Mediaset Group

MEDIASET GROUP

Interim Report 2000

Report on operating performance for the First half of 2000

MEDIASET S.p.A. - via Paleocapa, 3 - 20121 Milano Share Capital Itl. 1,181,227,564,000 entirely paid in Registered with the Commercial Register of Milan with n. 276785 (Trib. of Milan) Fiscal Code and VAT Number: 09032310154

Interim Report 2000

Report on operating performance for the First half of 2000

THE COMPANY’S STRUCTURE

Board of Directors

Chairman (*) Fedele Confalonieri

Deputy-Chairman (*) Pier Silvio Berlusconi Managing Director (*) Giuliano Adreani

Directors Franco Amigoni Tarak Ben Ammar Marina Berlusconi Pasquale Cannatelli Enzo Concina Maurizio Costa Mauro Crippa Gilberto Doni Adriano Galliani Alfredo Messina Jan Mojto (*) Gina Nieri Roberto Ruozi (*) Claudio Sposito Michel Thoulouze

Board of Auditors

Chairman Achille Frattini

Statutory Auditors Francesco Antonio Giampaolo Riccardo Perotta

Alternate Auditors Gianfranco Polerani Francesco Vittadini

Independent Auditing Firm

Deloitte & Touche S.p.A.

(*) Members of the Executive Committee

CONTENTS

Board of Directors’ Report on the First half of 2000...... 1 General economic trends and outlook...... 5 The Mediaset Group’s financial results...... 7 Drawing up criteria...... 7 Financial results...... 7 Capital structure and balance sheet...... 14 Results of the Holding Mediaset S.p.A...... 17 Investment ...... 18 Other operations...... 19 Mediaset Group structure and activities ...... 20 Commercial TV – Italy: advertising area ...... 20 Commercial TV - Italy: broadcasting and content area ...... 22 Commercial TV – Abroad...... 33 New media and telecommunications ...... 36 The personnel ...... 40 New legislation with regard to television...... 41 Relations with the companies of the Fininvest Group and the Mediolanum Group ...... 42 Events occurred after June 30th, 2000...... 42 Expected evolution of the activities ...... 46

Independent Auditors’ Report...... 47

Consolidated Balance Sheet and Income Statement as of June 30th, 2000 ...... 51

Notes to the Consolidated Financial Statements...... 59 Structure and contents...... 61 Main variations of the consolidation area and investments made during the first half of 2000...... 61 Group’s activities and legislation...... 62 Consolidation methods ...... 63 Evaluation criteria and accounting principles ...... 63 Conversion of financial statements denominated in a non-EU currency...... 66 Other information...... 67 Comments to the main items Assets ...... 68 Liabilities...... 78 Memorandum accounts ...... 85 Income Statement ...... 88 Attachments...... 98

Interim Report 2000

Board of Directors’ Report on the First half of 2000

MEDIASET GROUP

MEDIASET GROUP Board of Directors’ Report on of the First half of 2000

Dear Shareholders, in the first six months of 2000, the Group belonging to Your Company has shown strong growth, thus validating the positive trends which had already emerged in the first three months of the year.

The sustained positive trend registered in the first half of 2000 is reflected in the following results achieved: consolidated net revenues amounted to Itl. 2,489.1 billion, a 15.0% increase against the first half of 1999 and the operating result reached Itl. 913.7 billion (against Itl. 723.8 billion in the same period of 1999), a 26.2% increase net of amortization and depreciation equal to Itl. 620.3 billion. The operating profitability therefore increased from 33.4% to 36.7%. Income before taxes and third Shareholders’ income equalled Itl. 901.5 billion against Itl. 752.8 of the first six months of 1999. The results in the first six months of 2000 included the effect of the proportional consolidation of the Epsilon Group, the Joint Ven- ture established by Mediaset and Kirch Media at the end of 1999. The effects on Mediaset Group’s margins in the period of reference were negligeable and mainly due to depreciation of the goodwill acknowledged on some activities transferred into the newly established Group. The Holding Mediaset S.p.A. has closed the period of reference with an income before taxes of Itl. 551.4 billion, after amortization and depreciation totalling Itl. 317.4 billion.

These results, which ideally extend the positive trend shown in 1999, reflect the strong decision of the Group to achieve the primary objective of profitability of its core business, an unavoidable condition to compete as leader in the three fundamental development drives which shall commit the Group in the upcoming years: contents, technology and international expansion.

The main reasons which supported the excellent performance of the first half of 2000 are the strong growth achieved in TV advertising collection as well as the continuous focus on operating cost monitoring and reduction. These two elements can be ensured through an improved co-ordination of advertising and broadcasting activities, consistently with the new Group’s organization.

The Italian national TV advertising market continues to show an extraordinary growth, thus benefiting, more than all the other traditional media (all also showing growth), from the huge investments planned for the TV sector by telephone operators and by the operators offering access and services linked with the Internet. With respect to this overall growth, which also involved other sectors such as the financial/insurance sectors and the manufacturers of consumer goods, the strong demand of TV spaces fostered by both the new investors and the traditional users, who offer on-line services, provides the con- firmation that television is the privileged media to offer new brands and services for its coverage and efficacy.

In addition to this, Mediaset also relies on an acknowledged ability in targetting the TV audience: in the first six months of 2000, Publitalia’80 achieved a significant increase (14.5%) in TV advertising collection towards third party customers, an excellent result which was also accompanied by the steady share rating growth. As matter of fact, the average share rating of the Mediaset channels during the day reached 43.2%, a 1.1% increase against the same period of the preceding year and despite the exclusive rights of live broadcasts of the European football Championship granted to the two main Italian competitors during the month of June.

3 In the first months of 2000, the Mediaset channels have been able to offer an extremely rich and balanced selection of programs, in which the presence of the Italian national fiction is consolidated (both in the serial version of Vivere and in the most traditional episodes reserved for the Prime Time) as well as the strong appeal of the majority of the entertainment shows. Moreover, quality formats, such as Verissimo and La macchina del tempo, which proved absolutely excellent and long-lasting brands in their respective nature, also struck the attention of the audience.

With respect to sports events, in addition to the usual events regarding the Champions League, the Me- diaset channels have also broadcast for the first time the official matches of the Italian National Under 21 Football Team, relative to the finals of the European Under 21 Championship. The excellent share ratings achieved awarded once again the well-timed choice which provided both economic and image returns. At the same time, significant operations, such as the transfer of the encoded rights of part of 2000-2001 Champions League to Stream, perfectly satisfied the objective of managing and selling self-produced contents, in order to maximize the ratio between costs and revenues, thus granting quality and high advertising appeal to the channels as well as recovering part of the original investments also through the activity of content provider for the digital pay TV and the Internet.

International expansion

In the first six months of 2000, Epsilon, the joint venture jointly owned by Mediaset and Kirch Media established with the objective of developing commercial TV activities on an international scale, started operating. The Joint Venture, established at the end of 1999, mainly operated through two pre-existing operating companies in the first months of 2000: Betafilm GmbH (rights distribution) and Publieurope In- ternational Ltd. (advertising collection on the international level). The process for the implementation of common international activities is currently focused on the production of TV and cinema contents in the context of the next two companies to be established (E-Vision and E-Motion).

The Telecinco Group, in which Mediaset owns 40% of the interest, is one of the consolidated more profitable broadcasters at the European level. In fact, in the first six months of 2000, its financial margins have steadily increased, favoured by an additional extraordinary growth of the advertising sales (+25%) and by the consolidation of the rating leadership on the commercial target to which the broadcaster ad- dresses its primary efforts.

Diversification and development

The data relative to the trend and composition of advertising investments on the TV sector, on one hand, and those relative to the share ratings of the channels, on the other, have once again confirmed the undisputed leadership of the commercial TV in Italy. The increasing penetration of the Internet and of the digital satellite Pay TV as well as the expectations linked to the introduction and availability, in the upcoming years, of the new applications and digital technological standards (wide band-width Internet, earth digital TV and UMTS) will pave the way to a potential, yet gradual change in the habits and use of the media (free TV, Internet, pay tv, pay per-view, cellular), which, as for the present time, are still strongly differentiated and complimentary for technology, access costs, interactivity level, type and content quality.

Mediaset, which fully understood the importance of this evolution, governs the businesses, which have emerged from the multimedia convergence driven by the technological evolution both through Me- diadigit S.r.l., a company established at the end of 1999, in which all activities connected to the new media have been transferred (teletext, topic-specific channels and Internet), and through an interest owned in Albacom S.p.A. (19.5%) and in the fourth mobile telephony operator, Blu S.p.A. (9%). These activities

4 provide Mediaset with a significant opportunity of growth and value creation, also granting the right integration between the Group’s core activities (development and/or adaptation of TV products destined to the different distribution platforms) and those shared with the partners of Albacom and Blu, relative to the management of fixed and mobile networks, which shall play an increasingly important role in the overall multimedia communications scenario.

In the first months of the year, Mediadigit started distributing on Stream two new topic-specific channels (Duel and Comedy Life), which add to Happy Channel (distributed by Telepiù since January 1998). By year end, the launch of a third channel is expected and, moreover, new projects are currently under way, among which that concerning the development of an international channel.

Mediadigit also includes activities relative to the vertical portal Mediaset Online and the web sites of the three channels. Mediadigit will progressively develop the Portal according to an extensive web content offering model consistent with that provided through TV, thus favouring the convergence and the cross promotion between the original TV productions and the Internet. The availability of TV contents destined to the Internet will enable Mediadigit to also develop the activity of non-exclusive content provider towards third parties and of the general Portal of Fininvest, Jumpy. With reference to the integration of the collaboration obligations underwritten by Mediaset and Jumpy during last March 2000, Mediaset Online is currently negotiating a franchising agreement with the general Portal, which should be based on a cross offering of contents and services as well as the presentation of the respective brands in order to efficiently develop and improve each other’s positioning. Additional synergies will be developed with regard to the production of original contents for the Internet sector, which could be better designed by a dedicated and jointly owned company.

GENERAL ECONOMIC TRENDS AND OUTLOOK

As of the end of June 2000, the world’s economy confirmed the expansion trend of the economic cycle. Good growth prospects have been identified in the non-EU economies, in particular the strong economic recovery in the South-East Asia regions, the increasing contribution of the non-OCDE countries to the international trade, the good recovery of Latin America, above all Brazil, and the lower level of uncer- tainty of the Japanese economy, which, however, still shows the need for structural reforms in the social security and tax systems as well as in the financial markets.

In the industrialized countries, the increase in the world’s demand should not also imply a prolonged ac- celeration of inflation, thanks to the limited restrictions of the production capacity concerning the raw material market and the bullish trend of the money market interest rates operated by the Central Banks.

The most dynamic component of the US economy is the households’ consumption expenditure, which, however, jointly with the increase of the Dollar exchange rate on the international markets registered in the first six months of 2000, contributed to an increase of the trade gap. On the supply side, there is a steady increase of manufacturing.

The EMU also shows an uptrend of the economic cycle, with a 3% growth rate confirmed by several ac- credited sources, and is mainly driven by the dynamics of investments and net exports. This growth is also accompanied by a re-configuration of the demand, which from internal and including an inventory reduction cycle has become external and export-oriented as a result of the double shock registered on the Euro exchange rate and on the Dollar denominated oil price. Additional supports to the EMU belonging economies could derive from the tax policies necessary to comply with the stability programs which each individual country has committed to, in particular with reference to the expected 2001-2002 elec- tions.

5 The Italian economy confirms its recovery sustained both by the domestic demand (in the first three months of 2000 equal to +1.1%, net of inventory, as against the last three months of 1999), and in particular by the household consumption demand, and by the positive contribution of net exports. The pro- gressive reduction of the income tax, the tax incentives for investments and the swifter capital obsoles- cence rate fostered by the technological innovation of the last years contributed to the increase of the capital goods demand. In a context characterized by increasing employment, expectations are for an increasingly sustained recovery. In fact, estimates envisage a 3% yearly growth rate of the GDP in the year 2000.

As a result of external factors, such as the joint effect of the increase of the oil-derived products and the depreciation of the Euro currency, inflation reached 2.7% in the month of June. If we can say that the Italian economy is recovering, though at a slower pace than in the other European countries, and is nar- rowing the gap, there is still the need for structural reforms of the markets, in particular of the services, which allow to shorten the growth gaps and above all the structural inflation differences which still sepa- rate Italy from the other European economies.

6 THE MEDIASET GROUP’S FINANCIAL RESULTS

Drawing up criteria

The economic and financial data shown here below refer to the first half of 2000, the first half of 1999 and as of December 31st, 1999. It should be noted that the Epsilon Group has been included in the consolidation area according to the proportional integration method. The accounting entries have been carried out so as to be comparable with those of the first half of 1999 and as of December 31st, 1999. Here below is the analysis of the main consolidated financial results relative to the first half of 2000.

Financial results

Here below is a summary of the Mediset Group of income statement:

31/12/1999 31/12/1999 Mediaset Group 30/06/2000 30/06/1999 30/06/2000 30/06/1999 (mln/Euro) (bln/Lire) (bln/Lire) (mln/Euro)

2,008.81 3,889.6 Revenues from sales and services 2,465.3 2,132.4 1,273.22 1,101.32 39.92 77.3 Other revenues and proceeds 23.8 32.0 12.29 16.53 2,048.73 3,966.9 Total net consolidated revenues 2,489.1 2,164.4 1,285.51 1,117.85 289.27 560.1 Labor cost 293.8 288.2 151.74 148.87 586.39 1,135.4 Purchases, services, sundry costs 661.3 605.0 341.52 312.47 875.66 1,695.5 Operating costs 955.1 893.2 493.26 461.34 1,173.07 2,271.4 Gross operating margin 1,534.0 1,271.2 792.25 656.51 612.88 1,186.7 Amortization, depreciation and write-downs 620.3 547.4 320.36 282.71 560.19 1,084.7 Operating income 913.7 723.8 471.89 373.80 18.59 36.0 Financial revenues / (charges) (21.8) 21.0 (11.26) 10.90 2.43 4.7 Revenues / (charges) from investments 11.6 5.3 5.99 2.72

581.21 1,125.4 Result before extraordinary items 903.5 750.1 466.62 387.42 4.91 9.5 Extraordinary and sundry revenues / (charges) (2.0) 2.7 (1.04) 1.39 586.12 1,134.9 Pre-tax result 901.5 752.8 465.58 388.81

With regard to the above shown table, it should be noted that the data of the first half of 2000 are not immediately comparable with those of the same period of reference in 1999. In fact, starting from the year 2000, the Epsilon Group, that is the group of companies in joint venture with the Kirch Group and belonging to Euroset S.a.r.l., has been included in the consolidation area according to the proportional integration method, which reflects the 50% of interest owned.

7 For a better analysis of the results, here below are described the effects on the income statement deriving from the proportional consolidation of the Epsilon Group (50%):

Mediaset Group 30/06/2000 30/06/1999 30/06/2000 30/06/1999

(consolidation of Epsilon Group) (bln/Lire) (mln/Euro)

Revenues from sales and services 52.2 - 26.96 - Other revenues and proceeds (0.2) - (0.10) - Total net consolidated revenues 52.0 - 26.86 -

Labor cost 1.8 - 0.93 - Purchases, services, sundry costs 44.6 - 23.03 - Operating costs 46.4 - 23.96 -

Gross operating margin 5.6 - 2.90 -

Amortization, depreciation and write-downs 7.9 - 4.08 - Operating income (2.3) - (1.18) -

Financial revenues / (charges) (2.1) - (1.06) - Revenues / (charges) from investments (4.4) - (2.29) -

Result before extraordinary items (8.8) - (4.53) -

Extraordinary and sundry revenues / (charges) - - Pre-tax result (8.8) - (4.53) -

It should be noted that the negative effect of the economic margins of the Mediaset Group, deriving from the 50% consolidation of the Epsilon Group, is mainly due to the depreciation of the goodwill. In fact, if we were to exclude these items, the economic impact deriving from the characteristic management of the Epsilon Group would result positive.

For a better analysis of the financial results pertaining to the Epsilon Group, refer to the specific section included in this Report, dedicated to the analysis of the Group’s main international activities.

Here below is a summary of the income statement items of the Mediaset Group without the effects deriving from the 50% proportional consolidation of the Epsilon Group:

31/12/1999 31/12/1999 Mediaset Group 30/06/2000 30/06/1999 30/06/2000 30/06/1999 (mln/Euro) (bln/Lire) (net of consolidation of Epsilon Group) (bln/Lire) (mln/Euro)

2,008.81 3,889.6 Revenues from sales and services 2,413.1 2,132.4 1,246.26 1,101.32 39.92 77.3 Other revenues and proceeds 24.0 32.0 12.39 16.53 2,048.73 3,966.9 Total net consolidated revenues 2,437.1 2,164.4 1,258.65 1,117.85 289.27 560.1 Labor cost 292.0 288.2 150.81 148.87 586.39 1,135.4 Purchases, services, sundry costs 616.7 605.0 318.49 312.47 875.66 1,695.5 Operating costs 908.7 893.2 469.30 461.34 1,173.07 2,271.4 Gross operating margin 1,528.4 1,271.2 789.35 656.51 612.88 1,186.7 Amortization, depreciation and write-downs 612.4 547.4 316.28 282.71 560.19 1,084.7 Operating income 916.0 723.8 473.07 373.80 18.59 36.0 Financial revenues / (charges) (19.7) 21.0 (10.20) 10.90 2.43 4.7 Revenues / (charges) from investments 16.0 5.3 8.28 2.72

581.21 1,125.4 Result before extraordinary items 912.3 750.1 471.15 387.42 4.91 9.5 Extraordinary and sundry revenues / (charges) (2.0) 2.7 (1.04) 1.39 586.12 1,134.9 Pre-tax result 910.3 752.8 470.11 388.81

8 The percentage incidence on the net revenues of some significant items of the income statement is broken down here below:

MEDIASET GROUP MEDIASET GROUP (net Epsilon Group)

31/12/1999 30/06/2000 30/06/1999 30/06/2000 30/06/1999

100.0% Net consolidated revenues 100.0% 100.0% 100.0% 100.0%

42.7% Operating costs 38.4% 41.3% 37.3% 41.3% 57.3% Gross operating margin 61.6% 58.7% 62.7% 58.7% 29.9% Amortization, depreciation and write-downs 24.9% 25.3% 25.1% 25.3% 27.3% Operating income 36.7% 33.4% 37.6% 33.4% 28.4% Result before extraordinary items 36.3% 34.7% 37.4% 34.7% 28.6% Pre-tax result 36.2% 34.8% 37.4% 34.8%

It should be noted that, due to the incomplete alignment between the revenues, above all those from advertising (higher in the first part of the financial year) and the operating costs (which reflect in the second part of the financial year, the start up of the activities linked with the autumn program schedule), the results of the Mediaset Group are characterized by a high level of seasonality. The consequence of this phenomenon is the higher contribution to the year end result achieved in the first months of the year. In 1999, the incidence of the gross operating margin on the net revenues totalled 58.7% as of June 30th , against a global yearly incidence of 57.3% and the incidence of the operating result was 33.4% as of June 30th, 1999 against 27.3% as of December 31st, 1999.

Here below are the single items of the Mediaset Group income statement, including the Epsilon Group, as of June 30th, 2000.

Net revenues

30/06/2000 2,489.1 The Mediaset Group consolidated net revenues registered an Itl. 324.7 billion increase in the first half of 2000 as against the same period of 30/06/1999 2,164.4 reference in 1999. This increase is mainly due to the overall growth of var. % 15.0% the revenues from TV and the 50% consolidation of the Epsilon

Group.

9 The table below shows the revenue breakdown:

31/12/1999 Billions of Lire 30/06/2000 30/06/1999

3,567.7 Revenues from ads sale 2,256.8 1,963.7 624.3 Revenues from TV sale, telepromotions, sponsoring 384.5 344.1 4,192.0 Advertising revenues - third parties 2,641.3 2,307.8

49.0 Revenues from Promoservice 15.1 23.4 177.9 Other revenues from TV activities 86.2 71.9 (615.2) Agency discounts (387.6) (338.9) 3,803.7 Total net revenues from TV activities 2,355.0 2,064.2

20.5 Revenues from new media 23.7 8.9

142.7 Total net revenues from non-TV activities 58.4 91.3

3,966.9 Total net consolidated revenues Italy 2,437.1 2,164.4

- 50% Epsilon Group revenues 63.6 - - Eliminations (11.6) -

3,966.9 Total net consolidated revenues 2,489.1 2,164.4

Advertising revenues have shown an extraordinary uptrend, beyond any initial expectation. Revenues from third party customers totalled Itl. 2,641.3 billion, an Itl. 333.5 billion increase, equal to 14.5%, as against the first half of 1999.

Revenues for the sale of commercials have registered a very high increase, going from Itl. 1,963.7 billion to Itl. 2,256.8 billion (+14.9%). Also revenues from TV sales, telepromotions and sponsorships have shown a high growth rate, going from Itl. 344.1 billion to Itl. 384.5 billion (+11.7%).

The increase of Other revenues from the TV activity is mainly due to an increase of the revenues from advertising achieved by Publitalia’80 on the Mediaset networks towards companies belonging to the Fininvest Group.

The increase of Revenues from activities linked to the new media is mainly referred to an increase in the sales of the activities started in the preceding years (Happy Channel and Mediavideo), the strong development of the advertising collection activities linked to the Internet (Mediaset Online and third party portals under concessions) and revenues acknowledged by Stream with regard to the distribution of the two topic-specific channels (Duel and Comedy Life), started in April. The decrease of the Revenues deriving from non-TV activities is the result of the following factors: n lack, during the first half of 2000, of the revenues from the recording business, as a result of the transfer of the recording division of RTI Music S.r.l. and the interest owned in PDU S.A. as of Octo- ber 1999; in the first half of 1999, revenues from the recording business equalled Itl. 23.3 billion; n decrease of the revenues from the sale of the broadcasting equipment as a result of the transfer to third parties of the division of the subsidiary Elettronica Industriale S.p.A. relative to the equipment design and development as of last January 2000; in the first half of 1999, revenues from this activity equalled Itl. 13.7 billion; n increase (Itl. 5.3 billion) of Publitalia’80 S.p.A.’s revenues relative to the collection of static advertising, also as a result of the acquisition of new concessions in the Italian stadiums and the sale of spon- sorhips of the Italian National Football Team.

10 The Mediaset Group portion (50%) relative to the Revenues from the Epsilon Group can be summarized as described below: n revenues deriving from the international sale of TV rights, generated by Betafilm GmbH for a total amount of Itl. 35.2 billion; n revenues deriving from the sale of advertising space under concession or sub-concessions generated by Publieurope International Ltd. and revenues resulting from the activity of Publieuros Ltd., the holding of the advertising division of the Epsilon Group, for a total amount of Itl. 26.4 billion.

The eliminations refer to the services rendered and invoiced among the companies belonging to the Me- diaset Group and the companies belonging Epsilon Group.

Operating costs

30/06/2000 955.1 The Mediaset Group operating costs increased by Itl. 61.9 billion in the first half of 2000; this increase includes Itl. 46.4 billion relative to the 30/06/1999 893.2 proportional consolidation of the Epsilon Group. var. % 6.9% The main components of the operating costs are represented by the

cost of labor and purchases, services and sundry costs and are summarized below.

