or professional activities, or in relation to the functions performed, have access to privileged information. This Register was amended during 2018 and introduced ex novo as per the procedures set out under Art. 18 MAR, subsequent to EU Regulation 596/2014 coming into effect. The Board has established further that the Company’s internal processes have incorporated the measures envisaged by the Italian Data Protection Authority and that the Company acts in accordance with the provisions specified in EU Regulation No. 679 of 27 April 2016 (“GDPR”), Italian Legislative Decree No. 196 dated 30 June 2003, as amended by Italian Legislative Decree No. 101 of 10 August 2018, as well as any additional regulations applicable on the protection of personal data. In this regard, the Board met with the Company’s Data Protection Officer (“DPO”), appointed in

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accordance with the GDPR, who outlined to the Board the implementation process relating to the aforementioned regulation, including the relevant operations put in place.

18. In the scope of the supervisory and control activities carried out during the year, no reprehensible events, omissions or irregularities of significance emerged, such that they would need mentioning in this Report.

19. Insofar as it is aware, the Board of Statutory Auditors discloses that, in drawing up the consolidated and separate financial statements, no departures were made from the provisions of the law.

Having also considered the results of the activities carried out by the Independent Auditing Firm, with regard to the aspects it is responsible for, the Board of Statutory Auditors does not find any reasons which would prevent the approval of the financial statements as at the 31st of December 2018, as per the draft drawn up and approved by the Board of Directors in the meeting held on the 1st of March 2019. The latter show a loss for the year of € 32,158,364.81 and, given the reserves available in the financial statements for a total of € 344,443,160.84, the Board of Statutory Auditors agrees with the Board of Directors with regard to covering the loss entirely by utilising the reserves available in the financial statements at 31 December 2018.

Rome, 28 March 2019

The Board of Statutory Auditors

Gaetano Rebecchini (Chairman of the Board of Statutory Auditors)

Maurizio Lauri (Statutory Auditor)

Marina Scandurra (Statutory Auditor)

APERTURE_SFUMATURA.qxp_impaginato 06/02/19 11:46 Pagina 11

Independent Auditors’ Report of the Separate Financial Statements

KPMG S.p.A. Revisione e organizzazione contabile Via Ettore Petrolini, 2 00197 ROMA RM Telefono +39 06 80961.1 Email [email protected] PEC [email protected]

(Translation from the Italian original which remains the definitive version)

Independent auditors’ report pursuant to article 14 of Legislative decree no. 39 of 27 January 2010 and article 10 of Regulation (EU) no. 537 of 16 April 2014

To the shareholders of GEDI Gruppo Editoriale S.p.A.

Report on the audit of the separate financial statements

Opinion We have audited the separate financial statements of GEDI Gruppo Editoriale S.p.A. (the “company”), which comprise the statement of financial position as at 31 December 2018, the income statement and the statements of comprehensive income, cash flows and changes in equity for the year then ended and notes thereto, which include a summary of the significant accounting policies. In our opinion, the separate financial statements give a true and fair view of the financial position of GEDI Gruppo Editoriale S.p.A. as at 31 December 2018 and of its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the separate financial statements” section of our report. We are independent of the company in accordance with the ethics and independence rules and standards applicable in Italy to audits of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the separate financial statements of the current year. These matters were addressed in the context of our audit of the separate financial

GEDI Gruppo Editoriale S.p.A. Independent auditors’ report 31 December 2018

statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Recoverability of the nameplate “La Repubblica” Notes to the separate financial statements: paragraphs 3.1 “Intangible assets”, 3.5 “Loss in value of assets”, 7.1 “Retrievability of intangible assets with an indefinite useful life”, 9.1 “Intangible assets” and 10.25 “Depreciation, amortisation and write- downs”