Cost of labour

30/06/2000 293.8 The cost of labour of the Mediaset Group, net of the portion relative to the companies of the Epsilon Group (Itl.1.8 billion) and the cost of 30/06/1999 288.2 the first six months of 1999 relative to the activities transferred (re- var. % 1.9% cording and the division of Elettronica Industriale S.p.A.) showed a

3.9% increase.

Purchases, services and sundry costs

30/06/2000 661.3 Purchases, services and sundry costs showed an Itl. 56.3 billion increase in the first half of 2000, which was mainly due to the growth 30/06/1999 605.0 of TV costs and the effect of the 50% consolidation of the Epsilon var. % 9.3% Group, as broken down below:

31/12/1999 Billions of Lire 30/06/2000 30/06/1999

158.7 Commercial costs 82.0 77.3 650.8 Costs of the program schedule 379.9 351.8 55.7 Costs of broadcasting 31.4 29.4 140.0 Costs for the organization and other costs 66.7 72.6 1,005.2 Total TV costs 560.0 531.1

13.3 New media 13.9 5.3 116.9 Other non-TV costs 42.8 68.6

1,135.4 Purchases, services and sundry costs 616.7 605.0

- 50% Epsilon Group costs 56.2 - - Eliminations (11.6) -

1,135.4 Total purchases, services and sundry costs 661.3 605.0

11 The increase of TV costs was mainly due to the increase of the costs for the TV program schedule: contributions due to SIAE (which are variable as a function of the sales from advertising), the allowances and the costs linked to the compliance with the regulations referring to fair compensation and the new fee due for the TV concession (which is measured, starting from 2000, as a function of the sales achieved by R.T.I. S.p.A. in the previous year) have all increased; net of these components, the TV program schedule costs increased by 1.5%.

The increase of the costs from the new media essentially reflected the start up of the activities linked to the Internet ( variable costs with respect to the advertising collection activity and the costs for the development of the Mediaset Online portal) and the costs for the development of the two new topic-specific channels launched last April 2000.

The decrease of the Other non-TV costs was fundamentally impacted by the transfer of the recording activity and the division of Elettronica Industriale; these effects were partially compensated by the increase of the variable costs linked to the activity of sale of static advertising.

The Mediaset Group portion (50%) relative to the Costs from the Epsilon Group is broken down below: n costs linked to the international distribution of rights, borne by Betafilm, for a total amount of Itl. 28.1 billion; this component represents the portion held by the owner of the right, whose distribution is looked after by Betafilm; n costs relative to the advertising concessions, borne by Publieurope International Ltd. for a total amount of Itl.20 billion; n other operating costs relative to the companies belonging to the Epsilon Group for a total amount of Itl. 8.1 billion.

Gross operating margin

30/06/2000 1,534.0 The gross operating margin showed an Itl. 262.8 billion increase in the first half of 2000 as against the same period of reference in 1999. Net 30/06/1999 1,271.2 of the effect deriving from the 50% consolidation of the Epsilon var. % 20.7% Group, the variation would be equal to Itl 257.2 billion.

Operating result

30/06/2000 913.7 The operating result of the first half of 2000 showed an Itl. 189.9 billion increase against the same period of reference of 1999. 30/06/1999 723.8 Net of the effect deriving from the 50% consolidation of the Epsilon var. % 26.2% Group, the Mediaset Group operating result would show an Itl. 192.2

billion increase, that is, a 26.6% growth. In comparable terms, the incidence on the net revenues showed a significant increase reaching a peak of 37.6% (33.4% as of the end of the first half of 1999). As already anticipated, the evaluation of the end-of-period results should be considered taking into account the effect deriving from the seasonality of the Group’s results, which imply better and stronger performances in the first part of the financial year.

12 Financial revenues / (charges)

30/06/2000 (21.8) This item’s trend inversion was mainly due to the effect of the management of the exchange rates, which presented a net negative bal- 30/06/1999 21.0 ance of Itl. 15.8 billion, of which 12.0 billion unachieved and relative to var. mld. (42.8) the increase (as of the end-of-period exchange rate) of the currency

rates used in the transactions having a multi-year duration, whose financial impact will become evident in the subsequent years. This item’s balance also included the write-down of treasury shares, equal to Itl. 11.0 billion, which was carried out in order to align the book value with the market value as of end of June 2000.

Revenues / (charges) from investments

30/06/2000 11.6 This item included the result of the interests owned and reflected the financial impact of the equity evaluation of Albacom S.p.A. (owned 30/06/1999 5.3 with a 19.5% interest), of the companies operating in the Spanish TV var. mld. 6.3 sector belonging to the so-called “Gruppo Telecinco" (owned with a

40% interest) and, starting from 2000, the portion of the Mediaset Group (50%) relative to the result deriving from the interest owned by the Epsilon Group in PKS (49%). The balance of Itl. 11.6 billion can be summarized as follows:

n net revenues for Itl 54.7 billion relative to the equity increase of Telecinco (Itl.74.2 billion representing the share’s result and itl. 19.5 billion relative to the depreciation of the goodwill);

n net charges for Itl. 37.3 billion relative to Albacom (Itl.35.2 billion representing the share’s result and Itl. 2.1 billion relative to the depreciation of the goodwill);

n Itl. 0.1 billion write-down of RTI Music Espana;

n Itl. 1.2 billion to cover the losses of Blu S.p.A.;

n Itl. 4.5 billion relative to the charge for the equity evaluation of the PKS/SAT1 Group.

Result before taxes

30/06/2000 901.5 The increase of the result before taxes was equal to 19.8% and the incidence with respect to net revenues increased from 34.8% to 30/06/1999 752.8 36.2%. var. % 19.8% Net of the effect deriving from the 50% consolidation of the Epsilon

Group, the variation of the first half of 2000 as against the same period of reference in 1999 was equal to Itl. 157.5 billion, a 20.9% increase.

Income tax allowances

In compliance with the facility provided for in Art. 81, sub-section 7, of the Regulation approved through CONSOB resolution n. 11971 of May 14th, 1999 and subsequent amendments, the result has been presented before taxes, and, therefore, active and passive deferred taxation deriving from the application of the new accounting principle relative to the income tax, has not been included.

13 Capital structure and balance sheet

Below is a summary of the balance sheet items of the Mediaset Group:

31/12/1999 31-dic-99 Mediaset Group 30/06/2000 30/06/1999 30/06/2000 30/06/1999 (mln/Euro) (bln/Lire) (bln/Lire) (mln/Euro)

1,725.90 3,341.8 TV rights 3,495.1 3,441.5 1,805.07 1,777.39 398.11 770.8 Other intangible/tangible fixed assets 937.7 794.0 484.26 410.07 545.33 1,055.9 Investments and financial fixed assets 939.0 694.4 484.94 358.62 (584.58) (1,131.9) Net working capital and other assets/liabilities (579.7) (777.3) (299.39) (401.42) (80.77) (156.4) Employee severance indemnity fund (158.6) (148.0) (81.91) (76.44) 2,003.99 3,880.2 Net invested capital 4,633.5 4,004.6 2,392.97 2,068.22

175.51 339.9 Net financial position 74.3 306.9 38.40 158.52

2,179.50 4,220.1 Group's and Third Shareholders' equity 4,707.8 4,311.5 2,431.37 2,226.74

Below are the balance sheet effects deriving from the 50% proportional consolidation of the Epsilon Group:

Mediaset Group 30/06/2000 30/06/1999 30/06/2000 30/06/1999 (consoidation of Epsilon Group) (bln/Lire) (mln/Euro)

TV rights 15.1 - 7.80 - Other intangible/tangible fixed assets 130.1 - 67.19 - Investments and financial fixed assets (115.8) - (59.81) - Net working capital and other assets/liabilities (43.8) - (22.62) - Employee severance indemnity fund - - - - Net invested capital (14.4) - (7.44) -

Net financial position 5.2 - 2.69 -

Group's and Third Shareholders' equity (9.2) - (4.75) -

14 For a comparable analysis of the data of the first six months of 2000 as against those of the same period of 1999, here below is a summary of the balance sheet and the cash flow of the Mediaset Group excluding the effects deriving from the 50% consolidation of the Epsilon Group:

31/12/1999 31/12/1999 Mediaset Group 30/06/2000 30/06/1999 30/06/2000 30/06/1999 (mln/Euro) (bln/Lire) (net of consolidation of Epsilon Group) (bln/Lire) (mln/Euro)

1,725.90 3,341.8 TV rights 3,480.0 3,441.5 1,797.27 1,777.39 398.11 770.8 Other intangible/tangible fixed assets 807.6 794.0 417.07 410.07 545.33 1,055.9 Investments and financial fixed assets 1,054.8 694.4 544.75 358.62 (584.58) (1,131.9) Net working capital and other assets/liabilities (535.9) (777.3) (276.77) (401.42) (80.77) (156.4) Employee severance indemnity fund (158.6) (148.0) (81.91) (76.44) 2,003.99 3,880.2 Net invested capital 4,647.9 4,004.6 2,400.41 2,068.22

175.51 339.9 Net financial position 69.1 306.9 35.71 158.52

2,179.50 4,220.1 Group's and Third Shareholders' equity 4,717.0 4,311.5 2,436.12 2,226.74

31/12/1999 31/12/1999 Sources and utilization 30/06/2000 30/06/1999 30/06/2000 30/06/1999 (mln/Euro) (bln/Lire) (net of consolidation of Epsilon Group) (bln/Lire) (mln/Euro)

950.44 1,840.3 Operating cash flow 1,519.8 1,315.0 784.91 679.14

(1,384.92) (2,681.6) Total investments in: (749.6) (1,765.4) (387.13) (911.76) (932.82) (1,806.2) TV rights (682.0) (1,350.0) (352.22) (697.22) (394.26) (763.4) interests (5.4) (358.4) (2.79) (185.10) (16.42) (31.8) intangible fixed assets (2.5) (17.0) (1.29) (8.78) (41.42) (80.2) tangible fixed assets (59.7) (40.0) (30.83) (20.66)

1.96 3.8 Capital increases 5.2 - 2.69 -

(167.07) (323.5) Dividends distributed (418.6) (323.5) (216.19) (167.07)

422.15 817.4 Other currency variations (627.6) 397.3 (324.08) 205.19 (177.44) (343.6) Net cash flow (270.8) (376.6) (139.80) (194.50)

Here below are the comments relative to the main items and variations against December 31st, 1999.

The analysis is carried out with reference to the Mediaset Group including the results of the first half of 2000 relative to the Epsilon Group.

Net invested capital

30/06/2000 4,633.5 The most important item of the invested capital of the Mediaset Group is the TV rights which showed an Itl. 153.3 billion increase 31/12/1999 3,880.2 against December 31st, 1999. var. mld. 753.3 This increase was mainly due to the investments made in the period of

reference (Itl. 682.0 billion) and reflected the different distribution of the investments over the year: more concentrated in the first months as compared to the corresponding amortization portions. The increase of the other intangible and tangible fixed assets equal to Itl. 166.9 billion was mainly due to the consolidation net differences which generated as a result of the consolidation of the Epsilon Group. The investments and financial fixed assets showed an Itl. 116.9 billion decrease against December 31st, 1999 and this was mainly due to the variations listed below: n an Itl. 10.4 billion net decrease as a result of the equity evalua- tions;

15 n Itl. 5.4 billion in new interest acquisitions;

n transfer of Fivefactor S.p.A. (Itl. 2.1 billion);

n an Itl. 379.7 billion decrease as a result of the proportional consolidation of the interest held in Euroset S.a.r.l., a company consolidated according to the costing method as of December 31st, 1999 (this company’s interest value was replaced with the assets and liabilities of the corresponding subsidiaries);

n an Itl. 268.6 billion increase as a result of the proportional consolidation of the interest owned in the Epsilon Group, evaluated according to the equity method (PKS) and costing method (New Re- gency).

Group’s Shareholders’ and Third Shareholders’ equity

30/06/2000 4,707.8 The Group’s Shareholders’ equity, net of the effect deriving from the 50% consolidation of the Epsilon Group, equalled Itl. 4.717,0 billion. 31/12/1999 4,220.1 The increase as against December 31st, 1999 was due to the first half’s var. mld. 487.7 gross result, net of the withdrawal carried out for the distribution of

dividends.

Net financial position

30/06/2000 74.3 The level of liquidity, net of the effect deriving from the 50% consolidation of the Epsilon Group, was equal to Itl. 69.1 billion. 31/12/1999 339.9 The liquidity decrease against December 31st, 1999 (equal to Itl. 270.8 var. mld. (265.6) billion, net of the effects of the consolidation of the Epsilon Group), despite the significant cash flow produced by the current management, should be evaluated in relation to the seasonality characteristic of some cost items (dividends for a total amount of Itl. 418.6 billion and taxes for approximately Itl. 428.0 billion).

16 RESULTS OF THE HOLDING MEDIASET S.P.A.

During the first half of 2000, Mediaset S.p.A. has registered a pre-tax income of Itl. 551.4 billion, after amortization and depreciation totalling Itl. 317.4 billion.

31/12/1999 31/12/1999 Financial results 30/06/2000 30/06/1999 30/06/2000 30/06/1999 (mln./Euro) (bln./Lire) (bln./Lire) (mln./Euro)

509.94 987.4 Total net operating income 412.2 467.3 212.88 241.36 405.21 784.6 Amortization, depreciation and write-downs 317.4 386.6 163.93 199.66 60.68 117.5 Other operating costs 49.2 56.3 25.39 29.08 465.89 902.1 Total operating costs 366.6 442.9 189.32 228.74 44.05 85.3 Operating result 45.6 24.4 23.56 12.62

136.14 263.6 Revenues / (charges) from investments 512.8 145.3 264.84 75.04 1.96 3.8 Financial revenues / (charges) (6.0) 2.8 (3.07) 1.45 138.10 267.4 Total financial revenues / (charges) 506.8 148.1 261.77 76.49 Extraordinary and sundry 12.50 24.2 revenues/(charges) (1.0) 2.1 (0.54) 1.10 194.65 376.9 Pre-tax result 551.4 174.7 284.79 90.21

Operating revenues, amounting to Itl. 412.2 billion, mainly included revenues from lease of rights to Mediatrade S.p.A. The decrease equal to Itl. 55.1 billion (as of June 30th, 1999 they amounted to Itl. 467.3 billion) was the result of the reorganization process of the Italian Commercial Television area, which started in the first half of 1999 and which involved a gradual reduction of the activity of rights acquisition and sale by the Holding.

Operating costs decreased from Itl. 442.9 billion in the first half of 1999 to Itl. 366.6 billion in the first half of 2000. This Itl. 76.3 billion decrease was mainly due to the considerable reduction of intangible assets amortization, as a result of the decrease registered in the rights ownership. The Other operating costs also decreased, though to a more limited extent, as a result of the reduction of the costs for services and for the personnel.

The lower reduction of the operating revenues as compared to the operating costs generated the increase of the operating result (which increased from Itl. 24.4 billion in the first half of 1999 to Itl. 45.6 billion in the first half of 2000).

The overall financial result showed a significant increase, going from Itl.148.1 billion in the first half of 1999 to Itl. 506.8 billion in the same period of reference of 2000, thanks to the increase of the dividends received by subsidiaries.

This variation also generated the considerable increase in the pre-tax result, which increased from Itl. 174.7 billion as of June 30th, 1999 to Itl. 551.4 billion as of June 30th, 2000.

31/12/1999 31/12/1999 Balance Sheet - summary 30/06/2000 30/06/1999 30/06/2000 30/06/1999 (mln./Euro) (bln./Lire) (bln./Lire) (mln./Euro)

861.55 1,668.2 TV rights 1,406.3 1,983.4 726.29 1,024.34 81.14 157.1 Other intangible/tangible fixed assets 123.7 202.4 63.89 104.53 930.50 1,801.7 Investments and other financial fixed assets 1,785.2 1,164.2 921.98 601.26 93.58 181.2 Net working capital and other assets/liabilities (77.4) 290.9 (39.92) 150.23 (5.11) (9.9) Employee severance indemnity fund (6.2) (9.9) (3.23) (5.11) 1,961.66 3,798.3 Net invested capital 3,231.6 3,631.0 1,669.01 1,875.25 (240.20) (465.1) Net financial position 239.6 (379.8) 123.74 (196.15)

1,721.46 3,333.2 Shareholders' equity 3,471.2 3,251.2 1,792.75 1,679.10

17 The most important item of the net invested capital of the Holding is represented by the investments, which, as of June 30th, 2000, were equal to Itl. 1,785.2 billion. The decrease against December 31st, 1999, equal to Itl. 1,801.7 billion, was mainly due to the Itl. 14.2 billion write-down of the interest held in Alba- com S.p.A. and to the transfer of the interest in Fivefactor S.p.A. (interest held: 10%) for a total amount of Itl. 2.1 billion.

TV rights also represented a significant element of the net invested capital. However, against December 31st, 1999, they decreased by Itl. 261.9 billion. This decrease was mainly due to the net reduction of the investments during the first half of 2000, as already previously explained.

The net financial position showed a significant improvement, increasing from a deficit of Itl. 465.1 billion as of December 31st, 1999 to a positive balance of Itl. 239.6 billion as of June 30th, 2000. This increase was particularly influenced by the already mentioned revenues from the collection of the dividends by the subsidiaries, as well as by the cash flow generated by the management with respect to the financial charge relative to the payment of the dividends equal to Itl. 418.6 billion.

The net equity showed an Itl. 138.0 billion increase against December 31st, 1999, due to the balance between the half-year gross result and the withdrawal for the dividend distribution to the Shareholders carried out last May 2000.

INVESTMENTS n In the corporate restructuring process and in the re-organization process of the activities linked to the core business, the following should be noted:

– as of January 1st, 2000, Elettronica Industriale S.p.A., a subsidiary of R.T.I. S.p.A., acquired a 30% interest in Data Media Technology – DMT S.r.l., a company to which it simultaneously transferred the corporate division, including 113 employees, specialized in the design and assembly of TV broadcasting equipment for a total amount of Itl. 300 million. Elettronica Industriale S.p.A. keeps the design activity and maintenance of the TV broadcasting network (in relation to which it relies on an undisputed know-how) and the acquisition activity on behalf of R.T.I. in relation to the equipment necessary to further develop the network;

– as of January 25th, 2000, the Shareholders’ Meeting of Picienne Italia S.p.A. approved the company’s final financial statements for its liquidation. The company’s paid-in capital has been reimbursed pro-quota to all shareholders;

– as of March 8th, 2000, the holding Mediaset S.p.A. transferred to third parties its 10% interest in Fivefactor S.p.A. n With regard to the activities linked to the new media, the following corporate operations concerning Mediadigit S.r.l. should be noted:

– as of January 14th, 2000, the holding Mediaset Investment S.a.r.l. underwrote a capital increase from Itl. 20 million to Itl. 20 billion (paid-in for a total amount of Itl. 11 billion) aimed at purchas- ing, on the side of Mediadigit S.r.l. from R.T.I. S.p.A., the division of the topic-specific channel activities of Happy Channel and of the Internet Mediaset Online site;

– as of January 25th, 2000, Mediadigit S.r.l. acquired a 10% interest in Class Financial Network S.p.A., for a total value of Itl. 600 million. Class Financial Network S.p.A., a company established by Class Editori S.p.A., produces CFN, a topic-specific channel dedicated to economic-financial information, which is distributed by Stream since April 2000.

18 th n As of April 28 , 2000, Mediaset Investment S.a.r.l. participated in the establishment of TV Breizh S.A. by underwriting a 13% interest for a total value of Itl. 3.8 billion. The company, which includes the Groups TFI, Artemis and News International among its main Shareholders, will develop a regional TV channel in Breton destined to the distribution on the main satellite platforms and on the wired French channels.

OTHER OPERATIONS

Employee Stock Option Plan

As of June 28th, 2000, the capital increase of Mediaset S.p.A. resolved upon by the Board of Directors on May 15th, 2000 upon delegation of the Shareholders’ Meetings of May 19th, 1998 and April 20th, 2000, was underwritten and paid in. This operation, which increased the company’s capital from Itl. 1,180,320,964,000 to Itl 1,181,227,564,000, has been carried out through a paid-in capital increase of Itl. 151.7 million, issuance of n. 151.700 ordinary shares with a nominal value of Itl. 1,000 each at the price of Itl. 34,431, and a free increase of capital equal to Itl. 754.9 million, issuance of n. 754,900 of ordinary shares through the utilization of the 1999 income.

New Organization Chart

As of May 4th, 2000, the Board of Directors of Mediaset S.p.A., elected by the Shareholders’ Meeting of April 20th, 2000, resolved upon the question of appointments, assignments and power proxies. The new re-organization of the top management of the Mediaset Group includes the appointment of Vice- President to Mr. Pier Silvio Berlusconi reporting to the President Mr. Fedele Confalonieri, who holds all powers concerning both the ordinary and extraordinary management. The Board appointed Giuliano An- dreani Director with the responsibility of co-ordinating Italian Operations in order to ensure the necessary synergies and integrations between R.T.I. S.p.A. and Publitalia’80 S.p.A.

19 MEDIASET GROUP STRUCTURE AND ACTIVITIES

The activity of the Mediaset Group is organized as described in the tables below:

MEDIASET GROUP

COMMERCIAL TELEVISION NEW MEDIA AND TLC

Italy Abroad

Advertising Broadcasting and contents Epsilon Group New media

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

Commercial TV - Italy: advertising area

The revenues of the Mediaset Group are mainly generated from the sale of TV advertising on the Media- set networks, of which Publitalia’80 S.p.A. has an exclusive concession.

The table below shows Publitalia’80 S.p.A.’s turnover breakdown:

31/12/1999 Billions of Lire 30/06/2000 30/06/1999

4,192.0 Advertising revenues -third parties 2,641.3 2,307.8 53.9 Advertising revenues- Finivest Group and Mediolanum Group 49.0 25.4 10.6 Advertising revenues - Promoservice 2.6 6.0 1.5 Advertising revenues - other Group's companies - 1.4 4,258.0 TV advertising revenues - Publitalia '80 S.p.A. 2,692.9 2,340.6

Also in the first half of 2000, Publitalia'80 S.p.A. confirms its market leadership with revenues from TV advertising in the order of Itl. 2,692.9 billion, which, against Itl. 2,340.6 billion of the same period of reference of 1999, showed a 15.1% increase. This result was mainly obtained through a focused price pol- icy and an increasingly effective advertisement positioning.

20 Here below is a summary relative to advertising collection of the so-called Classical Area during the first half of 2000 with a comparison relative to the 1999 half-year data:

Media 1° half-year 2000 1° half-year 1999 Variation L./bln % L./bln % %

Dailies 1,660.4 21.0% 1,406.6 21.0% 18.0% Magazines 1,117.2 14.1% 1,002.5 15.0% 11.4% Television (*) 4,570.9 58.0% 3,865.0 57.7% 18.3% Radio 358.4 4.5% 260.6 3.9% 37.5% Billposting 193.2 2.4% 160.5 2.4% 20.4%

Total market 7,900.1 100.0% 6,695.2 100.0% 18.0%

(*) Television '99 comparable values 4,520.9 3,865.0 17.0% Source: Nielsen Adex - net values

The first half of 2000 confirmed once again the significant increase in the advertising market showing an 18.0% increase against the same period of reference of 1999. The positive trend is particularly interesting in the light of the already excellent 1999 results.

All the media of the Classical Area have registered significant increases.

Television confirms once again to be the main media, even though the percentage increase as against the 1999 data also shows that radio, bill-posting and press have achieved higher performances thanks to the wider space availability.

With regard to TV, which included for the first time in the first half of 2000 the revelation of MTV, it should be noted that, net of the same, a similar growth equal to 17% has been registered in 2000 as compared to the 1999 data. This growth was characterized by the excellent performance of Mediaset (over 15%) as well as by a significant increase of RAI entirely due to the extraordinary event of the Euro- pean football Championships of last June.

The high percentage increase registered in the radio sector (+37.5%) was favoured by the considerable increase in the number of the commercial radios (+58,1%). This growth does not only reflect the actual revitalization of the radio itself, but also the introduction of new broadcasters (Rai Radio 3, Radio Capital, One-o-One Network and Radio 24).

The press result (+15.3%) was influenced by the massive growth in the number of dailies (+18.0%), while the increase in the number of magazines is more limited (+11.4%).

The analysis of the different sectors confirms the trends, which have already been identified in the last years: n the companies operating in the high-technology sector continue to invest massively; in particular the sector of telecommunications and information technology (+107%) ranks first in the amount of investments made. Companies operating in the Internet sector also continue to invest massively and, with regard to this, television is the media mostly benefiting from this, because it is the only media which can guarantee an overall coverage for campaigns aimed at re-enforcing the new media product diffusion;

21 n the highest increases are registered by investments in advertising relative to the traditional sectors which are less inclined towards advertising. Among which there are the banking and insurance sector (+115%) and the sports and entertainment sector (+143%); n Investments continue to grow also in the sector of durables, because companies operating in this industry intend to validate the quality of their brand products against minor brands and private labels.

Publitalia’80 has also an exclusive concession for the sale of advertising relative to the Mediaset Group activities linked to the new media: n Mediavideo, which in the first half of 2000 generated revenues for approximately Itl. 4 billion; n Internet (Mediaset Online and third party sites) which in the first half of 2000 generated revenues for approximately Itl. 10 billion. The advertising collection on behalf of the horizontal portal of the Finin- vest Group, Jumpy, of which Publitalia purchased the exclusive concession at the beginning of this year, also contributed to the achievement of this result.

International advertising

Starting from 2000, the international advertising activity of the Mediaset Group is looked after by the European joint-venture Epsilon, through the companies Publieuros Ltd. and Publieurope International Ltd.

Publieuros Ltd., established in 1999, started its operations in the first months of 2000, with particular focus on the activity of promotion and marketing aimed at the monitoring the advertising investment strategies of the European multinational groups.

Publieurope International Ltd. carries out advertising activities under sub-concession, by selling space on behalf of the national space brokers of the different countries.

The results from this activity during the first half of 2000 are summarized in the section dedicated to the Epsilon Group.

Commercial TV – Italy: broadcasting and content area

The sector called “Broadcasting and content” is managed by R.T.I. S.p.A. which, both directly or through its subsidiaries, controls the activity areas listed below: n management of the TV networks and preparation of the TV program schedules; n production of TV programs; n technology for the production of the TV programs; n acquisition and management of TV rights; n management of the broadcasting network; n music editions.

Management of the TV channels and production of the TV program schedules

During the first half of 2000, each channel broadcasted 4,368 hours of programs for a total amount of 13,104 hours, of which 6,309 hours were relative to original self-produced programs.

22 The following table shows the breakdown of the program hours broadcast during the first half of 2000 per channel and type and divided by original self-produced productions and rights:

Description Canale 5 Italia 1 Retequattro Totale Mediaset

Films 218 5.0% 375 8.6% 1,520 34.8% 2,113 16.1% Movies 244 5.6% 78 1.8% 39 0.9% 361 2.8% Miniseries 59 1.4% 15 0.3% 45 1.0% 119 0.9% Telefilm 538 12.3% 1,349 30.9% 191 4.4% 2,078 15.9% Sit-com 146 3.3% 332 7.6% - 0.0% 478 3.6% Soap opera 75 1.7% - 0.0% 219 5.0% 294 2.2% Telenovelas - 0.0% - 0.0% 595 13.6% 595 4.5% Cartoons 41 0.9% 716 16.4% - 0.0% 757 5.8%

Rights 1,321 30.2% 2,865 65.6% 2,609 59.7% 6,795 51.9%

Documentaries - 0.0% 1 0.0% - 0.0% 1 0.0% News 1,399 32.0% 424 9.7% 698 16.0% 2,521 19.2% Sport 28 0.6% 205 4.7% 16 0.4% 249 1.9% Quiz 210 4.8% 110 2.5% 237 5.4% 557 4.3% Variety 1,289 29.5% 594 13.6% 548 12.5% 2,431 18.6% Music 4 0.1% 149 3.4% 88 2.0% 241 1.8% Soap operas 49 1.1% - 0.0% - 0.0% 49 0.4% TV sales 68 1.6% 20 0.5% 172 3.9% 260 2.0%

Productions 3,047 69.8% 1,503 34.4% 1,759 40.3% 6,309 48.1%

Total 4,368 100.0% 4,368 100.0% 4,368 100.0% 13,104 100.0%

In the first six months of the year, the Mediaset networks have confirmed the excellent indications identified during the first quarter: the result of 43.2% reached overall in the 24 hours represents the best result ever achieved since 1995, with a 1% increase against the same period of reference in 1999. Here below is a table showing the situation over the 24 hours:

Diff. Vs. Total day 1° half-year 2000 1° half-year 1999 I° half-year 1999 Mediaset Networks 43.2% 42.1% 1.1% RAI Networks 47.5% 48.2% -0.7% Others 9.3% 9.7% -0.4%

Total 100.0% 100.0%

Despite the fact that the 2000 data are influenced by a very significant event such as the European Foot- ball Championships (broadcast on the RAI networks), Mediaset has succeeded in nevertheless obtaining an improvement against 1999 and eroding share rating from its direct competitor, thanks to the excellent results of the first five months of the year. In fact, from January until the beginning of this great sports event the Mediaset networks had been able to total 43.4% of share on average against 41.8% of the preceding year.

The most important increase referred to the Day Time (+1,4% of share), but also the Prime Time improved as compared to last year (+0,2 %).

The good results achieved by Mediaset are the combination of the excellent performance of Canale 5, which increased from 20.5% of share in 1999 to 22.0% in 2000 (+1.5%). The reduction in the share registered by the RAI networks is mainly due to RAI2 whose share decreased by 1%.

23 Here below is an analysis relative to the share of each of the Mediaset network.

Canale 5

The first half of 2000 has been extremely positive for Canale 5: n in January, with 22.6% of share in the 24 hours, Canale 5 wins 1.5 points against 1999, thus narrow- ing the gap towards Rai 1 to a few decimals and launching the spring season in the best way possible; n also during spring (from February to the beginning of June, with the exclusion of the Sanremo week), Canale 5 succeeded in filling the gap towards RAI1 (22.4% vs. 22.6%), thanks to a 2% increase against the same period of last year; n during the first stage of the European Football Championship, despite the excellent results achieved by the Italian National Team, Canale 5 registered 19.3% of share against 19.9% registered during the 1996 edition, when our Italian national team had been defeated in the quarterfinals.

Excluding therefore the European Championships, the half-year increase achieved by Canale 5 gains in significance.

Diff. Vs. Canale 5 - Total ratings 1° half-year 2000 1° half-year 1999 I° half-year 1999 Total day 22.0% 20.5% 1.5% Day Time 22.1% 20.4% 1.7% Prime Time 21.4% 20.5% 0.9%

In particular: n Day Time : the excellent result of the network has been obtained through the excellent results achieved in the early afternoon and first evening sections.

With regard to the early afternoon section, Beautiful and Vivere have reached record results: Beautiful with 34.9% of share improved by 3% against 1999 with more than six million viewers; the Italian soap opera reached 31.6% of share (almost 10% more than in the preceding year) with more than 4.8 million viewers.

With regard to the first evening section, the share increase of Verissimo, which for the entire first half of 2000 has continued to harvest the fruits of its autumn restyling, has peaked 25.2% of share, the highest result ever achieved by this two-year old program. In addition, it should also be added that this program registered an additional increase during the last three weeks of the spring season when it was broadcast in a prolonged version (until 7:00 p.m.), peaking also 35% of share (approximately 3 million viewers) in the minutes preceding the beginning of the new game show Chi vuol essere miliardario.

Also Passaparola has increased its share. This game show lead by Gerry Scotti has registered a 23,7% share at the end of steady increase started last fall.

Chi vuol esser miliardario is the program which has confirmed the final overtaking of Canale 5 over Rai 1 in the first evening section, with a peak of 34.6% of share equal to 3.5 million viewers (and peaks also over 5 million viewers) and a coverage exceeding 9.5 million.

The Canale 5 traditional programs confirmed their positive trend:

– Buona Domenica in the first part has registered 24.4%, a result in line with that of 1999; Buona Domenica sera has instead registered a higher result during the last seasons with a 26.6% share;

24 – Maurizio Costanzo Show in the second part of the evening with its 22.5% of share has gained 2.5 points against the same period of reference of last year, clearly overcoming Porta a porta (20.5%). n Prime Time, Striscia la notizia has closed the first half of 2000 with a 29.0% of share, above the average reached in the same period of reference of last year (27.3%), without suffering from the change-over of the anchormen of last March, the Greggio-Iacchetti pair was replaced with the Bono- lis-Laurenti pair.

During the first six months positive results have been achieved also thanks to all types of products offered:

– good results for the movie programming: in addition to the record of Tre uomini e una gamba (36.7%) broadcast on a Tuesday, Scambio di identità (28.8%) and The Peacemaker (26,0%), and also Ransom, Dante’s Peak and Il paziente inglese all above the 25.0% of share broadcast on Mon- days need to be mentioned;

– the fiction also covered a relevant part in the TV program schedule of Canale 5, thus granting excellent results through a wide variety of product types offered. First of all the TV event of Pa- dre Pio with a 36.9% of share (and the second part with a 39.7% of share and almost 11.2 million viewers); also positive was the share achieved by Le ali della vita, with Sabrina Ferilli (27.7%), of the detective fiction Operazione Odissea (26.3%) and of Valeria Medico Legale (23.7%);

– among the new productions, a special mention should be made for the new program lead by Maria De Filippi, C’è posta per te, which has shown positively both on the version broadcast on Wednesdays (from 21.0% of January to 24.4% of February), and in the version on Fridays against RAI1 fiction (25.6% against 23.5% of Linda, il brigadiere e…, and 22.1% of Una donna per amico 2). Positive also Premiata Teleditta (23.5%), the new edition of Il grande bluff (24.5%) and Bufffoni, the most recent product of the Compagnia del Bagaglino, with a satisfying 24.9% of share against the variety show Panariello on Rai 1 (Torno Sabato 31.2%). On Saturdays, Chi ha in- castrato Peter Pan (24.8%) has reached the best results over its direct competitor broadcast by Rai1 Per tutta la vita;

– Lastly, the debut of the Italian National Under 21 Football Team on the Mediaset networks should be mentioned. The two matches broadcast by Canale 5, relative to the European Cham- pionships, have obtained an average share of 28.1% with a peak reached during the finals of 34.3%.

Italia 1

The first half of 2000 also proved positive for Italia 1. Despite the superiority of Canale 5, Italia 1 data are aligned with those of the same period of reference of last year: steady in the 24 hours and slightly increasing during Day Time.

Diff. Vs. Italia 1 - Total ratings 1° half-year 2000 1° half-year 1999 I° half-year 1999 Total day 11.3% 11.3% 0.0% Day Time 11.2% 11.1% 0.1% Prime Time 11.8% 12.0% -0.2%

As the tables show, Italia 1 has only limitedly suffered from the European Football Championships, which only slightly decreased the Prime Time share as a demonstration of the fact that this network is a good

25 and healthy one in a first half of the year characterized by a more intense and efficient exploitation of the available resources (evenings dedicated to telefilms increased by 50%, from 43 to 63).

In the 24 hours, the network focused on children from 4 to 14 years old with a 25.5% of share (+2.2 points against the same period of 1999) and kept control over the young/adult audience (third network on 15/44-year olds with a 15.2% of share), thus not being absolutely impacted by the growth obtained by Canale 5 on the same target.

In particular: n Day Time: in the afternoon, above average for the network are the cartoons. In addition to the traditional I Simpson (15.8%) (replaced as of end of April with Dragon Ball with a significant 15.5% of share), the true phenomenon is represented by Pokemon , which in a very short time struck the audience’s attention with an irresistible growth from 12.6% of share in January to the extraordinary 27.4% of share of the first week of June. The power of this cartoon on the younger viewers (65.9% on 4/14 year olds and 28% on 15/19 year olds) has also attracted an older audience. In fact, in June, this cartoon peaked 26.0% of share on 20/44 year olds. Pokemon ensures visibility also to the other programs proposed by Bim Bum Bam, thus allowing the network to further capitalize on its success to the detriment of its direct competitor Solletico (16.1% vs. 10.4%).

Good results have also been achieved by the telefilms offered by Italia 1: Xena has a 16.0% of share, while Pacific Blue reaches 12.1%, improving the performance of Nash Bridges and keeping apace vis- à-vis the very strong Chi vuol essere miliardario.

With regard to productions, first of all Sarabanda should be mentioned. This program has steadily grown in the first five months of the year (from 11.9% of share in January to 17.1% of share in May), slightly slowing down in June as a result of the European Football Championships, but with an overall average of 14.5% of share (+3% against 1999), thus giving a decisive contribution also to the network’s Prime Time result. Bigodini also scored well, this is the new game show broadcast at lunch time. Despite the difficult competitive environment, dominated by the news and by Beautiful, this new production manages to ever improve its share as the increasing trend from March until June clearly shows (from 7.7% to 10.2%).

In the second part of the evening, the best results have been achieved by the already consolidated production, such as Mai dire gol on Mondays ( 14.0% of share despite the fact that this year the program could not rely on the rights on the Football League Championship), Le Iene on Tuesdays (18.2%), and Zelig on Thursdays, which showed a 14.5% of share, thus keeping apace with its direct competitor Libero on Rai 2. n Prime Time, as already mentioned, has suffered from the positive result achieved by Sarabanda, which can be estimated as 1% of share as compared to the network’s average.

The data concerning the movie programming are also satisfying with a 12.2% average share and peaks of 20.3% of share for Space Jam and 17.0% of share for Arma Letale3 and Anaconda.

With regard to the productions, good results have been achieved by Angeli (13.8%) and by Tempi Moderni (12.7%); among the new productions of the first half of 2000, Candid Angels on Wednesdays (12.3%) and, in the second part, Strano ma vero on Thursdays (11.8%) should be mentioned. The significance of the music event Festivalbar is confirmed, which starting with a 15.7% of share against the fiction Lourdes of Rai 1, reached 17.9% in the last evening of the first half of 2000. Lastly, the excellent performance of the specials should be mentioned: Galà della pubblicità with 19.5% of share and Macchemù with a 14.1% of share.

26 Also the decision of broadcasting three times in a week telefilms has brought about good results. In particular noteworthy are: Walker Texas Ranger, 10.6% on average in a difficult competitive environment as that of Saturdays; Dawson’s Creek (10.9%) which, though starting with a very low profile, progressively conquered the young public (36.8% of 15/24 year old women), benefiting from the program swap of Thursdays (10.4%) on Tuesdays (11.9%); lastly X-Files, which on Sundays reached 10.2% in a very committing evening due to the simultaneous broadcast of Un medico in famiglia.

Football also scored positively with the broadcast of the five Champions League’s matches with a 15.7% of share.

Retequattro

Diff. Vs. Retequattro - Total ratings 1° half-year 2000 1° half-year 1999 I° half-year 1999 Total day 9.9% 10.3% -0.4% Day Time 10.5% 10.8% -0.3% Prime Time 7.9% 8.4% -0.5%

In the 24 hours, despite showing higher results than Rai 3, the period’s result showed below average. However, starting from March, Retequattro has increased its share in all the different times. This has enabled Retequattro to close the second part of the first six-month period with values in line with those of the previous year, that is, 10.2% against 9.6% of the first quarter, thus demonstrating a new revitalization within the network.

In particular: n Day Time , also in this first half of 2000, the power of the traditional productions has proven winning: the evergreen Forum (20.4% of share) did not show any sign of reduction, La ruota della fortuna maintained 11.6% of share, while O.K. il prezzo è giusto showed a slight increase (9.3% vs. 8.9%), thanks to a renewed attention of the over-35 public.

Excellent are the performances of La domenica del villaggio, which has gained more than 1.5% against 1999 (16.0% vs. 14.4%) and of the Saturdays productions: Il trucco c’è which, having been broadcast one hour earlier as its autumn debut time, reached 14.2% of share (against 9.8%) while Chi c’è c’è obtained 14.5%. n Prime Time : films confirmed to be a fundamental resource: the number of evenings dedicated to the movies are increasing (105 against 101 of last year) and the cautious use of the cinema rights allows the network to reach an average of 8.0% of share. In this context, the data of Nostra Signora di Fatima (13.6%) and of L’aquila d’acciaio, Sol Levante and Chi trova un amico trova un tesoro, all above 11.0% of share need to be mentioned. In addition to the single titles, the results of the cycles of Don Camillo e Peppone (9.1%) and Ingrid ultima diva (7.7%) need also to be remembered.

Fiction also scored satisfactorily: in the first part of the year Questa casa non è un albergo against the fiction with Cochi and Renato on Rai1 has reached a remarkable 7.9%; in the second part, the miniseries Uno sparo nel buio has reached 9.9% of share.

With reference to productions, it should be noted that 9.0% of share has been achieved by Nel mondo dei dinosauri, a new chapter of the program entitled La Macchina del Tempo and an excellent 11.3% by Viva Napoli. Moreover, noteworthy are the excellent results achieved by the two Speciale Miracoli which reached an average of 13.6% of share.

27 Football also scored very well: the three matches of Champions League broadcast by Retequattro reached 11.8% of share, even better the two evenings dedicated to the European Under 21 Cham- pionships with a 19.9% on average.

Production of TV programs

In the first half of 2000, R.T.I. S.p.A. has produced approximately 43% of the TV programs broadcast by the Mediaset networks.

Numero produzioni realizzate Number of productions Description 1° half-year 2000 1° half-year 1999 Variation % Prime Day Prime Day Prime Day Total Total Total Time Time Time Time Time Time TV Programs Information and news 7 32 39 9 51 60 -22.2% -37.3% -35.0% Entertainment 37 58 95 36 42 78 2.8% 38.1% 21.8% Sport 2 11 13 3 12 15 -33.3% -8.3% -13.3% Games and quiz shows 0 7 7 0 4 4 0.0% 75.0% 75.0% Music 3 7 10 4 9 13 -25.0% -22.2% -23.1% Telefilms 0 0 0 0 0 0 0.0% 0.0% 0.0% Total 49 115 164 52 118 170 -5.8% -2.5% -3.5% Commercial programs TV sale 1 19 20 1 21 22 0.0% -9.5% -9.1% Sub-total 1 19 20 1 21 22 0.0% -9.5% -9.1% Total 50 134 184 53 139 192 -5.7% -3.6% -4.2%

The number of productions reduced as compared to the first half of 1999 (-4.2%). In particular, the Prime Time production reduced by 5.7% and Day Time productions by 3.6%. This trend was mainly the result of lower volumes in the News type of product. Among the new programs produced in the first half of 2000, the following should be noted: n for Canale 5: Chi vuol esser miliardario, A tu per Tu (lunch time), Telegatto Story in Day Time; Provini, A me gli occhi, C’è posta per te, I ragazzi irresistibili, Teleditta and the Concert of R. Martin in Prime Time; n for Italia 1 : Asterics, Bigodini, Telenauta 69 e Mai dire Maik in Day Time; Strano ma vero and Candid Angels in Prime Time; n for Retequattro: Chi c’è c’è, Madama Do Re, Sabato 4 and TV Moda in Day Time; Miracoli in Prime Time.

The hours of finished product globally produced during the first half of 2000 amounted to 3,830 against 3,963 of the same period of reference in 1999, a 3.4% decrease.

An hour swap from the News product type to the entertainment production and Talk Show type should be noted; the latter gain in hours (+15.9%) almost entirely during Day Time, while the reduction of the hours produced and dedicated to the News is equal to 34.2%. In particular, the failed production of Vi- vere Bene and Inviato Speciale needs to be mentioned, as well as the daily duration reduction of Studio Sport and the stopped broadcasting of Moby Dick in the first evening section.

It should be noted, that in Prime Time a significant increase of the hours of finished product dedicated to the sports events linked to the Champions League matches was registered, which, thanks to the new for- mula, have been played both on Tuesdays and Wednesdays.

Game Shows and Quiz Shows increased by 14.2%, thanks to the introduction of Bigodini , which started in spring 2000 on Italia 1.

28 Lastly, the hours of TG news produced in the first half of 2000 showed a reduction against 1999. In fact, last year great coverage had been dedicated to the Kosovo events.

Description Hours of finished product

1° half-year 1° half-year % inc. % inc. Variat. % 2000 1999

Entertainment and talk shows 1,573 41.1% 1,357 34.2% 15.9% Other news 632 16.5% 961 24.2% -34.2% Television news 828 21.6% 882 22.3% -6.1% Sport 193 5.0% 191 4.8% 1.0% Games and quiz shows 363 9.5% 318 8.0% 14.2% TV sales 170 4.4% 172 4.3% -1.2% Music 71 1.9% 82 2.1% -13.4%

Total 3,830 100.0% 3,963 99.9% -3.4%

Technology for the production of the TV programs

The technology for the program production (self-production) is property of R.T.I. only to a limited extent and is mainly concentrated in the subsidiary Videotime S.p.A., which ensures the maintenance and technological development of the production sites (studios, post-production and graphics, mobile productions).

In these years, the digital technology strongly fostered the TV production process, involving the production stages (in the studios), post-production and storage before the broadcasting itself.

In addition to the production and post-production stages, which have been involved in the digital transformation project of the production and assembly equipment as of the mid ‘90s, the opportunities provided by the digital technology made it possible to start, in this first half of 2000, a project of digital storage. The digitalization of the archives will enable the elimination of the manual movement of the magnetic discs, which will be stored by automated devices with subsequent classification on PC of the physical content of the archive. The production area involved in this project is that of the news programs, for which the stored images represent a fundamental element of the process. The project will be integrated with a digital office, composed of working stations connected to this archive and also interconnected, from which it shall be possible to scroll and create the various images stored with those derived from the satellite or outside shootings.

Acquisitions and management of the TV rights

Mediaset S.p.A. and its subsidiaries rely on the most important library of Italian TV rights and one of the most important also in Europe.

29 The table below provides a breakdown per type of the TV rights library as of June 30th, 2000:

Description N. of titles Episodes

Films 5,463 5,463 Telefilms 694 17,131

Telenovelas 22 3,165 Cartoons 754 21,870 Miniseries 198 690 Soap operas 19 3,315 Tv movies 2,011 2,061 Other (Musicals, homevideos, ecc.) 208 765

Total 9,369 54,460

Soap Opera e Cartoons Miniseries Telenovelas 8% 2% 0%

Telefilms 7%

Tv movies 22% Film Other (Musicals, 58,4% homevideos, ecc.) 2%

Starting from 1999, the TV rights acquisition and production activity for the Italian national TV sector are concentrated in Mediatrade S.p.A.