Key audit matter Audit procedures addressing the key audit matter The separate financial statements at 31 Our audit procedures included: December 2018 include the nameplate “La — gaining an understanding of the process Repubblica” as an intangible asset with an adopted to prepare the impairment tests indefinite useful life of €220 million, including approved by the company’s board of an impairment loss of €1 million recognised directors on 25 January 2019; during the year. — gaining an understanding of the process Assisted by external experts, the directors used to draft the plan; tested the carrying amount of the cash- generating unit (CGU) to which the — analysing the criteria used to identify the nameplate is allocated for impairment by CGU and trace the amount of the assets comparing it to its recoverable amount. The and liabilities allocated thereto by the test was approved on 1 March 2019. The directors to the separate financial directors estimated the recoverable amount statements; based on value in use calculated using the — comparing the cash flows used for discounted cash flow model. impairment testing to the cash flows As a result of the impairment test, the forecast in the plan and analysing any company recognised an impairment loss of discrepancies; €1 million on the “La Repubblica” CGU. — analysing the main assumptions used by Impairment testing entails a high level of the directors in drafting the plan for judgement, especially in relation to: reasonableness; — the expected cash flows, calculated by — considering the most significant taking into account the general discrepancies between past years’ economic performance and that of estimates and actual figures, in order to company’s sector and the actual cash assess the accuracy of the forecasting flows generated by the CGU in recent process; years; — involving experts of the KPMG network — the financial parameters to be used to in the assessment of the discount the above cash flows. reasonableness of the impairment Moreover, the 2019-2021 business plan (the testing model and related assumptions, “plan”) that the company’s directors including by means of a comparison with approved on 25 January 2019 and that is the external data and information; basis for the cash flow estimates is not only affected by the uncertainties inherent in any — checking the sensitivity analysis forecast, but also by the current uncertainty presented in the notes in relation to the about the short and medium term key assumptions used for impairment performance of the national newspaper testing; market. — assessing the appropriateness of the For the above reasons, we believe that the disclosures provided in the notes about recoverability of the nameplate “La the recoverability of the nameplate “La Repubblica” is a key audit matter. Repubblica”.

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Recoverability of the carrying amount of investments in subsidiaries and in the associate Persidera S.p.A. Notes to the separate financial statements: paragraphs 3.5 “Loss in value of assets”, 3.6 “Investments”, 7.2 “Recoverability of investments in subsidiaries and associates”, 9.3 “Investments” and 10.26 “Financial income (expense)”

Key audit matter Audit procedures addressing the key audit matter The separate financial statements at 31 Our audit procedures included: December 2018 include investments in — gaining an understanding of the process subsidiaries and associates of €320 million adopted to prepare the impairment tests and €94 million, respectively, as well as approved by the company’s board of impairment losses of €25 million recognised directors on 26 January 2019; during the year, of which €19 million related to the investment in the associate Persidera — analysing the reasonableness of the S.p.A.. assumptions underlying the investees’ expected cash flows; Assisted by external experts, the directors tested these equity investments for — with reference to investments in impairment and checked their recoverability subsidiaries, comparing the cash flows by comparing their carrying amount to their used for impairment testing to those value in use calculated using the discounted forecast in the 2019-2021 business plan cash flow model. The tests were approved approved by the company’s directors on on 1 March 2019. 25 January 2019 and analysing the reasonableness of any discrepancies; As a result of the impairment tests, the company recognised impairment losses of — with reference to the investment in €25 million. Impairment testing entails a high Persidera S.p.A., comparing the cash level of judgement, especially in relation to: flows used for impairment testing to those forecast in the 2019-2021 — the investees’ expected cash flows, business plan approved by the calculated by taking into account the associate’s directors on 19 February general economic performance and that 2019 and analysing the reasonableness of investees’ sector and the actual cash of any discrepancies; flows in recent years; — analysing the most significant — the financial parameters to be used to discrepancies between past years’ discount the above cash flows. estimates and actual figures, in order to For the above reasons and considering the check the accuracy of the estimation materiality of the carrying amounts, we process adopted by the company’s and believe that the recoverability of the carrying associate’s directors.; amount of the investments in subsidiaries — involving experts of the KPMG network and associates is a key audit matter. in the assessment of the reasonableness of the impairment testing model and related assumptions, including by means of a comparison with external data and information; — analysing the events after the reporting date; — checking the sensitivity analysis presented in the notes in relation to the key assumptions used for impairment testing; — assessing the appropriateness of the disclosures provided in the notes about the measurement of investments in subsidiaries and in the associate Persidera S.p.A..