The Company has also the objective of managing all the Group’s TV rights, which are broken down as follows: n American majors:

The Mediaset Group stipulated multi-year agreements for the purchase of the rights with the main American producers and distributors; these agreements include purchases with an average duration of five years with the possibility of using 4 or 5 TV passages.

Currently, there are agreements with MCA-Universal, Twentieth Century Fox, Sony Columbia, Warner Bros. International, Dreamworks. n International TV producers:

The Group maintains important and consolidated relations for the purchase of rights with American and European producers, distributing greatly popular tv movies, soap operas, miniseries and tele-

30 films. The serial characteristic of these works, which are seasonally produced, makes the producer/user relationship long-lasting over time. n Italian national movie producers/distributors:

Packages composed of TV rights on movies produced by the Italian national producers are purchased (these rights together with the European product purchases make for a significant value for the compliance with the broadcasting shares established by the specific regulation on TV broadcasting) as well as packages composed of international movie rights.

In this framework, a fundamental role is played by the rights supply relation established with the af- filiate Medusa Film S.p.A., one of the leading Italian producers/distributors. n Fiction self-production:

The Mediaset Group relies on the know-how and organization to select projects and develop the production of popular tv movies and miniseries. These products are self-produced or are produced in collaboration with major international partners and, in some cases, are also exported, thus con- tributing to the coverage of the production costs.

The first half of 2000, in line with the strategy defined in 1999 aiming at strengthening contents, was characterized by an increase of the activity of fiction production.

In particular, the production was oriented towards the following: – fiction with a long serial nature; – increase of the hours produced; – gradual reduction of the average production costs.

In the first six-month period of 2000, the Mediaset Group focused on the extension of its rights library.

Among the several agreements, the following are noteworthy: n the stipulation of an exclusive three-year (2000-2002) supply agreement for the Free TV rights relative to programs dedicated to the young public (in particular cartoons) with the Saban Group, one of the leading producers and producers worldwide of children’s TV products; n the acquisition for the current TV season of successful movies, such as: L’uomo della Pioggia, Simpatici e Antipatici, Kundun, Deep Rising, in relation to the three-year (1995-1998) agreement with the affili- ate Medusa Film S.p.A.; n The start up of the production of some prestigious miniseries and TV series for their object, cast and authors, such as: Sei forte Maestro, Camici Bianchi, Il Bello delle Donne, Tequila e Bonetti, Piccolo Mondo antico, L’Impero. Particular relevance should also be given to the second series of the Italian soap opera Vivere, which keeps steady its high share; n the renewal of the rights for the most successful TV series, such as: Beautiful, Beverly Hills, Sentieri, Febbre d’Amore, Baywatch, X Files, I Simpson, Ally Mc Beal, Buffy, Dawson’s Creek, Cosby, Siska; n the acquisition, thanks to the multi-year agreements with the American Majors, of the availability of the following principal titles: Man in Black, Ipotesi di Complotto, Space Jam, Ransom-il Riscatto, L’ombra del Diavolo, Contact, Bugiardo Bugiardo, Speed 2: Senza Limiti, Peacemaker, Batman e Robin, Innamorati Cronici, Mars Attacks;

31 n the acquisition for the current TV season of tv movies such as Giuseppe di Nazareth e Maria Madda- lena and high quality miniseries, such as La Guerra del Golfo, Mama Flora, Virtual Obsession relative to the multi-year agreement with Hallmark, Giovanna D’arco e Mr. Murder, acquired from Endemol.

Management of the broadcasting network

The broadcasting distribution network owned by R.T.I. S.p.A. is managed by the subsidiary Elettronica Industriale S.p.A.. The latter ensures the development of the network, that is, its engineering network operation, the functioning and its maintenance 24 hours a day and for 365 days in a year.

The network ensures the broadcasting of the three R.T.I. S.p.A’s commercial channels (Canale 5, Italia1 and Retequattro), covering 99% of the Italian population. This infrastructure is not only used to broadcast the TV programs from the Segrate center (distribution system), but also to broadcast “semi-finished” products from any node of the network to the TV production centres in which the TV program is produced (contribution system).

The digitalization process of the broadcasting network through radio links, developed in the second half of the ‘90s, will enable R.T.I. S.p.A. to efficiently exploit a very high potential. In fact, a redundant broadcasting capacity is currently available which can be used for other business opportunities.

In the contribution system, during the first half of 2000, a fiber optic link has been completed, owned by R.T.I. S.p.A., and connecting the production centres to the distribution centres within the Milan area. In the next months, this link will allow for the installation of a highly reliable connecting system with excellent speed and data transport data capacity, well above any current technology (radio bridge). Thanks to the introduction of the fiber optics, R.T.I. S.p.A. enters a new broadcasting era. Up until today, in fact, the only alternative to the proprietary radio link network was the use of satellite transponders on a long lease. Within this year, instead, R.T.I. S.p.A. will be equipped with fiber optic connections also between Milan and Rome and also within the area of Rome among the principal production centres. Alike the Mi- lan ring, the other connections will be granted by the leased capacity on the long run from the main carrier providers operating in this market.

During the first half of 2000, important activities have been implemented, which involved the broadcasting area, which represents the starting node for the transmission of the TV signal on the Italian territory.

Since April 2000, a new automatic system of assembly and broadcasting for the topic-specific channels has been introduced, produced by the subsidiary Mediadigit S.r.l.. This plant, thanks to the digital technology, allows the broadcasting management of the three topic-specific channels (Happy Channel for Telepiù, Duel and Comedy Life for Stream) and can also manage two additional channels from a single station, thus allowing the broadcasting of a large number of channels, as it is the case with the topic- specific channels.

Downstream of this project dedicated to the topic-specific channels, a design stage was started for the automation of the assembly and broadcasting activity of the three R.T.I.. S.p.A.’s commercial channels (Canale 5, Italia1 and Retequattro), so as to transfer the advantages brought about by this technology also to the general proprietary networks. This project, which shall be completed in the next months, is mainly aimed at improving the quality of the current process, thus reducing the risk for errors linked to the various manual operations (for example, movement of the magnetic discs, sequence of the events, etc.).

32 Music editions

Despite the transfer of the corporate division of recording, RTI Music S.r.l. continues to operate in the sector of music editions linked to the TV activities of the Mediaset Group.

In relation to this activity, which includes the production, acquisition, management and protection of the copyrights of the original music products produced for the audio-visual editions, RTI Music S.r.l. has produced the soundtracks of movies and telefilms produced by Mediatrade (i.e Maestri si nasce, Padre Pio, Il IV Comandamento e Nanà) and by external producers in the first half of 2000 and, on behalf of R.T.I. S.p.A., it has soundtracked many TV productions such as La sai l’ultima, Bigodini, Bellissima, Vivere second series, etc..

RTI Music S.r.l. also supplies an important music storage service through the management of a “Music Bank”. Currently, it relies on approximately 3,000 hours of music with original recordings of proprietary works and approximately 5,000 hours of original recordings of third party works as well as market supports, which would allow it to provide a musical coverage of approximately 20,000 hours.

This activity generated in the first half of 2000, publishing returns equal to Itl. 4.0 billion , which mainly derive from telecasting rights for the exploitation of the music works used in the TV programs of the Mediaset networks.

Commercial TV - Abroad

Epsilon Group

In the first months of 2000, the Epsilon Group started operating, the jointly owned joint venture between Mediaset and Kirch Media, established in the month of October 1999.

The economic and financial position of the Epsilon Group as of June 30th, 2000 is the result of the integral consolidation of the holding Euroset S.a.r.l. and of its subsidiaries: Publieuros Ltd., Betafilm GmbH and Euroset Television S.a.r.l. (“E.T.N.”), which, in turn, includes according to the equity method, its 49% interest owned in the PKS/Sat1 Group.

The three subsidiaries are respectively responsible for the following business areas: international advertising, production and trading of contents, interest management in European TV networks.

33 Below is a summary of the income statement of the Group as of June 30th, 2000:

Epsilon Group 30/06/2000 30/06/1999 (bln./lire)

Revenues from sales and services 127.3 - Other revenues and proceeds - - Total net consolidated revenues 127.3 -

Labor cost 3.7 - Purchases, services and sundry costs 112.1 - Operating costs 115.8 -

Gross operating margin 11.5 -

Amortization, depreciation and write-downs 23.0 - Operating result (11.5) -

Financial revenues / (charges) (4.4) - Revenues / (charges) from investments (8.9) - Result before extraordinary items (24.8) -

Extraordinary and sundry revenues / (charges) - Pre-tax result (24.8) -

These results are considerably impacted by the depreciation of the goodwill, generated by the consolidation of the assets brought within during the establishment of the Group.

Net of the cost elements, the positive result generated by the characteristic management should anyway be interpreted considering the recent start up of the operating activities of the above mentioned companies within the context of the newly established joint venture.

The Epsilon Group’s consolidated net revenues equal to Itl. 127.3 billion, mainly derive from the following activities: n sale of TV rights, carried out by Betafilm GmbH for Itl. 70.3 billion. This activity involves the distribution on an international basis (with the exclusion of the Italian and German markets, which are directly managed by Mediaset and Kirch Media) of TV and cinema rights; n advertising for Itl. 52.8 billion. This activity involves the sale of TV network space and space on Euro- pean publications, (carried out Publieurope International Ltd. towards international customers resid- ing outside the Country of the media under concession) and the compensations acknowledged for the marketing and monitoring activity carried out by Publieuros Ltd. on the large European multinational investors.

The gross operating margin totalled Itl. 11.5 billion, corresponding to 9.0% of the net revenues. The most significant cost element varies as a function of the revenues and is borne both by Betafilm (for commissions acknowledged to the owners of the rights on behalf of whom it carries out the international sales operations) and by Publieurope (for commissions acknowledged to publishers or agents from whom the sub-concession for the sale of advertising space abroad is acquired). Labor costs are equal to Itl. 3.7 billion with 63 employees working in Betafilm and Publieuros.

34 The operating result has a negative result for Itl. 11.5 billion, due to the depreciation of the goodwill (18.4 billion), which mainly generated from the consolidation of Betafilm in Euroset and that relative to ETN’s establishment costs.

Revenues from investments show a negative value for Itl. 8.9 billion, corresponding to the evaluation with the equity method of the 49% interest held in the PKS Group, including the portion relative to the period’s result of the PKS/Sat 1 Group, equal to Itl. 8.8 billion and the depreciation portion of the goodwill included in the interest value held by ETN in PKS, equal to Itl. 17.7 billion.

The pre-tax result is negative by Itl. 24.8 billion as a result of the negative balance of the financial management, entirely due to the revaluation of the currency denominated payables of some Betafilm’s subsidiaries.

Here below is a summary of the Balance Sheet of the Group as of June 30th, 2000:

Epsilon Group 30/06/2000 30/06/1999 (bln./lire)

TV rights 30.2 - Other intangible/tangible fixed assets 396.5 - Investments and financial fixed assets 528.8 - Net working capital and other assets/liabilities (87.5) - Severance indemnity fund - -

868.0 - Net invested capital 10.5 - Net financial position Group's Shareholders' and Third Shareholders' equity 878.5 -

Investments and financial assets, whose balance amounts to Itl. 528.8 billion, include the 49% interest held in PKS GmbH, equal to Itl. 451.4 billion and the 3.95% interest held in Monarchy Holding BV, a company which, in turn, owns 100% of New Regency, equal to Itl. 76.8 billion.

The other net assets, equal to Itl. 396.5 billion mainly include the net consolidation differences, which are going to be amortized starting from the year 2000 over 10 years, relative to the interests held in Be- tafilm GmbH and Publieurope International Ltd.

The Epsilon Group’s Shareholders’ equity, equal to Itl. 878.5 billion, reflects, in addition to the period’s result, also the succession of the operations for the establishment and capital increase of Euroset S.a.r.l. carried out during 1999.

Telecinco Group

During the first half of 2000, the Gruppo Telecinco achieved a renewed improvement of its financial results. Operating profitability, in fact, reached 44.9%; the operating income totalled Pst. 24.6 billion (Itl. 286 billion) and grew by 71.4% against June 1999; the period’s net income registered a 67.9% increase reaching Pst.15.9 billion (Itl. 185 billion).

The excellent profitability levels reached in the first half of 2000, partially due to the sector’s typical seasonality, demonstrate the already consolidated effectiveness which advertising investors recognized to a ever more winning product over a commercial target.

35 These results have been achieved in a general, particularly favorable economic and advertising market situation. The Spanish economic system, as matter of fact, has maintained in the first months of 2000, a high growth rate, above the average registered in the EMU countries. In the first quarter of 2000, the Spanish national GDP grew by 4.1% as a result of the large increase of investments, exports improvement and, above all, the considerable growth of private consumption (+4.5% on average), which has been fostered by the growth of household’s income and the reduction of interest rates. In addition, the following should be taken into account: the significant reduction of the unemployment rate (15% in the first quarter of the year) and the recovery of the retail prices, facilitated by the Spanish domestic situation which was registering an intensive expansion stage (the average inflation growth rate of the month of May equalled 3.1%).

The positive general macro-economic situation has continued to sustain a high development rate of advertising investments reserved to the Spanish TV sector, which grew from Pst. 176.5 billion in June 1999 to Pst. 199.5 billion (approximately Itl. 2,320 billion) in June 2000, that is, almost a 14% increase.

In this scenario, Publiespana S.a.’s TV advertising collection showed a 25.3% increase, well above the market growth index, increasing from Pst. 46.3 billion as of June 1999 to Pst. 57.9 billion in the first half of 2000 (approximately Itl. 674 billion).

During the first half of 2000, excellent results have been achieved also with reference to the audience share, both in general terms and in commercial terms. In fact, respectively, on the whole day, they totalled 22.9% and 25.8% (as compared to 21% and 23,7%, respectively in the first half of 1999). In relation to the commercial target, which is of greater interest for the advertising investments, Telecinco’s performance showed clearly above that of its two main competitors Antena 3 and TVE-1, whose shares were equal to 22.8% and 19.6%, respectively. In the rationalization and development process of the Group’s activities, the following should be noted: n the start up of the operating activity of PubliMedia S.A. and Advanced Media S.A., Publiespana’s total subsidiaries. These companies are responsible for the publishing activity sector (magazine and home video) and for the advertising collection linked to the Internet; n Telecinco’s acquisition of a 29% interest in Gsmbox Spagna (a company belonging to an European portal dedicated to mobile communications with the objective of developing the e-commerce activity and becoming European leader in the sale of last generation’s telecommunications products) and of a 12.86% interest in Europortal Jumpy Espana S.A..

The evaluation according to the equity method of the interest held, including the depreciation of the goodwill for a total amount of Itl. 19.5 billion, contributed to an Itl. 54.7 billion proceed for the Mediaset Group.

New media and telecommunications n New media

This area groups together all activities which develop synergies vis-à-vis the traditional TV core business: – topic-specific channels;

– Teletext;

– Internet.

36 Starting from 2000, these activities are directly managed by Mediadigit S.r.l., a recently established company, to which all activities inherent to the topic-specific channels and the Internet have been transferred in the first months of the year.

The principal objectives are the development of contents for the different platforms (topic-specific channels), the development of services and contents for the new media, market (Internet and telecommunications) and the acquisition of interests in strongly expanding sectors. n Telecommunications

The Mediaset Group is currently operating in the telecommunications sector through a 19.5% interest held by Mediaset S.p.A. in Albacom S.p.A., a company operating in the fixed telephony sector and through a 9% interest held by Mediaset Investment S.a.r.l. in Blu S.p.A., the fourth mobile telephony operator in Italy.

New media

Topic-specific channels

This business area is characterized by interesting development prospects, which are currently fostered by the expected growth in the number of subscribers to the digital pay packages. Among the main market drivers, we should mention the reduction of the access costs relative to the “set-top box” (STB) and the antenna dish, the introduction of the single standard for the STBs and, above all, the increasing appeal of the pay offering, both in terms of the topic-specific channels and of the “premium” contents such as football, movies and sports events.

The Mediaset Group’s topic-specific channel offering, which as of end of 1999 was represented by the topic-specific channel dedicated to “smile and good mood”, Happy Channel, (distributed within Telepiù “Basic” bouquet), added two new topic-specific channels (Comedy Life and Duel TV), which, starting from April, are distributed through the digital platform of Stream. The agreement stipulated last January 2000 includes the launch of an additional topic-specific channel by the end of this year. Since April 2000, Stream also distributes CFN, a topic-specific channel dedicated to economic and financial information. This channel is produced by Class Financial Network S.p.A., whose main shareholder is the Gruppo Class Editori. Mediadigit S.r.l. acquired a 10% interest in January 2000.

In addition, a project for the development of an international channel is in progress, which should be distributed on the most important international platforms.

Revenues from the topic-specific channels registered in the first half of 2000 equalled Itl. 9.7 billion.

Teletext

The consolidation process of the teletext activities (Mediavideo and interactive service) is currently con- tinuing and thanks to the elements used for distinguishing from its main competitor (Televideo Rai), such as, easy use and the offering differentiation per channel, this activity has attracted 10 million of users per week as of the first half of 2000. The Group’s revenues from this activity were equal to Itl. 3.9 billion.

Internet

Internet represents for the Mediaset Group a great opportunity for further development, also thanks to the possibility of maximizing the collaboration opportunities with the other companies of the Fininvest Group so as to achieve and consolidate a leadership position also in this market.

37 In this scenario, Mediaset, through its sites, aims at becoming market leader in the info-tainment area, by developing the most successful TV vertical portal in Italy. In particular, already during the second half of 1999, the Mediaset Online site has always distinguished itself as the information site, if not also as the “site of the sites” of the Group’s networks (Canale 5, Italia1 and Retequattro), in which, instead, the Internet versions of the Group’s principal TV programs have concentrated.

With the aim of maximizing the collaboration opportunities provided by the Internet, during the last six- month period, Mediaset has stipulated a non-exclusive licence agreement with Jumpy over a period of five years for the rights of use of cinema and audio-visual works. This agreement allows the Finivest Group’s general portal to have access and financially exploit, through the Internet, the contents of the Mediaset Group’s library in compliance with the established specific exploitation restrictions.

In order to increase the number of page views hit on average every day, the Mediaset Online site and the three official sites of Canale 5, Italia1 and Retequattro have jointly reached and exceeded, as of the end of June 2000, the number of 440,000 daily page views.

Revenues from the Group’s Internet area were equal to Itl. 2.7 billion. To this figure, additional Itl. 7.5 billion should be added relative to other portals, such as Jumpy and Tin.it, of which Publitalia’80 S.p.A. owns the concessions for the sale of the advertising spaces.

Telecommunications

In the telecommunications sector, the drive to convergence and integration of the traditional voice service with the data transmission service continues. This phenomenon of convergence of network/voice and network/data is accompanied by the phenomenon of convergence of mobile/data, which is currently fostered by the increasing demand for high-speed mobile multimedia services, by the expectations with regard to the third generation telephony and by the increasing Internet diffusion.

The worldwide telecommunication services demand confirms the growth trend which started in 1996. Last year, a 7.2% increase was registered, going from USD. 732 billion to USD 785 billion, clearly above the development rate registered by the world economy in the same period. In the EU, which represents approximately 23% of the world market, the telecommunication growth demand exceeded 6% last year.

Mobile telephony and data traffic confirm to be the true key drivers of the market, while the traditional switched voice telephony segment shows a clear slowdown.

From the Italian legislative framework, the most important element refers to the third-generation mobile telecommunications systems: UMTS (Universal Mobile Telecommunications System). The calendar established by the resolution n. 410/99 of December 1999 provides that the deadline for participating to the tender for the assignment of the licences is August 2000. The process for the assignment will be ac- complished through an auction, starting from an auction’s base of Itl. 4,000 billion. The overall availability of the UMTS spectrum is expected for January 2002.

Among the main events which characterized this sector in the first six months of 2000, we should mention the acquisition of the telecommunications activities of the German Mannesmann Group and, therefore, indirectly of Omnitel and Infostrada by the British Vodafone.

38 Fixed telephony The Mediaset Group operates in the fixed telephony sector through its 19.5% interest in Albacom S.p.A.

The evolution of this market continues to strongly depend, both in Italy and in the other developed countries, on the increase of data traffic and the Internet, which still mostly runs through traditional telephone lines and ISDN (Integrate Service Digital Network) lines.

In particular, with regard to “Business” users, who, as of the present time, represent the key segment upon which Albacom’s strategy is focused, we should highlight the percentage increase, from 27% to 30% in one year, of the number of “Corporate” connections on the total of the fixed network connections. In addition, the significant increase, in absolute terms, registered in Italy, of the ISDN subscriptions should also be mentioned, which at the beginning of this year reached and exceeded 3 million.

In this situation, Albacom’s strategy remains focused on the “Corporate” segment through the supply of various services, which range from voice telephony to data transfer, from Internet services to value added services. In the market of the traditional telephony, we should note the continuation of the trade- off between the price erosion and the traffic increase, particularly in the fixed-mobile typology, which is accompanied by an increasing interest of all operators towards the lower end of the market, the so-called Small office Home office (SoHo). With reference to this specific market segment, Albacom successfully continues to provide a wide range of services, from simple telephony to telephony associated with the Internet (Albaclick). Among the other initiatives started in the voice sector by Mediaset Group’s subsidiary in the first half of 2000, there is the introduction of the urban carrier selection, which should have been extended to 80 cities by March 2001.

The Internet, data and VAS markets continue to grow thanks to the new technologies, the strong demand of IP-type solutions, among which the Intranet; the increasing demand of value added services, such as hosting, housing, Web design, and the mailboxes; and the development of the e-commerce, in particular in the B2B segment.

Albacom’s financial results relative to the first half of 2000 were impacted by the high costs for the inter- connection as a demonstration of the failed completion of the liberalization process already started in 1998 through the design of rules aimed at favouring both a greater competitiveness among enterprises and a better protection of the final users. In particular, as of June 30th, 2000, the company has registered an Itl. 180.7 billion loss, composed of Itl. 84.9 billion relative to the January-March 2000 period (included in the 2000 financial year) and Itl. 95.8 billion relative to the April-June 2000 period (included in the 2001 financial year).

As of June 30th, 2000, the evaluation according to the equity method of Albacom S.p.A. implied for the Mediaset Group an overall charge of Itl. 37.3 billion, composed as follows: Itl. 35.2 billion for the portion relative to the company’s result and Itl. 2.1 billion for the depreciation of the company’s goodwill.

As of July 26th, 2000, Albacom’s Extraordinary Shareholders’ Meeting resolved upon the integral coverage of the losses accumulated by the holding as of March 31st, 2000, which were amounted to Itl. 280.7 billion and the recomposition of the stock capital to Itl. 543.4 billion. This operation implied for the Media- set Group an overall charge in the order of Itl.54.7 billion.

Mobile telephony

The Mediaset Group operates in the mobile telephony sector through its 9% interest held in Blu S.p.A.

The extraordinary growth which characterized the mobile telephony sector in the last years, continues to attract new users. At the European level, in the last three years, the number of mobile users has even tri-

39 pled, thus peaking 170 million at the beginning of the year. In this context, Italy is one of the principal markets in Europe and in the world: the number of subscribers has already exceeded 30 million vis-à-vis a penetration rate of approximately 53%, which marks a definitive overtaking of the mobile telephony over the fixed telephony.

At the basis of this extraordinary growth is the extraordinary commercial success both of GSM and the prepaid systems. For the future, in the mobile telephony sector, the most important development drivers will be the value added services, which will also be provided thanks to the new technologies (such as GPRS and UMTS), and the Internet and both for the mobile as well as for the fixed, the key driver will be the development of the data traffic.

In this context, Blu S.p.A.’s offering, whose commercial activity started last spring, is focused on a higher value user platform, that is, both consumers (households and professionals) and business (SoHo, SME)

As of June 30th, 2000, Blu S.p.A.’s stock capital amounted to Itl. 300 billion. Among the shareholders, in addition to Mediaset Investment S.a.r.l. (9%), are Autostrade S.p.A. (32%), British Telecom (20%), Dis- tacom International Ltd. (9%), Edizione Holding S.p.A. - Gruppo Benetton (9%), Banca Nazionale del Lavoro S.p.A. (7%), Italgas S.p.A. - Gruppo ENI (7%) and Palatinus S.A. - Gruppo Caltagirone (7%). In the first half of 2000, the coverage of the losses equal to Itl. 13.1 billion as of December 31st, 1999, has been resolved upon. The overall charge for the Mediaset Group, for its 9% interest, was equal to Itl. 1.2 billion.

THE PERSONNEL

The table below is a breakdown of Mediaset Group’s personnel as of June 30th, 2000:

Personnel - included employees under 30/06/2000 31/12/1999 a time-limited and entertainment labor contract

Executives 270 267 Journalists 277 280 Managers 609 612 Employees 3,158 3,304 Workers 68 99

Mediaset Group "homogeneous" 4,382 4,562 Epsilon Group 63 63

Total Mediaset Group 4,445 4,625

The reduction in the overall number of employees, including both those under a time-unlimited labour contract and those under an ordinary time-limited and entertainment labour contract, as of December 31st, 1999, was equal to 180 people.

The main cause for this reduction can be attributed to the transfer to third parties of Elettronica Industri- ale S.p.A.’s division dealing with the design and assembly of TV broadcasting equipment, which involved 113 employees. The reduction in the number of employees in the first half of 2000 is also due to the cyclical reduction of the production activities which is typical of the summer season and which particularly involved those under a time-limited and entertainment labour contract.

40 From the organization point of view, we should note the transfer of the personnel from R.T.I. S.p.A. to Mediadigit S.r.l., following to the transfer of the corporate division dealing with the activity of the topic- specific channel, Happy Channel, and the Internet Mediaset Online site.

With regard to the labour costs, increases have been registered in this period of reference as a result of the payments due as bonus on the results achieved to employees and journalists under integrative labour contract and the payments of the contractual tranches relative to the national labour contracts for industry and commerce managers and the Italian national labour contract for private TV.

NEW LEGISLATION WITH REGARD TO TELEVISION

In the last months, two important preliminary investigations carried out by the Telecommunications Authority involved our Group: one pertaining to the predominating position in compliance with Art. 2 sub-section 9 of Law 249/97 and the other pertaining to the development of the satellite/cable customer base, which should also give an indication as to when Retequattro will be transferred on the satellite in compliance with Art. 3, sub-section 7.

The first preliminary investigation was positively concluded in the sense that the competent Authority did not identify any illegitimate position.

The second preliminary investigation won’t be concluded before October; the decision of the Parliamen- tary Vigilance Commission with regard to advertising on RAI3 is still pending.

The resolutions announced by the competent Authority and the projections made by EURISKO in a sur- vey commissioned by the Authority underline the current inconsistency of satellite broadcasting and a slowed down development of broadcasts in general. In both cases, the authority, professionality and high degree of autonomy of the sector’s competent Authority was confirmed.

Before the summer closure of the Parliament, the Public Works Commission of the Senate gave the ap- proval for the re-opening of the discussion relative to the law draft n. 1138.

41 RELATIONS WITH THE COMPANIES OF THE FININVEST GROUP AND THE MEDIOLANUM GROUP

During the first half of 2000, the Mediaset Group has had the following financial relations with its holding Fininvest S.p.A. and its subsidiaries and affiliates:

Trade and Trade and Financial Extraordinary Financial Production Production (in billions of Lire) sundry sundry revenues and revenues and receivables value costs receivables payables (charges) (charges)

Fininvest S.p.A. 9.4 8.1 3.5 5.4 Alba S.p.A. 0.4 0.7 A. Mondadori Editore S.p.A. 14.4 1.8 27.8 0.3 Athena 2000 S.p.A. 2.5 2.2 Blockbuster 4.3 2.8 Cinema 5 Gestione S.r.l. Consorzio Servizi Vigilanza 0.2 0.3 Edilnord Gestioni S.p.A. 0.4 0.7 Euridea S.p.A. 0.1 European Communications Ltd. 0.2 0.3 Europortal Italia S.p.A. Fininvest Servizi S.p.A. 0.1 0.1 I.C.T. Servizi S.r.l. 0.4 2.9 Jumpy S.p.A. 8.3 2.1 9.8 1.9 Mediolanum Assicurazioni S.p.A 0.3 0.2 8.5 0.6 Mediolanum S.p.A. 0.1 0.1 Medusa Film S.p.A. 9.7 13.8 10.8 Medusa Video S.r.l. 0.3 0.1 Milan A.C. S.p.A. 0.1 Pagine Italia S.p.A. 0.5 0.3 0.4 0.5 Reteitalia S.p.A. 0.1 0.2 0.2 S.E.E. S.p.A. 0.4 Trefinance S.A. 0.2 Other 0.2 0.2 0.5 0.4 Total 0.1 48.5 31.0 64.3 16.2 - -

In compliance with the CONSOB resolution n. 97001574 of February 20th, 1997 and n. 98015375 of February 27th, 1998, it should be noted that the trade relations with the Fininvest Group and the Medio- lanum Group listed in the table above were subject to the usual market conditions.

During the first half of 2000, the Mediaset Group has also purchased TV rights from the companies belonging to the Fininvest Group or affiliated companies for a total amount of Itl. 43.0 billion. Here below is the breakdown of the above mentioned purchases:

Medusa film S.p.A. Itl. 38.8 billion; Quinta Communications Itl. 4.2 billion.

EVENTS OCCURRED AFTER JUNE 30TH, 2000

th n As of July 14 , 2000, an important union agreement dealing with the introduction of the digital system in our TG news has been stipulated with the editorial staff committees of our networks, assisted by the Italian National Press Federation and by the associations of the journalists of the Lombardy and Lazio regions. Thanks to this agreement, the process which will help complete, within 2001, the transformation from the traditional analog technology to the digital technology, has been given green light. This transformation, which allows us to be at the sector’s forefront and capitalize on the positive returns in terms of product quality, also creates the conditions for the use of our services on the new media.

42 st n As of July 21 , 2000, the shareholders of Blu S.p.A. underwrote a capital increase previously resolved upon, from Itl. 300 billion to Itl. 1,500 billion. Mediaset Investment S.a.r.l.’s share, equal to Itl. 108 billion, has been paid for three tenths (Itl.32.4 billion).

In addition, as of August 24th, 2000, Blu S.p.A. presented the application for the assignment of one of the five licences relative to the new generation UMTS mobile telephony. As of the date of presentation of the application, eight other operators, both companies and consor- tiums, have submitted the same application, more precisely: Tim, Omnitel, Wind, Blu, Andala, Ipse 2000, TU Mobile, Anthill. Only the latter has not been acknowledged as having the formal requirements requested for participating in the tender.

Within the end of 2000, the following deadlines have been established:

– presentation of the technical and commercial plans by the operators, which have been admitted to the tender (by September 11th);

– suitability with respect to the satisfaction of the requirements for the admission or exclusion from the tender (by October 21st);

– assignment of the licence (in the second half of the month of November).

The basic price for the participation in the tender and the assignment of the corresponding licences is Itl. 4,000 billion.

th n As of July 25 , 2000, the subsidiary Mediaset Investment S.a.r.l participated in the EuroMedia Ven- ture Fund through the underwriting of n. 500,000 of shares of EuroMedia Luxembourg Two S.A., for a total amount of USD. 5,000,000, representing 11.8% of the stock capital.

th n As of July 26 , 2000, the Extraordinary Shareholders’ Assembly of Albacom S.p.A. resolved upon the integral coverage of the losses accumulated by the holding as of March 31st, 2000, equal to Itl 280.7 billion and the recomposition of the stock capital to Itl. 543.4 billion. This operation implied for the Mediaset Group an overall charge in the order of Itl.54.7 billion.

nd n As of August 22 , 2000, following to a reorganization proposal of the “broadcasting” business area of the Kirch Media Group, the Assemblies of the involved companies approved a corporate organization project, according to which the TV and advertising activities of Sat1 GmbH and Media1 GmbH shall be grouped under the common control of a holding, which will have an interest also in the stock capital of the companies which manage the activity of the “Pro7” broadcaster and its subsidiaries “Kabel 1” and “N24”.

This reorganization, which shall be completed through legal transactions and instruments typical of the German corporate law, will bring about a final result which will essentially equal to that which would have been generated through the merger of the companies managing the above mentioned activities. The required investigation of the merger project of the involved companies has revealed the following value ratios in order to establish the share swap ratios in favor of the shareholders:

– Gruppo Sat1 / Media 1: 28% of the new ProsiebenSat1 Media AG; – Gruppo Pro7: 72% of the new ProsiebenSat1 Media AG.

This merger operation will be anticipated by the transfer of 41.6% of the ordinary shares (equal to 20.8% of the overall stock capital) of Pro7 by the shareholder Rewe in Kirch Media KgaA. Following to this transfer, 100% of the ordinary shares of Pro7 (equal to 50% of the overall stock capital) will be held by Kirch Media KgaA. Rewe, in exchange of the Pro 7 shares transferred, will re- ceive Kirch Media shares for a total value equal to 6% of this company’s stock capital.

43 Here below is a summary of the stock evolution of the two broadcasters after the above mentioned operations.

Before the merger and before the transfer of Pro7 in Kirch Media

Sat1/Media1: PKS: 59% (indirect interest of Mediaset through ETN: 14.45%) Gruppo Springer 41%

Pro7: Ordinary shares Privileged shares Total stock capital Kirch Media KgaA 58.4% - 29.2% REWE 41.6% - 20,8% Mercato - 100.0% 50.0%

Before the merger and after the transfer of Pro7 in Kirch Media Sat1/Media1: PKS: 59% (indirect share of Mediaset through ETN: 14.45%); Gruppo Springer 41%

Pro7: Ordinary shares Privileged shares Total stock capital Kirch Media KgaA 100.0% - 50.0% Mercato - 100.0% 50.0%

After the merger ProsiebenSat1 Media Ordinary shares Privileged shares Total stock capital Kirch Media KgaA 72.0% - 36.0% PKS (*) 16.5% 16.5% 16.5% Gruppo Springer 11.5% 11.5% 11.5% Market - 72.0% 36.0%

(*) indirect share held by Mediaset through ETN: Ordinary shares Privileged shares Total stock capital 4.05% 4.05% 4.05%

The above described project also represents an important step for the development of Kirch Media.

The Group referring to this company does no longer have as its exclusive core business the trading activity of rights, characterized by a simple diversification in the broadcasting sector. In fact, this was its position up until 1999, where Sat 1 represented the only interest held by Kirch Media in the general TV sector.

Today, Kirch Media has strengthened its position in the TV sector, not only in quantitative terms (three general networks: Pro7, Sat1 and Kabel 1, in addition to the networks specialized in the News - N24 – and sports - DSF), but also and above all because it is further developing in order to pursue the objective of an effective and rational management of its activities in this sector.

Kirch Media can now be considered as the “German Mediaset”, being in a leading position in the principal continental market and in a sector which provides well managed enterprises with the possibility of achieving very high profitability margins (see the examples of Mediaset and Telecinco).

44 In the light of the above described considerations, it is clear how Kirch Media can represent today, much more than one year ago, an absolutely interesting investment opportunity for Mediaset.

Therefore, in the period immediately after the end of the first year half, the top managements of Mediaset S.p.A. and of its subsidiary Mediaset Investment S.a.r.l. started a negotiation with the Kirch Group in order to develop a project for the acquisition of an interest in Kirch Media.

Both parties have agreed that Mediaset could fund the transaction through the re-investment of the financial resources employed in 1999, when the joint venture Epsilon was established. This structure, which will involve the re-acquisition on the side of each single partner, of the activities initially transferred into the joint venture, allows Mediaset to pursue two important objectives:

– additional financial resources are not absorbed; – the values negotiated for the acquisition of the interest in Kirch Media are particularly good. The essence of the industrial project known as “Epsilon” continues consistently with its original lines.

In a scenario characterized by the multiplication of the distribution media (from the traditional general TV to its recent interactive developments, up to its most advances “on line” communications formats), the production and the purchase of good TV and cinema contents represent the true scarce resource which is going to gain in importance in the very short future.

In this area, Mediaset and Kirch Media can benefit from the combination of their strengths, based on refined editorial skills and on the knowledge of the most important European markets: E-Vision and E-Motion (companies which will be shortly established to operate in the sector of TV contents and cinema contents, respectively) will provide for a complete corporate structure, which will ensure the necessary continental scale for the co-production projects, such as I miserabili, one of the year’s TV events at the European level.

Based on the consolidated relation with the Kirch Media Group (thanks to the cross interest held between the two holdings) and the ongoing value increase of the investment made in Kirch Media, which will shortly go public, Mediaset can now dedicate itself to the development of also the other areas of the European project: broadcasting and the international advertising market.

Also the conversion of the financial resources invested in the acquisition of the indirect interest in Be- tafilm is clearly linked to the objective of maximizing the creation of value, without giving away the industrial base of the project: Betafilm will remain the international distributor of the Mediaset Group rights.

The above mentioned negotiation also included the definition of a preliminary agreement approved by the BoD.s of the companies involved as of last September 11th.

This agreement reads that the parties undertake to establish all contractual details by March 31st, 2001, with regard to the following:

– acquisition by Mediaset Investment S.a.r.l. of a 2.34% interest in Kirch Media KgaA (that is, 2.48% before the effect of dilution subsequent to the already mentioned Rewe’s participation in Kirch Media’s stock capital) vis-à-vis a total of Itl. 391.3 billion.

The acquisition of the interest in Kirch Media shall be accompanied by the underwriting of an agreement among some of the companies of the Gruppo Kirch, Fininvest S.p.A., the Group of the Prince Alwaleed and the Lehman Brothers Group.

45 The underwriting of this agreement will imply the acquisition of important rights, including that relative to the representation in the corporate bodies after the authorization of the other shareholders; – re-acquisition by each single partner of the activities transferred into Epsilon:

- Mediaset Investment S.a.r.l. will own 100% of the stock capital of Publieuros / Publieurope, which will keep the Kirch Media and Telecinco licence for Europe; - The Kirch Media Group will own 100% of the stock capital of Betafilm and PKS.

In addition to the re-acquisition of the transferred activities, Mediaset Investment S.a.r.l. will re- ceive an Itl. 391.3 billion payment (the monetary investment considered for the establishment of the Epsilon company in 1999 was equal to Itl. 361.6 billion). These financial resources will allow for the financing of the interest acquisition in Kirch Media as above described, without having to resort to other means;

– Establishment of E-Vision and E-Motion in Milan and in Munich, respectively. The latter will also have a branch in Zurich.

E-Vision will be jointly owned by Mediaset Investment S.a.r.l and Kirch Media KgaA; E-Motion, instead, will be owned by Mediaset Investment S.a.r.l with a 20% interest; by Medusa Film S.p.A. with a 30% interest and by Kirch Media KgaA with a 50% interest.

The underwriting of these new agreements will cancel the previous joint-venture agreement stipulated on October 13/14/15th, 1999.

EXPECTED EVOLUTION OF THE ACTIVITIES n The 15% increase in advertising collection achieved in the first eight months of the year confirms the sustained growth already registered during the first half of 2000. n In relation to the nature of the activity carried out (with revenues from advertising higher in the first half of the year and operating costs impacted by the start up of the autumn TV program schedule activities in the second half of the year) the period’s result is characterized by high seasonality and does not entirely reflect the presumable year trend. However, for the remaining part of the financial year, growth prospects remain extremely interesting, both with reference to TV advertising and that on the new media. n In the first eight months of 2000, the Mediaset networks have reached ratings in the 24 hours equal to 42.7%, with a 0.5% increase against the same period of reference of the preceding year.

The Board of Directors

46 Interim Report 2000

Independent Auditors’ Report

MEDIASET GROUP

AUDITORS’ REVIEW REPORT ON THE INTERIM FINANCIAL INFORMA- TION FOR THE SIX MONTHS ENDED JUNE 30, 2000

To the Shareholders of Mediaset S.p.A.

1) We have reviewed the accompanying interim financial information for the six months ended June 30, 2000, made up of the accounting schedules (balance sheet and income statement), both statutory and consolidated, and of the related footnotes of Mediaset S.p.A. In addition, we have verified the consistency of the footnotes with the related information contained in the above accounting schedules.

2) Our review was carried out in accordance with the auditing standards recommended by Consob under Resolution n. 10867 of July 31, 1997. Our review consisted principally of applying analytical procedures to the underlying financial data, assessing whether accounting policies have been consistently applied and making enquiries of management responsible for financial and accounting matters. The review excluded audit procedures such as tests of controls and verification of assets and liabilities and was therefore substantially less in scope than an audit performed in accordance with auditing standards. Accordingly, unlike the auditors’ report on the year end financial statements, we do not ex- press an audit opinion on the interim financial information.

As for the comparable financial data for the corresponding period of the previous year and for the financial statements as at December 31, 1999 reference is made to the reports issued on October 12, 1999 and April 5, 2000 respectively.

3) Based on our review, we are not aware of any material modifications that should be made to the interim financial information mentioned in paragraph 1. above in order for it to be in conformity with the criteria provided by Consob regulations for the preparation of the interim financial information for the six months approved with Resolution n. 11971 of May 14, 1999 and subsequent modifications.

49 4) As indicated in the interim financial information for the six months ended June 30, 2000, we draw your attention to the fact that:

– the Company has taken advantage of the possibility granted by Article 81 of CONSOB Regula- tion n. 11971 of May 14, 1999 as subsequently amended, to report income for the period before taxation and, consequently, has not accounted for deferred tax assets and liabilities resulting from the application of the new accounting standard on taxes on income;

– the Company (in the Holding interim financial information) has carried out some adjustments made exclusively for tax benefits.

DELOITTE & TOUCHE S.p.A.

Patrizia Arienti

Partner

This auditors’ review report and the accompanying interim financial information are English translations of the Italian auditors’ review report and interim financial information prepared for and used in Italy. The interim financial information was prepared using accounting principles, procedures and reporting practices generally accepted in Italy and are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than those in Italy. The standards, procedures and practices utilised to audit such interim financial information are those generally accepted and applied in Italy.

Milan, September 25, 2000

50 Interim Report 2000

Consolidated Balance Sheet and Income Statement as of June 30th, 2000

MEDIASET GROUP

MEDIASET GROUP Consolidated Balance Sheet as of June 30th, 2000 (in billions of Lire)

ASSETS 30/06/2000 31/12/1999 30/06/1999

A) RECEIVABLES DUE FROM SHAREHOLDERS FOR OUSTANDING PAYMENTS - - -

B) FIXED ASSETS I Intangible fixed assets 1 Start-up and expansion costs 17.2 24.7 28.2 2 Research, development and advertising costs 3.5 4.1 5.9 3 Patents and intellectual property rights 13.5 16.2 8.6 4 Concessions, licenses, trademarks and similar rights - - - a) TV rights 3,495.1 3,341.8 3,441.5 b) trade marks 60.8 69.1 77.6 c) concessions 0.2 0.2 3.7 5 Goodwill 28.2 32.2 36.2 6 Work in progress and advances 255.9 195.6 195.1 7 Other intangible fixed assets 19.8 12.6 16.9 8 Consolidation difference 148.3 45.8 56.1 Total 4,042.5 3,742.3 3,869.8 II Tangible fixed assets 1 Land and buildings 110.2 110.9 108.6 2 Plant and machinery 204.4 185.1 187.0 3 Industrial and commercial equipment 30.8 35.0 29.4 4 Other assets 34.9 36.2 36.8 5 Work in progress and advances 10.0 3.1 3.9 Total 390.3 370.3 365.7 III Financial assets 1 Investments in: a) subsidiaries 0.3 380.1 3.9 b) affiliates 795.5 538.2 560.3 c) other companies 127.2 122.9 115.7 Total 923.0 1,041.2 679.9 2 Accounts receivable: a) Fininvest Group companies 0.1 0.1 - b) other companies 15.9 14.5 14.4 Total 16.0 14.6 14.4 3 other investments - 0.1 0.1 Total 939.0 1,055.9 694.4

TOTAL FIXED ASSETS (B) 5,371.8 5,168.5 4,929.9

53 MEDIASET GROUP

Consolidated Balance Sheet as of June 30th, 2000 (in billions of Lire)

ASSETS 30/06/2000 31/12/1999 30/06/1999

C) WORKING CAPITAL I Inventory 1 raw, ancillary and consumable materials 3.6 6.2 9.2 2 work in progress and semi-finished products 3.6 8.5 7.4 3 contract work in progress - 0.7 2.0 4 finished products and goods 22.5 23.1 38.0 Total 29.7 38.5 56.6 II Accounts receivable 1 customers 1,381.6 1,109.5 1,193.2 2 subsidiaries 16.3 8.9 10.0 3 affiliates 6.7 14.2 19.3 4 parent company 9.4 11.9 26.4 5 Fininvest Group companies 39.1 35.8 33.6 6 other 474.5 236.7 373.2 Total 1,927.6 1,417.0 1,655.7 III Financial assets (not listed under fixed assets) 5 own shares 55.8 - 30.6 6 other securities 337.3 323.0 287.3 7 receivables from others - - - 8 receivables from subsidiaries and affiliates - - - Total 393.1 323.0 317.9 IV Liquid asset 1 bank and post office deposits 449.3 338.3 183.5 3 cash and valuables in safekeeping 3.9 0.2 0.2 Total 453.2 338.5 183.7

TOTAL WORKING CAPITAL (C) 2,803.6 2,117.0 2,213.9

D) ACCRUED INCOME AND PREPAID EXPENSE 1 Accrued income 10.4 7.0 8.0 2 Prepaid expense 20.2 13.1 17.3

TOTAL ACCRUED INCOME AND PREPAID EXPENSE (D) 30.6 20.1 25.3

TOTAL ASSETS 8,206.0 7,305.6 7,169.1

54 MEDIASET GROUP

Consolidated Balance Sheet as of June 30th, 2000 (in billions of Lire)