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Assessment of the possible effects of judicial investigations on the separate financial statements Notes to the separate financial statements: paragraph 3.16 “Provisions for risks and charges, potential assets and liabilities” and 9.14 “Provisions for risks and losses”

Key audit matter Audit procedures addressing the key audit matter The separate financial statements at 31 Our audit procedures included: December 2018 include specific disclosure — updating the analysis of the about the judicial investigations notified on reasonableness of the assumptions 21 March 2018 to the company’s then CEO, underlying the directors’ assessment of general manager and head of human the possible effects of the judicial resources, to the company itself and some of investigations, based on the its subsidiaries. documentation about the alleged crime The judicial authorities are investigating an and discussions with the main internal alleged fraud against the Italian social departments, the board of statutory security institution (INPS) in relation to the auditors (“Collegio Sindacale”) and the participation of certain employees in the supervisory body as per Legislative government-sponsored lay-off scheme to decree no. 231/2001; access the early retirement procedure as per — examining the legal advisors’ opinions Law no. 416/81 from 2012 to 2015. on the possible effects of the pending Assisted by their legal advisors, the directors investigations; assessed the effects of the investigations on — obtaining information, by written the separate financial statements. The requests and interviews, from the legal assessment is, by its very nature, complex advisors; and highly uncertain. — assessing the appropriateness of the For the above reasons, we believe that the disclosures provided in the notes about assessment of the possible effects of the the pending investigations and their pending judicial investigations is a key audit possible effects. matter.

Other matters As required by the law, the company disclosed the key figures from the latest financial statements of the company that manages and coordinates it in the notes to its own separate financial statements. Our opinion on the separate financial statements of GEDI Gruppo Editoriale S.p.A. does not extend to such data.

Responsibilities of the company’s directors and “Collegio Sindacale” for the separate financial statements The directors are responsible for the preparation of separate financial statements that give a true and fair view in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05 and, within the terms established by the Italian law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The directors are responsible for assessing the company’s ability to continue as a going concern and for the appropriate use of the going concern basis in the preparation of the separate financial statements and for the adequacy of the related disclosures. The use of this basis of accounting is appropriate unless the directors believe that the conditions for liquidating the company or ceasing operations exist, or have no realistic alternative but to do so.

4 GEDI Gruppo Editoriale S.p.A. Independent auditors’ report 31 December 2018

The Collegio Sindacale is responsible for overseeing, within the terms established by the Italian law, the company’s financial reporting process.

Auditors’ responsibilities for the audit of the separate financial statements Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA Italia will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements. As part of an audit in accordance with ISA Italia, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: — identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; — obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control; — evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors; — conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the company to cease to continue as a going concern; — evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance, identified at the appropriate level required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with the ethics and independence rules and standards applicable in Italy and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current year and are, therefore, the key audit matters. We describe these matters in our auditors’ report.

Other information required by article 10 of Regulation (EU) no. 537/14 On 21 April 2016, the company’s shareholders appointed us to perform the statutory audit of its separate and consolidated financial statements as at and for the years ending from 31 December 2016 to 31 December 2024. We declare that we did not provide the prohibited non-audit services referred to in article 5.1 of Regulation (EU) no. 537/14 and that we remained independent of the company in conducting the statutory audit. We confirm that the opinion on the separate financial statements expressed herein is consistent with the additional report to the Collegio Sindacale, in its capacity as audit committee, prepared in accordance with article 11 of the Regulation mentioned above.

Report on other legal and regulatory requirements

Opinion pursuant to article 14.2.e) of Legislative decree no. 39/10 and article 123-bis.4 of Legislative decree no. 58/98 The company’s directors are responsible for the preparation of the a directors’ report and a report on corporate governance and ownership structure at 31 December 2018 and for the consistency of such reports with the related separate financial statements and their compliance with the applicable law. We have performed the procedures required by Standard on Auditing (SA Italia) 720B in order to express an opinion on the consistency of the directors’ report and the specific information presented in the report on corporate governance and ownership structure indicated by article 123-bis.4 of Legislative decree no. 58/98 with the company’s separate financial statements at 31 December 2018 and their compliance with the applicable law and to state whether we have identified material misstatements. In our opinion, the directors’ report and the specific information presented in the report on corporate governance and ownership structure referred to above are consistent with the company’s separate financial statements at 31 December 2018 and have been prepared in compliance with the applicable law. With reference to the above statement required by article 14.2.e) of Legislative decree no. 39/10, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have nothing to report.

Rome, 28 March 2019

KPMG S.p.A.

(signed on the original)

Benedetto Gamucci Director of Audit

cover_bilancio_inglese 18mm.qxp_x27/03/1912:07Pagina1

Annual Report at December 31, 2018 GEDI Gruppo Editoriale

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