LIABILITIES 30/06/2000 31/12/1999 30/06/1999

A) SHAREHOLDERS' EQUITY I Share capital 1,181.2 1,180.3 1,178.5 II Additional paid-in capital 1,432.3 1,427.3 1,423.7 III Revaluation reserve - - - IV Legal reserve 87.5 74.9 74.9 V Treasury shares reserve 55.8 - 30.6 VI Statutory reserve - - - VII Other reserve 179.4 413.5 382.6 VIII Retained earnings (loss) 866.8 463.8 464.7 IX Fin. year's income (loss) 656.7 Half-year's pre-tax income (loss) 901.3 752.4 Total Group's Shareholders' equity 4,704.3 4,216.5 4,307.5 Third party interest and reserve 3.5 3.6 4.1

TOTAL SHAREHOLDERS' EQUITY (A) 4,707.8 4,220.1 4,311.6

B) FUND FOR RISKS AND CHARGES 1 retirement benefits 5.2 4.7 4.2 2 taxes 114.2 114.2 107.3 3 other 62.2 61.2 82.8

TOTAL FUND FOR RISKS AND CHARGES (B) 181.6 180.1 194.3

C) EMPLOYEE SEVERANCE INDEMNITY FUND 158.6 156.4 148.0

D) ACCOUNTS PAYABLE 3 banks 764.2 316.2 187.2 4 other financial institutions 7.8 5.4 7.5 5 advances 5.6 7.1 6.7 6 suppliers 2,045.8 1,878.3 2,006.8 8 subsidiaries - 1.0 3.5 9 affiliates 1.9 1.0 8.7 10 holding 8.1 0.5 5.5 10-bis Fininvest Group companies 22.9 46.0 34.7 11 tax obligations 79.4 315.5 56.1 12 social security 24.4 21.2 22.2 13 other 140.1 118.9 81.2

TOTAL ACCOUNTS PAYABLE (D) 3,100.2 2,711.1 2,420.1

E) ACCRUED LIABILITIES AND DEFERRED INCOME 1 Accrued liabilities 28.3 6.9 60.1 2 Deferred income 29.5 31.1 35.0

TOTAL ACCRUED LIABILITIES AND DEFERRED INCOME (E) 57.8 38.0 95.1

TOTAL LIABILITIES 3,498.2 3,085.5 2,857.5

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 8,206.0 7,305.6 7,169.1

55 MEDIASET GROUP

Consolidated Balance Sheet as of June 30th, 2000 (in billions of Lire)

MEMORANDUM ACCOUNTS 30/06/2000 31/12/1999 30/06/1999

Collaterals 7.8 13.1 35.0 Secured guarantees given - - - Obligations 2,774.9 2,539.5 2,547.3 Risk accounts 23.1 15.6 46.3 Potential liabilities counter-guaranteed by parent company 20.6 22.6 21.9

TOTAL MEMORANDUM ACCOUNTS 2,826.4 2,590.8 2,650.6

56 MEDIASET GROUP Consolidated Income Statement as of June 30th, 2000 (in billions of Lire)

INCOME STATEMENT 30/06/2000 31/12/1999 30/06/1999

A) PRODUCTION VALUE 1 Revenues from sales and services 2,465.3 3,889.6 2,132.4 2 Variation of semi-finished and finished goods 0.4 (8.7) (5.2) 3 Variation of contract work in progress (0.3) (3.6) (2.3) 4 Increases in fixed assets by internal production 2.9 39.2 18.1 5 Other revenues and proceeds 23.8 77.3 32.0

TOTAL PRODUCTION VALUE (A) 2,492.1 3,993.8 2,175.0

B) PRODUCTION COST 6 Raw, ancillary and consumable materials and goods 61.7 128.2 73.5 7 Services 486.9 820.9 423.7 8 Third party assets use 73.1 147.0 75.4 9 Personnel: a) salaries and wages 204.7 384.1 210.7 b) social security contributions 61.8 114.3 59.4 c) severance indemnity 18.9 34.8 16.6 d) retirement benefits and similar 0.6 1.1 0.6 e) other costs 7.8 25.8 0.9 Total cost of personnel 293.8 560.1 288.2 10 Amortization, depreciation and write-downs: a) amortization of intangible fixed assets 578.1 1,079.4 506.6 b) depreciation of tangible fixed assets 34.6 66.4 32.5 c) other assets write-downs - 17.8 - d) bad debt entered in the working capital 7.6 23.1 8.3 Total amortization, depreciation and write-downs 620.3 1,186.7 547.4 11 Variation of raw, ancillary and consumable materials and goods (3.8) 16.8 3.0 12 Allowance for risks 1.5 - - 13 Other allowances 1.8 3.5 23.9 14 Sundry charges 43.1 45.9 16.1

TOTAL PRODUCTION COST (B) 1,578.4 2,909.1 1,451.3

VARIATION BETWEEN PRODUCTION VALUE AND COST (A-B) 913.7 1,084.7 723.8

C) FINANCIAL REVENUES AND CHARGES 15 Income from investments a) Fininvest Group companies and affiliates 0.1 0.2 0.1 b) other - - - Total financial revenues 0.1 0.2 0.1 16 Other financial revenues a) receivables listed under fixed assets 0.1 0.3 0.1 b) securities listed under fixed assets 0.1 - - c) securities listed under working capital 7.2 19.0 13.4 d) other 45.9 79.4 49.8 Total other financial revenues 53.3 98.7 63.3 Total financial revenues 53.4 98.9 63.4

57 MEDIASET GROUP

Consolidated Income Statement as of June 30th, 2000 (in billions of Lire)

INCOME STATEMENT 30/06/2000 31/12/1999 30/06/1999 17 Interests and financial charges a) subsidiaries - - - b) parent company (0.1) - - c) Fininvest Group companies - (0.3) - d) other companies (75.1) (62.6) (42.3) Total interests and financial charges (75.2) (62.9) (42.3) TOTAL FINANCIAL REVENUES AND CHARGES (C) (21.8) 36.0 21.1

D) FINANCIAL ACTIVITIES VALUE ADJUSTMENTS 18 a) Revaluations of investments 54.7 42.3 20.6 19 a) Write-downs of investments (43.1) (37.6) (15.3) TOTAL FINANCIAL ACTIVITIES VALUE ADJUSTMENTS (D) 11.6 4.7 5.3

E) EXTRAORDINARY REVENUES AND CHARGES 20 Revenues a) capital gains on transfers 0.7 10.9 3.0 b) out of period incomes 0.9 5.3 3.6 Total revenues 1.6 16.2 6.6 21 Charges a) capital losses on transfers - (0.6) (0.4) b) out of period expenses (3.6) (6.1) (3.5) Total charges (3.6) (6.7) (3.9) TOTAL EXTRAORDINARY REVENUES AND CHARGES (E) (2.0) 9.5 2.7

Pre-tax result 901.5 1,134.9 752.8

Third party income (loss) 0.2 0.2 0.4 GROUP'S PRE-TAX INCOME 901.3 1,134.7 752.4 22 Income tax a) current taxes 470.8 b) deferred taxes 7.2 Total taxes 478.0

26 YEAR'S INCOME (LOSS) 656.7

58 Interim Report 2000

Notes to the Consolidated Financial Statements

MEDIASET GROUP

MEDIASET GROUP Interim Report as of June30th, 2000 Notes to the Half-Year Financial Statements

STRUCTURE AND CONTENTS

The consolidated Financial Statements as of June 30th, 2000 and these Notes have been drawn up in compliance with CONSOB resolution n. 11971 of May 14th, 1999 (and subsequent amendments) and with Law Decree n. 127 of April 9th 1991 following the application of the VII EEC Directive specifically concerning the drawing up of consolidated Financial Statements.

The Balance Sheet and the Income Statement of the companies included in the consolidation area have been drawn up according to the accounting entries updated as of June 30th, 2000; have been intregrated extra-accounting with the accounting entries which are normally based on the books during the preparation of the yearly Financial Statements and are in line with the legislation in force and with the accounting principles recommended by the Italian Register of Certified Accountants.

In compliance with the above mentioned CONSOB resolution, the first half 2000 result has been calculated before the taxes of the period of reference.

The consolidated Financial Statements include the Balance Sheet and the Income Statement of Mediaset S.p.A. and of the companies in which the same owns, both directly or indirectly, the absolute majority of the stock capital and voting rights, as well as the Balance Sheet and the Statement of Income of the companies belonging to the European joint venture with the Kirch Group for the interest owned equal to 50%.

Mediaset Ireland Ltd. has not been consolidated according to the line-by-line method, but according to the costing method, despite the fact that the company, which is not operating, is currently entirely owned by Mediaset S.p.A.

The following companies have been consolidated according to the costing method, because of irrelevant value: Thasos GmbH and Kappalibrae GmbH, of which the Mediaset Group owns 50% of the interest in relation to the above mentioned joint venture.

MAIN VARIATIONS OF THE CONSOLIDATION AREA AND INVESTMENTS MADE DURING THE FIRST HALF OF 2000

During the first six months of 2000, the consolidation area of Mediaset Group has been subject to the following variations:

th n Class Financial Network S.p.A.: as of January 25 , 2000, the subsidiary Mediadigit S.r.l. acquired a 10% interest in Class Financial Network S.p.A, a topic-specific production company for economic- financial information of the CFN channel, distributed by Stream. This company has been consolidated according to the costing method.

th n D.M.T. S.p.A. : as of February 18 , 2000, the subsidiary Elettronica Industriale S.p.A. acquired a 30% interest in D.M.T. S.p.A., to which it had transferred its activities relative to the design and assembly of the broadcasting equipment as of January 1st, 2000. This company has been consolidated according to the costing method.

61 th n Fivefactor S.p.A.: as of March 8 , 2000, the holding Mediaset S.p.A. transferred to third parties its interest in Five Factor S.p.A., equal to 10%. This company has been therefore excluded from the consolidation area.

th n TV Breizh S.A.: as of April 7 , 2000, the subsidiary Mediaset Investment S.a.r.l. underwrote a 13% interest in the newly established French company, whose corporate purpose is the creation of a TV channel in Breton to be distributed on the main satellite platforms and French cable TV. This company has been consolidated according to the costing method.

th n R.T.I. Music Espana S.A.: as of June 30 , 2000, the subsidiary Mediaset Investment S.a.r.l. concluded the entire transfer of its interest in R.T.I. Music Espana S.A. following to the liquidation of the company, which, therefore, has been excluded from the consolidation area. n Epsilon Group : Euroset S.a.r.l. holding of the European joint venture, established together with the Kirch Group last October 1999 and consolidated as of December 31st, 1999 according to the costing method, has been proportionally consolidated in this six-month period as all the other affiliated companies. As of June 30th, 2000, the financial position of the Mediaset Group includes, in each individual item, 50% of the balances deriving from the companies belonging to the Epsilon Group, which reflect the interest owned by Mediaset Group. For additional details regarding this consolidation method, refer to the specific session included in these Notes. In order to facilitate the interpretation of the financial situation as of the first six months of 2000 and rely on comparable data with the preceding years, these Notes have been drawn up including the effect of the proportional consolidation of the companies with a cross-check for each single item. The entire list of companies included in the consolidation area is shown in the attached specific Table.

GROUP’S ACTIVITIES AND LEGISLATION

Also following the joint-venture agreement with the Kirch Group, most of the activities carried out by the Mediaset Group are still concentrated in Italy and mainly in the sector of production and broadcasting of TV programs and sale of advertising.

With respect to the legal framework, two important preliminary investigations involved the Group in the last months: one pertaining to the predominating position in compliance with Art. 2 sub-section 9 of Law 249/97 and the other pertaining to the development of the satellite/cable customer base, which should also give an indication as to when Retequattro will be transferred on the satellite in compliance with Art. 3, sub-section 7.

The first preliminary investigation was positively concluded in the sense that the competent Authority did not identify any illegitimate position.

The second preliminary investigation won’t be concluded before October; the decision of the Parliamen- tary Vigilance Commission with regard to advertising on RAI3 is still pending.

The resolutions announced by the competent Authority and the projections made by EURISKO in a sur- vey commissioned by the Authority underline the current inconsistency of satellite broadcasting and a slowed-down development of broadcasts in general. In both cases, the authority, professionality and high degree of autonomy of the sector’s competent Authority was confirmed.

Before the summer closure of the Parliament, the Public Works Commission of the Senate gave the ap- proval for the re-opening of the discussion relative to the law draft n. 1138.

62 CONSOLIDATION METHODS

All accounting values of the companies included in the consolidation area have been evaluated in compliance with the global integration method, replacing the book value of the stakes owned with the adoption of the assets and liabilities of the corresponding subsidiaries.

The difference between the acquisition cost and the net equity resulting from the financial position of the subsidiaries at the moment of their acquisition, net of any negative corrections, is entered as “consolidation difference” and amortized according to the methods provided for in the “Evaluation Criteria” section.

Receivables and payables, expenses and revenues, unrealized intercompany profits and losses have been cancelled.

The Shareholders’ equity and the financial year’s results relative to third party investments are included in the corresponding specific items.

All accounting values of the companies jointly owned with the Kirch Group (European joint venture) have been consolidated according to the proportional integration method, replacing the book value of the stakes owned with the proportional adoption of the assets and liabilities of the jointly owned subsidiaries, which is at 50%.

The difference between the acquisition cost and each party’s net equity resulting from the financial position of the subsidiaries at the moment of their acquisition, net of any negative corrections, is entered as “consolidation difference” and amortized according to the methods provided for in the “Evaluation Crite- ria” section.

Receivables and payables, expenses and revenues, unrealized intercompany profits and losses have been cancelled according to the interest owned.

The accounting values of the affiliated companies included in the consolidation area have been mainly evaluated according to the net equity method.

Not operating companies and companies presenting irrelevant accounting values have not been included in the consolidation area and have been evaluated according to the costing method.

EVALUATION CRITERIA AND ACCOUNTING PRINCIPLES

The evaluation criteria and the accounting principles adopted for the drawing up of the consolidated financial statements as of June 30th, 2000 correspond to those already adopted for the drawing up of the 1999 financial statements and, in particular: Intangible fixed assets

Intangible fixed assets are entered at their purchase or production value, including accessory charges, and are amortized within the expected period of use by the company.

Start up and expansion costs are entered at their purchase cost, including accessory charges. This item mainly includes the costs borne by the Holding Mediaset S.p.A. on the occasion of the private placing on the international market of its shares and the costs borne for its listing in the Italian Stock Exchange.

These costs are systematically amortized over a period of five years as a result of the fact that the expected period of use deriving from the capital increases following the public and private placing is expected to be of at least five years. They will be listed as saving of financial charges.

63 TV rights relative to films and telefilms have been entered at their estimate value for the part deriving from the transfer of Reteitalia S.p.A. to Mediaset S.p.A. and at their cost with respect to the purchases carried out after 1994. They are amortized according to the contract duration and, anyway, over a period not exceeding 120 months.

TV rights relative to sports and journalistic programs are almost entirely amortized (90%) over the same period of use of the right and the remaining part is brought forward into the subsequent financial year.

Except for the sports rights, the linear amortization method has been adopted in alternative to other possible criteria commonly used in this specific sector in consideration of the difficulties in identifying objective correlation elements between the revenues from advertising and the amortization of the rights, which could have prioritzed a different criterion and also in consideration of the fact that the Group owns different TV networks, which implies different alternatives of use of the same rights.

If, independently of the already entered amortizations, the rights have exceeded the contract duration, the remaining value has been entirely paid. Trademarks are entered at their purchase cost and systematically amortized over 10 years.

Goodwill is entered on the basis of the estimate relative to the transfer of Reteitalia S.p.A. to Mediaset S.p.A. completed in 1993. This item is systematically amortized over 10 years, which reflect its expected period of use, including the possibility of exploiting the transferred company’s know-how in the sector of purchase and use of the TV rights. This know-how enabled to obtain competitive advantages, both in terms of purchase guaranteed and prices, deriving from the transfer of the contracts stipulated with the major American producers and the transfer of the human resources with their skills and contacts.

The benefits resulting from this competitive advantage are also confirmed by the spread and affection developed among the audience preferring the Group’s channels.

The “Consolidation difference “ item is amortized over a period proportional to the projected profitability of the company it refers to and, anyway, over a period not exceeding 10 years for the same reasons above explained in the paragraph concerning the goodwill.

The other intangible fixed assets (listed under “costs for R&D, advertising patents and intellectual property, concessions and other intangible assets”) are entered at their purchase or production cost, including accessory charges, and systematically amortized within the expected period of use by the company.

Tangible fixed assets

Tangible fixed assets are entered at their purchase or production cost or at their transfer cost. The global cost includes both direct and indirect costs for the part reasonably attributable to the asset.

Tangible fixed assets are systematically depreciated in each year at steady rates according to economic- technical rates calculated in relation to the corresponding expected period of use.

For the newly acquired assets the following depreciation rates were applied:

Buildings 3% Plant and machinery 10 - 20% Industrial and commercial equipment 16% Furniture and office equipment 8 - 20% Vehicles and other transportation means 10 - 25%

In case of a permanent value loss, notwithstanding the already entered depreciation rate, the asset is cor- respondingly depreciated; if during the upcoming years the depreciation presuppositions fail, the original value is re-entered corrected according to the corresponding depreciation.

64 Ordinary maintenance costs are entirely listed in the Income Statement. Extraordinary maintenance costs are listed under the assets they refer to and depreciated in relation to the asset’s expected period of use.

Leasing contracts

Financial leases for investment goods having a significant value and a duration considerably inferior to the expected life cycle of the goods themselves, are entered at their market value under fixed assets and consequently amortized starting from the beginning of the lease contract.

If these conditions fail to occur, leases are listed in the Income Statement according to the pro-tempore method.

Investments

Investments in companies not included in the consolidation area are evaluated according to the equity method, or, with specific reference to subsidiaries and affiliates, according to the costing method as indicated in the comments and in the introduction.

According to the equity method, investments in subsidiaries are entered according to the interest held after the distribution of dividends and after the corrections required by the correct accounting principles to apply for the drawing up of the consolidated financial statements.

Investments in foreign companies evaluated according to the equity method have not been corrected according to the variations of the accounting principles used in the country in which the company is operating, because local accounting principles prevail with respect to the faithful and truthful representation of the financial year’s results of the subsidiaries.

According to the costing method, the entry value is determined based on the purchase or underwriting price or the value of the transferred assets and it is increased by accessory charges reasonably attributable to the purchase price or interest held. The cost is reduced in order to include permanent value losses deriving from losses sustained by the subsidiary without any projection for future short-term profits. The original entry value is re-entered in the upcoming years if the reductions made are no longer valid.

Receivables

Receivables are entered at their expected scrap value; those denominated in a non-EU currency have been entered according to the exchange rate as of June 30th, 2000. Coverage contracts have been evaluated consistently with the credits covered.

Financial assets not listed under fixed assets

These are entered at the lowest between market cost and fair value. The value of the listed companies is determined on the basis of the mean of the prices relative to the last month. In case of variations, the potential lower value is not maintained in the following years.

Accruals and deferrals

This item includes revenues and costs common to two or more years in order to comply with the pro- tempore principle.

65 Fund for risks and charges

This item covers losses or liabilities, of certain or probable nature, whose amount or date of occurrence have not been determined at the end of the period of reference. Reserves reflect the best possible estimate based on the available elements. Risks relative to a probably emerging liability are listed in the comments to the Balance Sheet’s items and are not included in the specific fund for risks and charges.

Employee severance indemnity fund

This item covers all liabilities towards the employees in compliance with the legislation in force, the col- lective labour contracts and the corporate integration agreements. This liability item is subject to indexed revaluation.

Payables

Payables are entered at their book value; payables denominated in a non-EU currency have been entered according to the exchange rate as of June 30th, 2000. Coverage contracts have been evaluated consistently with the debt covered.

Revenues recognition

Revenues have been determined according to the criteria listed below: n advertising: at the time the insert or advertising spot appears; n goods: at the moment in which they are shipped or delivered. If a right is rented, the resulting revenues are entered in steady rates according to the duration of the lease contract; n services: at the moment of performance.

Dividends

Dividends are entered in the accounting period in which their distribution is decided. The tax credit is entered in the financial year in which the dividends are collected.

Financial instruments

The financial instruments to cover currency risks in relation to assets and liabilities which are not denominated in Lire, are evaluated consistently with the assets and liabilities covered. The financial instruments used to optimize financial charges and revenues are listed under revenues and charges in the statement of income on an accrual basis.

CONVERSION OF FINANCIAL STATEMENTS DENOMINATED IN A NON-EU CURRENCY

The financial statements of the foreign companies denominated in a non-EU currency are converted according to the current exchange rate method. This means that all assets and liabilities are converted according to the exchange rate as of the period’ s closing date; the Balance Sheet is converted as of the his- torical exchange rate and the Income Statement according to the period’s mean. The difference resulting from the result of the Income Statement in the local currency and that converted as of the exchange rate valid at the closing date as well as the differences deriving from the conversion of the Shareholders’ equity at exchange rates different from those valid as of the closing date are listed under the specific “Con- version reserve” item in the Balance Sheet.

66 OTHER INFORMATION

Adjustments to the preceding financial statements

This half-year financial statements include all the amounts referring to the items contained in the 1999 financial statements and in the Balance Sheet and Income Statement as of June 30th, 1999.

In order to have comparable data between the half-year report of 1999, the 1999 financial statements and this half-year report 2000, the following re-classifications were made: n a part of the 1999 assets direct amortization and depreciation fund (B.1.4) amounting to Itl. 5.4 billion has been adjusted as follows in the 2000 interim report:

– Itl. 4.3 billion have been listed under the fund for contract penalty risks (B.3), because allocated to cover possible penalties to pay due to a higher number of broadcasts than allowed;

– Itl. 1.1 billion have been listed under the fund for contract depreciation (B.1.6).

Exceptions in compliance with Art.2423, sub-section 4°

This half-year financial statement does not include any exceptions in compliance with Art. 2423, sub- section 4°.

67 COMMENTS TO THE MAIN ASSETS ITEMS

(in billion of Lire)

Fixed assets

For the three categories of fixed assets (intangible, tangible and financial ) the corresponding tables have been prepared and detailed in the attachments, showing for each single item the initial balance, movements of the period and the final balance.

For a better understanding of all variations occurred, these tables separately detail the effect of the proportional consolidation of the Epsilon Group, which has been included in the consolidation area for the first time this year.

Intangible fixed assets

The item “start up and expansion costs” includes the expenses for the establishment and capital increase of the consolidated companies and the costs relative to the Holding’s listing.

30/06/2000 31/12/1999

Start-up and expansion costs 17.2 24.7 Total 17.2 24.7

The proportional consolidation effect of Euroset S.a.r.l. and Euroset Television S.a.r.l. involved an increase of this item for the interest we own, equal to 2.1 billion in relation to the capitalization of the register fees on the capital increases the above mentioned companies have received.

With respect to the other companies of the Group, no other increases occurred during the first half of the year.

The decreases, equal to 9.5 billion, refer to amortization, which includes Itl. 0.3 billion relative to the establishment expenses of the Epsilon Group.

For the companies subject to the Italian law, in compliance with Art. 2426 of the Italian Civil Code, until completion of the cost amortization, dividends can be distributed only if sufficient available reserves can cover the remaining amount of the capitalized costs.

The Patents and intellectual property rights item is broken down below:

30/06/2000 31/12/1999

Patents and intellectual property rights 13.5 16.2 Total 13.5 16.2

During the first six months of 2000, increases amounted to Itl. 1.3 billion and they were mainly due to purchases of software and advances of the preceding year re-entered under “Work in progress and advances” (Itl. 0.5 billion ).

Decreases equal to Itl. 4.0 billion mainly refer to amortization.

68 The Concessions, licences, trademarks and similar rights item is detailed below:

30/06/2000 31/12/1999

TV rights 3,495.1 3,341.8 Trademarks 60.8 69.1 Concessions 0.2 0.2 Total 3,556.1 3,411.1

TV rights: during the first half of 2000, investments were made equal to Itl. 658.7 billion (Itl. 1,816.2 billion in 1999). This item also included the capitalization of Itl. 23.3 billion relative to advances previously paid to suppliers (entered under “Work in progress and advances” in the preceding financial year ), for which the corresponding contract was formalized during the first six months of 2000. These advances refer to the contracts with Medusa Film S.p.A.

As of June 30th, 2000, the balance includes the property rights of the Epsilon Group, where the share belonging to the Mediaset Group is equal to Itl. 15.1 billion. The so-called “tail rights” of a film currently used by others, represent an “output deal” between the Kirch Group and the distribution house of the American independent producer, New Regency. Since these contracts will be enforced not before 2007, they are not included in the amortization. The balance increased by Itl. 2.3 billion as a result of the advances previously paid.

The rights relative to contracts not yet enforced amount to approximately Itl. 1,332.1 billion (approximately Itl. 1,411.7 billion as of December 31st, 1999).

About Itl. 23.3 billion (Itl 31.7 billion as of December 31st, , 1999) still remain deriving from the transfer of the division of Reteitalia S.p.A. whose entry value was based upon a specific analysis which was carried out just before the transfer.

The period’s decreases equal to Itl. 537.0 billion were due to the amortization portions (Itl. 1,019.0 billion in 1999).

The Trademarks item relative to the trademarks of the networks and TV productions has decreased during the first six months of 2000 by Itl. 8.7 billion, mainly as a result of the amortization portions.

The Goodwill item, which has decreased by Itl. 4.0 billion in the period of reference as a result of the amortization, refers to the goodwill, entered in 1994, relative to the transfer of the division of Reteitalia S.p.A. to Mediaset S.p.A.. The amortization of this goodwill started in 1994 and is extended over a time span of 10 years as indicated in the “Evaluation criteria” section.

The Work in progress and advances item, which, as of June 30th, 2000, amounted to Itl. 255.9 billion (Itl. 196.7 billion as of December 31st, 1999) refers to advances paid to suppliers for the purchase of rights, advances on dubbings, options on the production of programs and production developments.

The most significant element of this item is represented by advances equal to Itl. 109.9 billion (Itl. 105.1 billion as of December 31st, 1999), paid to Medusa Film S.p.A., a company belonging to the Fininvest Group, operating in the cinema industry, as a result of the contracts dealing with the acquisition by Me- diaset S.p.A. of the exclusive rights of the films produced and distributed by Medusa Film S.p.A.. The price for these rights is established in the contract of reference according to parameters linked to the returns generated by each single film in the Italian theatres.

The balance of the “Work in progress and advances” item also includes Itl. 30.0 billion deriving from the stipulation of a contract with Cecchi Gori Communications S.p.A., which provides Mediaset S.p.A. with the pre-emption right for the purchase of a package containing the films of the cinema season 1997/98 to be used starting from the 1999/2000 season. This option provides for the “first deal - last denial rights”

69 which can be exerted not later than June 30th, 2000; as for the present time the modalities for exercising this option are still in the definition stage.

As of June 30th, 2000, the balance includes the advances paid by the Epsilon Group for the acquisition of additional packages of New Regency’s rights for a total amount of Itl. 11.9 billion corresponding to our share. In this time span, these advances reduced to Itl. 2.3 billion following to the stipulation of the contracts and the subsequent accounting registration under the “Rights” item.

The period’s increases, net of the proportional consolidation effect of the Epsilon Group, are mainly due to advances paid to suppliers of rights, like Medusa Film S.p.A., for a total amount of Itl. 28.1 billion.

The decreases, except for what already mentioned regarding the Epsilon Group, are equal to Itl. 40.8 billion and are mainly due to the stipulation of the contracts under definition as of December 31st, 1999 and their subsequent entry under the “Rights” item for Itl. 23.3 billion; in addition, contracts for an overall value of Itl. 14.1 billion have been annulled.

The Other intangible fixed assets item, whose balance as of June 30th, 2000 was Itl. 19.8 billion, is composed as follows: n Itl. 9.8 billion representing 50% of our interest in the put option granted by the Kirch Group to Eu- roset Television S.a.r.l.. This irrevocable and unreserved option gives the company the right to transfer, not later than December 31st, 2002, its interest in PKS GmbH, holding of 59% of the Gruppo Sat1 and Media1, at a price corresponding to the initial investment plus the interests accrued. This put option is listed under fixed assets and is amortized based on its duration in relation of the number of months.

The period’s amortization proportionally consolidated amounts to Itl. 2.0 billion. n Itl. 10.0 billion relative to costs for third party assets improvements and leases (Itl. 12.6 billion as of December 31st, 1999).

The decrease is mainly due to the period’s amortization portions, which globally amount to Itl. 5.1 billion. Itl. 2.0 billion represent the proportional amortization of the previously commented put option.

The Consolidation difference item includes, net of the amortization, the differences between the book value and the corresponding Shareholders’ equity of the consolidated companies for the portion which cannot be listed under fixed assets.

As of June 30th, 2000, the balance of Itl. 148.3 billion including the effects of the proportional consolidation of the Epsilon Group, can be broken down as shown below: n Itl. 42.4 billion relative to the overall net goodwill generated on the Mediaset Group as a result of the acquisitions made before the establishment of the Joint Venture with the Kirch Group (Itl 45.8 billion as of December 31st, 1999); n Itl. 174.0 billion representing 50% of the overall goodwill generated as a result of the establishment of the Epsilon Group and precisely:

– Itl. 170.2 billion deriving from the goodwill acknowledged vis-à-vis the Shareholders’ equity of Beta Film GmbH;

– Itl. 3.8 billlion deriving from the goodwill acknowledged vis-à-vis the Shareholders’ equity of Publieurope Ltd.. n A negative balance of Itl 68.1 billion, detracted from the above detailed values; this item represents the difference deriving from the consolidation of Epsilon into Mediaset and the corresponding paid-in

70 surplus relative to the Shareholders’ equity of the joint venture vis-à-vis the value of the interest held by Mediaset Group.

The period’s increases other than those deriving from the new proportional consolidation and amounting to Itl. 0.5 billion refer to the acquisition by the companies belonging to the Group of minority interests in other subsidiaries.

The decreases, equal to Itl. 9.5 billion, include Itl. 3.9 billion relative to the depreciation of goodwill (see point 1 above) and Itl. 5.6 billion relative to the depreciation of the goodwill of Epsilon.

Tangible fixed assets

The period’s increases, equal to Itl. 59.7 billion (Itl. 80.2 billion in 1999) mainly refer to the expansion activitiy of the broadcasting network and the innovation process on the TV studio technology. The principal increases involved the assets items listed here below: n buildings: Itl. 2.4 billion ; n plant and machinery: Itl. 43.2 billion; n industrial and commercial equipment: Itl. 0.4 billion ; n other assets: Itl. 5.5 billion.

This balance also includes Itl. 0.8 billion, net of the period’s depreciation totalling Itl. 0.1 billion, deriving from the proportional consolidation of the Epsilon Group and essentially referred to industrial buildings and machinery.

The Work in progress and advances item totals Itl. 10.0 billion and shows an Itl. 6.9 net increase against December 31st, 1999. This increase is mainly due to advances paid to suppliers for the development of the new studio located in Cologno Monzese (Milan).

Decreases mainly refer to the period’s depreciation for a total amount of Itl. 34.5 billion, of which Itl. 0.1 billion represent the depreciation portion of the Epsilon Group, and to transfers for a total amount of Itl. 5.6 billion .

Financial fixed assets

Investments

The following investments are evaluated according to the net equity method:

30/06/2000 31/12/1999

Affiliates: Gestevision Telecinco S.A. 485.3 457.9 Publiespana S.A. 83.8 79.8 PKS GmbH 225.7 -

Other companies: Albacom S.p.A. 52.5 89.8

Total investments evaluated according to the 847.4 627.5 equity method

The June 30th, 2000 value of the above listed investments mirrors the equity evaluation as better described in the corresponding section included in the comments to the Income Statement items.

71 The PKS GmbH company owns 59% interest in Sat 1 Group and Media 1 GmbH, space broker of the German network. The 49% PKS is owned by Euroset Television S.a.r.l. (the latter is entirely owned by Euroset S.a.r.l) and therefore co-owned with a 24.5% interest by Mediaset Group through the joint venture with Kirchmedia.

As of June 30th, 2000 the investment value was adjusted to the original acquisition value, equal to Itl. 230.2 billion, in order to include the variation occurred during the period of reference in the interest our Group holds in PKS. The period’s value decrease is almost entirely due to the depreciation of the goodwill acknowledged against the book value of PKS and Sat 1’ net equity.

The following investments are instead evaluated according to the costing method:

30/06/2000 31/12/1999

Subsidiaries: Euroset S.a.r.l. - 380.0 R.T.I. Music Espana S.A. - 0.1 Other 0.2 -

Affiliates: Consorzio Aeromobili Fininvest 0.5 0.4 Other 0.4 - Other companies: Consorzio Servizi Vigilanza 0.1 0.1 Fivefactor S.p.A. - 2.1 Blu S.p.A. 27.0 27.0 Monarchy Holding (New Regency) 38.4 - Other 9.1 4.0

Total investments evaluated according to the 75.6 413.7 costing method

The variations occurred during the first half of 2000 as against December 31st, 1999 mainly refer to a different consolidation criterion adopted for the Epsilon joint venture, and precisely: n Euroset S.a.r.l. : this company, holding of the joint venture with the Kirch Group, was consolidated as of December 31st, 1999 according to the costing method, because the financial operation was concluded towards the end of the year.

As already mentioned, starting from 2000, Euroset and all its subsidiaries, will be consolidated according to the proportional method, thus replacing the investment value with the assets and liabilities of the corresponding subsidiaries for all that refers to the Mediaset Group. n Thasos GmbH and Kappalibrae GmbH: as a result of the proportional consolidation of the Epsi- lon Group, the two companies, entirely owned by Beta Film GmbH and therefore 50% owned by the Mediaset Group, are included in the consolidation area under “Other subsidiaries”. They have been consolidated according to the costing method, because not particularly relevant. As of June 30th, 2000 the investment value globally amounts to Itl. 0.1 billion. n Monarchy Holding: with reference to the proportional consolidation of the Epsilon Group again, the Mediaset Group has entered as of June 30th, 2000 also its 1.975% of interest in the financial holding controlling the independent American production company New Regency and its distribution network.

72 With reference to the other investments evaluated according to the costing method in the first half-year period, the following variations have been identified:

th n Class Financial Network S.p.A.: as of January 25 , 2000, the subsidiary Mediadigit S.r.l. acquired 10% of the interest in Class Financial Network S.p.A, a company operating the economic-financial topic-specific channel CFN, broadcast by Stream.

th n D.M.T. S.p.A. : as of February 18 , 2000, the subsidiary Elettronica Industriale S.p.A. acquired a 30% interest in D.M.T. S.p.A., to which it had transferred as of January 1st, 2000 its division of design and assembly of broadcasting equipment.

th n Fivefactor S.p.A. : as of March 8 , 2000, the holding Mediaset S.p.A. transferred to third parties its 10% interest in Five Factor S.p.A..

th n TV Breizh S.A.: as of April 7 , 2000, the subsidiary Mediaset Investment S.a.r.l. participated with a 13% interest in the establishment of a French company for the creation of a pay-TV channel in Bre- ton.

th n R.T.I. Music Espana S.A.: as of June 30 , 2000, the subsidiary Mediaset Investment S.a.r.l. transferred its interest in R.T.I. Music Espana S.A. following to the company’s liquidation.

A specific table is attached listing all subsidiaries and affiliates with the corresponding information required by the legislation in force with regard to the drawing up of the consolidated Financial Statements.

For a more detailed understanding of the investments accounted for in the period of reference, refer to the Board of Directors’ Report.

Receivables This item includes long-term receivables for which no value adjustment was needed.

The Receivables towards other companies, item, whose balance amounted to Itl. 15.9 billion as of June 30th, 2000 (against Itl. 14.5 billion as of December 31st, 1999), includes Itl. 5.2 billion of down-payments and advances for leases and bills and Itl. 10.7 billion of tax revenue for advances paid on the Employee Sever- ance Indemnity Fund.

The above mentioned balance also includes Itl. 14.7 billion of receivables due over 12 months.

Working capital

Inventory

As of June 30th, 2000, this item is broken down as follows:

30/06/2000 31/12/1999 Gross Depreciation Net value Net value Raw, ancillary and consumable materials 8.3 (4.6) 3.6 6.2 Work in progress and semi-finished goods 3.6 - 3.6 8.5 Contract work in progress - - - 0.7 Finished products and goods 31.1 (8.6) 22.5 23.1 Total 43.0 (13.2) 29.7 38.5

Raw, ancillary and consumable materials mainly refer to spare parts for TV equipment; the depreciation refers to material with a low turnover, for which a value adjustment was needed in order to align it to the possible scrap value.

Work in progress and semi-finished goods mainly refer to scene settings and TV productions (Itl. 3.6 billion).

73 Finished products and goods include:

st n TV productions at R.T.I. S.p.A. for Itl. 12.3 billion (Itl. 8.4 billion as of December 31 , 1999); n Equipment for TV broadcasting and machinery for Itl. 7.5 billion (Itl. 12.6 billion as of December 31st, 1999);

st n TV rights for Itl. 2.0 billion (Itl. 2.0 billion as of December 31 , 1999) represent the residual value of the library of the Spanish rights acquired by Mediatrade S.p.A. in December 1996. These rights, net of the portions already transferred in the preceding years, are listed under “inventory of finished products” because deemed to resale. Their value as of June 30th, 2000 includes a depreciation of Itl. 8.2 billion. An additional provision was made and listed under the fund for risks in the liabilities.

Receivables

As of June 30th, 2000, this item is detailed as follows:

30/06/2000 31/12/1999 due within 12 Total Total months due over 12 months Accounts receivable: - customers 1,381.6 1,381.6 1,109.5 Accounts receivable: - subsidiaries 16.3 16.3 - 8.9 Accounts receivable: - affiliates 6.7 6.7 - 14.2 Accounts receivable: - parent company 9.4 9.4 - 11.9 Accounts receivable: - Fininvest Group and Mediolanum Group companies 39.1 39.1 - 35.8 Accounts receivable: - others 474.5 474.5 - 236.7 Total 1,927.6 1,927.6 - 1,417.0

Customers This item is detailed as follows:

30/06/2000 Gross Write-down Net value Accounts receivable due within 12 months 1,460.1 (78.5) 1,381.6 Accounts receivable due over 12 months - - - Total 1,460.1 (78.5) 1,381.6

Customer accounts receivable mainly refer to the sale of advertising space to domestic customers (Itl. 1,178.4 billion net of the depreciation fund; Itl. 979.5 billion as of December 31st, 1999). As of June 30th, 2000, this item’s balance included Itl. 73.3 billion of receivables of the Epsilon Group, which essentially refer to advertising contracts and rights distribution. The remaining part of the balance is represented by receivables deriving from the transfer of rights and TV productions as well as sale of radioTV-equipment.

The depreciation of the above described receivables reflects the value adjustment made in order to align these receivables to their scrap value. During the first six months of 2000, the depreciation fund was used for a total amount of Itl. 0.4 billion to cover losses on bad debts towards space brokers and an additional provision for Itl. 8.0 billion was made.

Receivables trasferred to factoring companies without recourse amounted to Itl. 277.7 billion (Itl. 430.4 billion as of December 31st, 1999). Receivables not yet due as of June 30th, 2000 equal Itl. 129.8 billion, of which Itl. 8.9 billion have been collected in advance and Itl.120.9 billion have been entered as of the period’s closing date under the “receivables towards factoring companies” item.

74 Subsidiaries, affiliates, parent company and Fininvest Group and Mediolanum Group companies This item includes receivables which are not listed under fixed assets and is detailed in the table below:

30/06/2000 31/12/1999

Accounts receivable: - subsidiaries 16.3 8.9 Accounts receivable: - affiliates 6.7 14.2 Accounts receivable: - parent company 9.4 11.9 Accounts receivable: - Fininvest Group and Mediolanum Group 39.1 35.8

Total 71.5 70.8

These receivables, all due within 12 months, are all considered to be recoverable and therefore no value adjustment was made.

Receivables towards subsidiaries refer to Beta Film GmbH for the rights transferred to Thasos GmbH .

Receivables towards affiliates refer to Publiespana S.A. for recharged services (Itl. 0.6 billion, of which Itl 0.4 billion are due by the Epsilon Group) and Gestevision Telecinco S.A. for the transfer of rights (Itl. 6.1 billion).

Receivables towards the parent company refer to Fininvest S.p.A. and amount to Itl. 8.4 billion. These include requests for compensation made by the Group’s companies (as a result of the guarantee provided by Fininvest S.p.A. to Mediaset S.p.A. and its subsidiaries on June 6th, 1996). This item also includes Itl. 1.0 billion for the recharging of services.

Receivables towards Fininvest Group and Mediolanum Group companies mainly refer to advertising space sale and recharged services. The balance includes Itl.0.9 billion of receivables of the Epsilon Group towards Medusa S.p.A..

For a more detailed analysis of the above mentioned item, refer to the specific chapter dedicated to the relations with the Fininvest Group and the Mediolanum Group provided in the Board of Directors’ Re- port.

Others This item is broken down as follows:

30/06/2000 31/12/1999

Tax credits 257.8 99.8 Advances to suppliers, collaborators, agents 44.5 28.9 Advances to employees 3.5 1.8 Factored receivables 133.1 94.3 Other 35.6 11.9

Total 474.5 236.7

These receivables which are all due within 12 months are all collectable and therefore no value adjustment was made.

The Tax credits item, includes Itl. 69.6 billion, relative to receivables deriving from direct taxation of the previous years, of which Itl. 67.9 billion have been brought forward and Itl. 1.7 billion have been subject to request for reimbursement. These amounts are all due within 12 months. As of June 30th, 2000, the item also included advances on income tax for Itl. 179.6 billion; as of December 31st, 1999, a value ad-

75 justment was made on each single company with regard to the advances paid with the corresponding tax debt item.

The Advances to suppliers, collaborators and agents item includes advances paid to professionals and suppliers for the advertising sector, equal to Itl. 11.3 billion, to suppliers, artists and professionals for TV productions for Itl. 14.8 billion and to sundry suppliers for Itl. 9.4 billion.

The Advances to employees item mainly includes advances paid for transfers.

The Factored receivables item includes receivables towards factoring companies regarding the transfer of trade receivables without recourse, whose balance had not been obtained at the end of the first half.

The Other receivables item includes Itl. 13.8 billion relative to the credit of the subsidiary Elettronica In- dustriale S.p.A. towards D.M.T. S.p.A., to which the corporate division of design and production of parts and equipment for the maintenance of the broadcasting network was transferred. The balance also includes Itl. 4.2 billion deriving from the Epsilon Group.

Financial assets (not listed under fixed assets)

Treasury shares

This item includes Mediaset S.p.A.’s shares acquired in compliance with the resolutions taken by the Shareholders’ Ordinary Meetings of January 12th, 1998 and April 30th, 1999.

The value of these shares as of June 30th, 2000 is equal to Itl. 55.8 billion, that is n. 1,800,000 shares; this value is entered net of a Itl. 11.0 billion write-down which was carried out in order to adjust the book value to the market value as of end of June 2000. During the six-month period, in order to stabilize the security value, n. 3,553,500 shares have been acquired for a total value of Itl. 129.2 billion and n. 1,753,500 shares equal to Itl. 62.4 billion have been transferred. The financial effect of these transactions has generated net proceeds equal to Itl. 2.5 billion.

Other securities This item, equal to Itl.337.3 billion, includes: n Stocks and corporate bonds owned by the subsidiary Mediaset Investment S.a.r.l. for Itl. 93.0 billion, net of the depreciation relative to the market price increases, equal to Itl. 6.2 billion; n Units of investment funds for Itl. 243.3 billion underwritten by the subsidiary Mediaset Investment S.a.r.l. and managed by SICAV in which Mediaset Investment S.a.r.l. holds an interest.

Liquid Assets This item is detailed below:

30/06/2000 31/12/1999

Bank and post office deposits 449.3 338.3 Cash and valuables in safekeeping 3.9 0.2

Total 453.2 338.5

As of June 30th, 2000, this item’s balance includes Itl. 5.3 billion corresponding to our portion of liquidity in the Epsilon Group.

76 Net financial position

The net financial position of the Mediaset Group as of June 30th, 2000 against that of the preceding year is shown here below:

30/06/2000 31/12/1999

Liquid asset 453.2 338.5 Securities and financial assets not listed under fixed assets 393.1 323.0

Total financial assets 846.3 661.5

Accounts payable: - banks (764.2) (316.2) Accounts payable: - other money lenders factoring company (6.5) (3.8) leasing company (1.3) (1.6)

Total financial liabilities (772.0) (321.6)

Net financial position 74.3 339.9

“Financial liabilities” have been included here only in order to show the net financial position of the Me- diaset Group as of June 30th, 2000 and its comparison against that of December 31st, 1999. The period’s decrease is mainly due to the distribution of the dividends and to tax expenses. For a better understanding of this item, refer to the Board of Directors’ Report.

Accrued income and prepaid expenses

30/06/2000 31/12/1999

Accrued income 10.4 7.0 Prepaid expense 20.2 13.1

Total 30.6 20.1

The Accrued income item includes Itl. 6.5 billion for the instalments relative to the positive results following to the operations of currency risk coverage as of June 30th, 2000.

As of June 30th, 2000, this item’s balance also included Itl. 2.0 billion deriving from the consolidation of the Epsilon Group. These essentially referred to the advertising contracts of Publieuros Ltd. and Publieurope International Ltd..

The prepaid expenses item essentially refers to lease payments, insurance premiums which do not pertain to the half period, and goods exchange operations carried out by the subsidiary Promoservice Italia S.r.l.

77 COMMENTS TO THE MAIN LIABILITY ITEMS

(in billions of Lire)

Shareholders’ equity

Attached are the data relative to the movements occurred in the Shareholders’ equity and the reconciliation between the Mediaset Group and Mediaset S.p.A. consolidated Shareholders’ equity.

The main items constituting the Shareholders’ equity and the corresponding variations are listed here below:

Stock capital

As of June 30th, 2000, Mediaset Group’s stock capital, which coincided with that of the Parent Company, resulted entirely subscribed and paid-in and represented by n. 1,181,227,564 nominal shares of Itl. 1,000 each for a total amount of Itl. 1,181.2 billion. The variation against December 31st, 1999, equal to Itl. 0.9 billion, is entirely due to the capital increase reserved to the Employee Stock Option Plan resolved upon by the Shareholders’ Assembly held on April 20th, 2000.

Additional paid-in capital

As of June 30th, 2000, the additional paid-in capital coinciding with that of the Parent Company amounted to Itl. 1,432.3 billion. The increase, equal to Itl.5.0 billion, refers to the payment made by the participants in the Employee Stock Option Plan with reference to their underwritten share.

Legal reserve

As of June 30th, 2000, the legal reserve totalled Itl. 87.5 billion (Itl. 74.9 billion as of December 31st, 1999) as a result of the 5% allocation of the 1999 Mediaset S.p.A. income during the first half of the year, as resolved upon by the Shareholders’ Meeting of April 20th, 2000. This reserve coincides with that shown in the Parent Company’s financial statement.

Treasury shares reserve

As of June 30th, 2000, the treasury shares reserve equalled Itl. 55.8 billion. During the first six months of the year n. 3,553,500 and n. 1,753,500 shares have been respectively acquired and transferred.

Other reserves

As of June 30th, 2000, other reserves amounted to Itl. 179.4 billion (against Itl.413.5 billion as of Decem- ber 31st, 1999); the Itl. 234.1 billion decrease, occurred during this period, refers to the following movements: n Itl. 178.6 billion were used for the distribution of the 1999 dividends as resolved upon by the Share- holders’ Meeting of April 20th, 2000; n Itl. 55.8 billion were entered in the treasury shares reserve, following to their acquisition; n Itl. 0.3 billion refer to the establishment of the conversion reserve, relative to the conversion of the financial statements of the subsidiaries of Euroset S.a.r.l., Publieurope International Ltd. and Publieu- ros Ltd., which were denominated in a non-EU currency.

78 The other reserves include also Itl. 16.6 billion of capital grants; 50% of the grants received are tax ex- empt and will contribute to the financial year’s income, if used for different purposes than the coverage of losses.

The remaining part of the grants is subject to taxation over ten years and has been entered under this item net of the corresponding deferred taxes.

Retained earnings

This item increased by the consolidated net income as of December 31st, 1999 and decreased as a result of the distribution of the dividends carried out during the first half of 2000 (Itl 418.6 billion), except for the portion withdrawn from the extraordinary reserve.

This item also includes the portion of the Mediaset Group loss relative to the Epsilon Group, which, as of June 30th, 2000, equalled Itl. 0.4 billion.

Pre-tax income for the first six months

This item shows the positive result before taxes of the first half of 2000 amounting to Itl. 901.3 billion. As specifically described in the corresponding section of the Income Statement, this result includes an Itl. 12.4 billion loss, which represents the Mediaset Group portion of the Epsilon Group result.

Funds for risks and charges

The composition and movements relative to these funds are detailed below:

01/01/2000 Allowance Utilization Other variations 30/06/2000

1 - Fund for retirement benefits and similar commitments 4.7 0.5 5.2

2 - Tax reserves: Deferred taxes 114.2 114.2 Current taxes - - 3 - Other funds 61.2 11.1 (10.0) (0.1) 62.2

Total 180.1 11.6 (10.0) (0.1) 181.6

Funds as of point 1 mainly refer to the supplementary pension reserve established following to the en- forcement of the corporate integrative labor contract stipulated on July 4th, 1992 and implemented in the corporate integrative labor agreement of January 13th, 1997.

As of June 30th, 2000, tax reserves (point 2) refer to the fund for deferred taxation relative to both the consolidation adjustments and the time-related differences between the taxable results and those of the financial statements of the companies included in the consolidation area.

As provided by Art. 81, sub-section 7 of the Directive approved by the CONSOB Resolution n. 11971 of May 14th, 1999 and subsequent amendments, the Group has presented the period’s result before taxes and therefore both active and passive deferred taxes deriving from the application of the new accounting principle regarding the calculation of the income tax have not been entered.

The majority of the Group companies has presented open fiscal years with reference to the taxable income starting from 1993, while Publitalia ’80 S.p.A. has applied to tax amnesty for the financial years including 1990 and Mediaset S.p.A. has presented open fiscal years with regard to both direct and indirect (VAT) taxes until 1993, having applied to the Arrangement with the Revenue with the exclusion of its subsidiary Reteitalia Productions S.p.A., whose financial years have been entered starting from 1990. In

79 addition, if Reteitalia S.p.A. resulted in default in case of income tax assessment with limitation to the fiscal period of 1993, the Tax Authority could make good its credit against Mediaset S.p.A.’s assets.

With reference to possible liabilities of fiscal nature, no provisions have been provided in these consolidated financial statements in relation to events which occurred prior to July 15th, 1996, the date of listing of Mediaset S.p.A. These liabilities have been covered through specific collaterals granted by Fininvest S.p.A., as better detailed in the “Potential liabilities covered by the Holding” section.

In relation to the application of these collaterals, it should be noted that Publitalia ’80 S.p.A. has been subject to tax assessments which have been notified with the Holding Fininvest S.p.A.; in particular, Itl. 1.0 billion have been asked for reimbursement to Fininvest S.p.A. for the payment of the tax-assessment no- tices.

The other funds (point 3) are mainly composed as follows: n Fund for risks of lawsuits (Itl. 13.8 billion ): this item covers possible liabilities deriving from lawsuits concerning compensations for libel or violation of personal rights, sanctions inflicted by the Compe- tent Authority and compensation for damage. The decision over these lawsuits is still uncertain and therefore the amount included in the provision is a cautious estimate of the possible charge; n Fund for risks of controversies under way with the personnel and the Social Security (Itl. 13.5 billion); as for the present time, the decision over these controversies is still uncertain and therefore the amount included in the provision is a cautious estimate of the possible charge . The period’s provision refers to litigations regarding the payment of social security contributions and the increase of the expected expenses deriving from the transactions with the employees and collaborators and from damages arising from legal proceedings which are not included in the collateral granted by Fininvest S.p.A. on June 6th, 1996, for which a detailed analysis is provided in a specific section of these Notes; n Fund for contractual risks (Itl. 34.6 billion): the most important elements refer to the provision relative to the risk of underutilization of the art resources against what established by contract and allowances made to cover potential controversies with suppliers or rights and losses on receivables deriving from goods (resulting from the revenues from advertising in exchange of goods). This item’s balance also includes Itl. 1.5 billion deriving from the Epsilon Group.

It should also be noted that no other provisions have been established for possible charges and liabilities relative to events occurred before July 15th, 1996 covered by the Collateral provided by Fininvest S.p.A.. With reference to charges already borne or included in the financial statements, the companies of the Mediaset Group have applied for indemnity to Fininvest S.p.A., as shown in the comments to the Produc- tion Value and Receivables items.

In relation to potential liabilities and risks whose occurrence is only likely, no allowances have been made. The Group’s companies have duly communicated to Fininvest S.p.A. the types of risks and their estimated amount.

80 Employee severance indemnity fund

This fund has shown the following movement during the first half of 2000:

Balance as of 31.12.1999 156.4

Part due and allocated in the income statement 18.9 Indemnities paid during the period and variations in the consolidation area (16.7)

Balance as of 30.06.2000 158.6

Payables

Here below is the composition and the movements of the elements grouped in this item in relation to the first six months of 2000:

Banks

These are broken down in the table below:

30/06/2000 31/12/1999 Maturity in years Total under 1 1 to 5 years over 5 years Total Payables uncovered by collateral guarantees Credit facilities 597.5 593.8 3.6 0.1 303.0 Bank interests due 166.7 166.7 13.2

Total 764.2 760.5 3.6 0.1 316.2

During the first half of the year, additional contracts with important credit institutes have been stipulated with reference to credit facilities for a total amount of approximately Itl. 300.0 billion.

Other money lenders

Payables towards other money lenders, equal to Itl. 7.8 billion as of June 30th, 2000, include Itl. 6.5 billion of payables without recourse towards factoring companies and Itl. 1,3 billion of payables towards leasing companies (Itl. 1.8 billion as of December 31st, 1999). The balance refers to lease contracts for building used for TV activities and includes a short-term part for a total amount of Itl. 0.2 billion.

Advances

This item, equal to Itl. 5.6 billion as of June 30th, 2000 (against Itl. 7.1 billion as of December 31st, 2000) mainly includes advances received from customers for advertising services and technical services.

81 Suppliers

The most relevant elements of this item, equal to Itl. 2,045.8 billion as of June 30th, 2000, and the main variations occurred against the preceding year can be summarized as follows:

30/06/2000 31/12/1999 Maturity in years Total under1 1 to 5 years over 5 years Total Accounts payable: - suppliers 2,045.8 1,494.3 531.3 20.2 1,878.3

Total 2,045.8 1,494.3 531.3 20.2 1,878.3 n Payables relative to the purchase of rights for Itl. 1,520.3 billion (Itl. 1,432.5 billion as of December 31st, 1999). This item includes Itl. 551.5 billion of long-term parts of right purchases not yet due;

st n Payables for TV production for Itl. 222.9 billion (Itl. 258.8 billion as of December 31 , 1999); n Payables towards art collaborators and TV professionals for Itl. 61.1 billion (Itl. 66.5 billion as of De- cemebr 31st, 1999); n Payables towards agencies and sundry suppliers for Itl. 100.1 billion (Itl. 84.9 billion as of December 31st, 1999);

st n Payables for purchases and technical services for Itl. 51.4 billion (Itl. 35.5 billion as of December 31 , 1999); n Payables for an overall amount of Itl. 90.0 billion, representing the portion of Mediaset Group, relative to the activities of distribution of rights and sale of advertising space under concession, carried out by the Epsilon Group.

Subsidiaries, affiliates, parent company and Fininvest Group and Mediolanum Group companies

The composition of the payables towards subsidiaries, affiliates, parent company and other companies of the Fininvest Group and Mediolanum Group is shown below:

30/06/2000 31/12/1999 Maturity in years Total under 1 over 1 Total Accounts payable: - subsidiaries - - - 1.0 Accounts payable: - affiliates 1.9 1.9 - 1.0 Accounts payable: - parent company 8.1 8.1 - 0.5 Accounts payable: - Fininvest Group and Mediolanum Group companies 22.9 22.9 - 46.0 Total 32.9 32.9 - 48.5

Payables towards affiliates

As of June 30th, 2000, the balance, equal to Itl. 1.9 billion (Itl. 1.0 billion as of December 31st, 1999) is broken down as follows: n Trade payables towards Gestevision Telecinco S.A. for Itl. 0.1 billion; n Trade payables towards Publiespana S.A. for Itl. 0.4 billion relative to the Epsilon Group; n Payables towards the Consorzio Aeromobili Fininvest for Itl. 1.4 billion (Itl. 1.0 billion as of Decem- ber 31st, 1999).

82 Payables towards the parent company

As of June 30th, 2000, the balance equal to Itl. 8.1 billion (Itl. 0.5 billion as of December 31st, 1999) towards Fininvest S.p.A. includes Itl. 5.6 billion relative to the use of the trademark and Itl. 2.5 billion relative to the recharging of services.

Payables towards Fininvest Group and Mediolanum Group companies

For a more detailed analysis of this item, refer to the table dealing with the relations with Fininvest Group and Mediolanum Group companies attached to the Board of Directors’ Report. The sharp decrease of this item, which as of December 31st, 1999 amounted to Itl.46.0 billion and as of June 30th, 2000 equalled Itl. 22.9 billion, is mainly due to the reduction of the debt towards Medusa Film S.p.A, which decreased from Itl. 21.7 billion as of December 31st, 1999 to Itl. 13.8 billion as of June 30th, 2000 and to the third suppliers’ re-classification with regard to the debt towards Fivefactor S.p.A. (Itl. 12.5 billion as of De- cember 31st, 1999), a company transferred to third parties in the month of March.

Tax debt

This item is detailed in the table below:

30/06/2000 31/12/1999

Withholding tax on earned income 27.0 17.0 Current taxes 8.8 274.1 Withholding tax on dividends - - VAT due 34.6 13.2 Other accounts payable 9.0 11.2

Total 79.4 315.5

As of June 30th, 2000, the current taxes debt is mainly due to the taxes of the foreign company I.M.S. Ltd relative to the 1999 fiscal year and still not paid as of the period’s closing date and to the taxes relative to the Epsilon Group amounting Itl. 4.4 billion.

Payables towards social security

This item refers to end-of-period payables towards these institutes for the contributions to be paid by the company in relation to employees’ salaries and wages of the month of June.

As of June 30th, 2000, this item’s balance is broken down as follows:

30/06/2000 31/12/1999

INPS 10.6 6.8 ENPALS 9.0 9.5 INPDAI and INPGI 3.0 3.1 FASI and FASDAC 0.2 0.2 Other 1.6 1.6

Total 24.4 21.2

83 Other payables

This item is broken down below:

30/06/2000 31/12/1999

Personnel (holidays, 13° monthly bonus, etc.) 47.5 37.5 Employees 26.3 34.8 Recording royalties - 0.5 Competitors to quiz shows 2.8 2.8 Emoluments to Directors and Auditors 1.0 2.0 Other 62.5 41.3

Total 140.1 118.9

Payables towards employees includes Itl. 18.1 billion relative to incentives accrued but not yet paid (Itl. 27.6 billion as of December 31, 1999).

Other payables include: n Itl. 22.8 billion, relative to the portion of the Mediaset Group on the debt of MiReg I GmbH, a subsidiary of Euroset S.a.r.l., towards Monarchy Holding concerning the interest acquisition in New Re- gency. n Itl. 30.6 billion, relative to the portion of the Mediaset Group on the debt of MiReg II GmbH, a subsidiary of Euroset S.a.r.l., towards Monarchy Holding concerning the purchase of the rights of New Regency as described in the comments to the “Intangible fixed assets” included in these Notes.

Accrued liabilities and deferred income

As of June 30th, 2000, this item is broken down as shown below:

30/06/2000 31/12/1999

Accrued liabilities: Forex 8.5 3.6 Interests due - - Other accrued liabilities 19.8 3.3 Total accrued liabilities 28.3 6.9

Deferred income: Revenues from multi-year leases 29.5 31.0 Other deferred income - 0.1 Total deferred income 29.5 31.1

Total 57.8 38.0

The balance of the Other accrued liabilities item includes Itl. 16.6 billion deriving from R.T.I. in relation, almost for its entirety, to the yearly fee due on TV concessions. The significant increase as against the same period of last year is mainly due to the introduction of the new criteria for the determination of the fees as compared to the preceding enforced regulation.

The balance also includes the part of accrued liabilities referred to the Epsilon Group equal to Itl. 1.0 billion.

84 COMMENTS TO THE MEMORANDUM ACCOUNTS

(in billions of Lire)

Collaterals

As of June 30th, 2000, the Group had granted sureties to third parties, mainly on behalf of affiliated companies, for a total amount of Itl. 7.8 billion (Itl. 13.1 billion as of December 31st, 1999).

The amount of the collaterals granted by the Epsilon Group is Itl. 3.5 billion and refers to a surety granted by Beta Film GmbH to a company belonging to the Kirch Group.

Obligations

The principal obligations of the companies of the Mediaset Group can be summarized as follows: n Multi-year obligations mainly in relation to lease contracts of satellite channels having a variable duration, which will involve expenses for a total amount of approximately Itl. 102.8 billion (Itl. 100.6 billion as of December 31st, 1999) in the next fiscal years, and short-term leasing contracts for a total amount of Itl. 1.9 billion of which Itl. 0.2 billion refer to leasing fees to be paid by Publieurope Ltd.. n Obligations relative to art collaboration, TV production and contracts with press agencies for a total amount of approximately Itl.101.2 billion (Itl.132.6 billion as of December 31st, 1999). n Obligations for the purchase of rights: the Group has stipulated “volume deal” contracts with some of the most renowned American Majors in order to ensure the availability of their movies and TV productions. These contracts provide the Group with the possibility of making investments in line with those made in the previous years and involve future obligations for approximately Itl. 1,209.1 billion (Itl. 1,442 billion as of December 31st, 1999) of which Itl 202.2 billion towards Medusa Film S.p.A.. Beta Film Gmbh has also acquired obligations for a total of Itl .340.1 billion in relation to agreements made before the establishment of the Joint Venture. These obligations have been acquired jointly and severally with some companies belonging to the Kirch Group and outside the Epsilon Group. Accord- ing to the Joint Venture Agreement relative to the establishment of the above mentioned joint venture, Kirch Media KGaA will relieve Beta Film Gmbh of potential prejudicial effects which might arise as a consequence of these acquired obligations. For a more detailed analyses of the agreements and their duration, refer to the Board of Directors’ Report. n Obligations for forward exchange deals for a total amount of Itl. 949.4 billion (Itl. 485.1 billion as of December 31st, 1999) relative to the purchase of currencies and Itl 1.6 billion (Itl 14.7 billion as of December 31st, 1999) for the sale of currencies. These swap transactions have been carried out in order to cover the currency risk relative to the debt and credit net exposure denominated in a different currency of some companies of the Group; n Obligations for the design and development of a new studio in Cologno Monzese (Milan) for a total amount of Itl. 3.0 billion and obligations for additional supplies for Itl. 4.6 billion.

85 Risk accounts

Risk accounts include about Itl. 20.6 billion of equipment owned by third companies, stored or on free loan at companies of the Mediaset Group. As of June 30th, 2000, Itl. 2.5 billion refer to discounted goods.

Potential liabilities covered by the Holding Fininvest S.p.A.

In relation to the Public Underwriting and Sale Offer of the shares of Mediaset S.p.A., Fininvest S.p.A. has granted an unlimited irrevocable guarantee for the duration corresponding to that of the prescription which relieves Mediaset S.p.A. and its subsidiaries of any damage, cost, liability, extraordinary loss (both as main liability and sanction), ascertained capital loss, non-existent assets or prejudicial effect, including any legal expenses (the “Losses”), which might arise as of June 30th, 2000, in relation to events and conditions occurred before the listing, deriving from breach of contracts and obligations, civil proceedings, criminal, administrative and tax-related proceedings, breach of regulations and breach of the conditions established in the TV broadcast concessions.

In compliance with this guarantee, Fininvest S.p.A. shall pay any indemnity due at the moment in which said Losses are borne, net of the allowances made to cover these risks and of the amount of the extraordinary items due with limitation to agency rebates subject to ten-year prescription and entered in the liabilities of Publitalia ’80 S.p.A. as of December 31st, 1995.

No indemnity is established and due in relation to losses for which Fininvest S.p.A. has already paid Me- diaset S.p.A.

In relation to the above, Fininvest S.p.A. undertakes that, for the entire duration of the guarantee, the following parameters shall be complied with: (i) the absolute value difference between (a) liquidity (cash on hand, deposits, treasury bonds and similar, SE securities, including securities of subsidiaries) and (b) payables towards third parties (financial, tax-related payables except for trade payables) shall never be lower than Itl. 3,000 billion and (ii) the ratio between liquidity and payables towards third parties, as above described, shall never be lower than 3:1. In case of breach, Fininvest S.p.A. undertakes to provide Mediaset S.p.A. with a bank surety on first request for a total amount which is equal to that necessary to comply with the parameters above specified.

On the basis of the financial results relative to the financial statements as of December 31st, 1999, Finin- vest S.p.A. has complied with all the parameters indicated in the text of the above mentioned surety. Following to the application of the above mentioned surety, the following events have occurred: n in relation to the already ascertained charges entered in the half-year report of 2000, the companies of the Mediaset Group have asked indemnities to Fininvest S.p.A. for a total amount of Itl. 3.4 billion, as detailed in the comments to the Production Value and Receivables items included in these Notes; n in relation to potential liabilities not yet ascertained, the corresponding theoretical risk was quantified in Itl. 20.6 billion; this amount almost exclusively refers to litigations and other risks relative to R.T.I. S.p.A. The request for indemnity will be made at the moment of the definition of the loss; n potential tax-related liabilities of the subsidiary Publitalia ’80 S.p.A. have been notified with the holding Fininvest S.p.A., as established in the above mentioned surety.

With respect to this surety and its interpretation agreements, upon request of Fininvest S.p.A., the BoD. of Mediaset S.p.A., as of December 16th, 1997, resolved to accept the request of Fininvest S.p.A. in relation to the extraordinary income entered in the financial statements of Publitalia ’80 S.p.A. of 1997 and

86 subsequent years. This extraordinary income was mainly due to agency rebates with ten-year prescription and entered in the 1995 liabilities of Publitalia ’80.

According to the implementation of these agreements, Publitalia ’80 S.p.A. has acknowledged to Fininvest S.p.A. Itl. 1.0 billion relative to lapsed agency rebates (this amount was included in the “Sundry charges” item).

Moreover, it should be noted that Fininvest S.p.A. has granted to Mediaset S.p.A. an unlimited guarantee to cover any non-existent assets and/or capital losses deriving from mistakes and defects relative to the ownership of the TV rights of the Mediaset Group, as shown in the consolidated financial statements closed as of December 31st, 1995, that is in the accounting entries as of March 31st, 1996; in the financial years of 1996, 1997, 1998, 1999 and during the first six months of 2000 no events or conditions emerged with regard to the application of this guarantee.

87 COMMENTS TO THE MAIN INCOME STATEMENT ITEMS

(in billion of Lire)

Production value

Revenues from sales and services

Revenues from transfer of assets and services are composed as follows:

1° half-year 2000 1° half-year 1999

TV advertising 2,326.8 2,009.6 Printed advertising 3.5 2.4 Other advertising revenues 32.6 18.1 Rental of rights 12.9 10.6 Right and TV production transfers 57.9 24.3 Sale of goods 5.2 5.3 Construction and maintenance of Tv equipment 16.3 28.7 Sale of records 0.4 21.5 Other 9.7 11.9

Total 2,465.3 2,132.4

Revenues from the sale of TV advertising mainly include: n Revenues from sales of advertising spaces on the three channels under national concession for a total amount of Itl. 2,303.9 billion, net of the agency discounts, against Itl. 1,994.7 billion of the first half of 1999, thus showing a 15.5% increase. n Revenues deriving from the sale of TV spaces in exchange of goods and printed advertising carried out by Promoservice S.r.l. as a result of the purchases of spaces from Publitalia ’80 S.p.A.. These revenues amounted to Itl. 6.9 billion (Itl. 12.0 billion in the first six months of 1999); n Revenues deriving from the international activities of the Epsilon Group equal to Itl. 12.0 billion, re- flecting the share owned by the Mediaset Group.

Revenues from sales of Printed advertising refer to the resale by Promoservice s.r.l. of advertising spaces acquired by third publishers for a total amount of Itl. 1.3 billion (Itl. 2.4 billion as of June 30th, 1999) and to the international activities carried out by Publieurope Ltd. in the context of the joint venture for its share equal to Itl. 2.2 billion.

The Other advertising revenues of the first six months mainly refer to billposting in stadiums and revenues from advertising on new media. The contribution of the joint venture is equal to Itl. 0.6 billion.

Revenues from Rental of rights mainly refer to the design and development of dedicated programs and dedicated channel by Mediadigit S.r.l..

The item “Rights and Tv production transfer” as of June 30th, 2000 groups the consolidated share of the revenues deriving from the distribution of the TV rights carried out by Beta Film GmbH, a company belonging to the Epsilon Group, for a total amount of Itl. 35.2 billion. The remaining part mainly refers to multi-year revenues for the use of TV productions of the Mediaset Group according to the period’s com- petence share.

Revenues from Sale of goods mainly refer to the transfer of goods and services rendered by Promo- service S.r.l. in exchange of the advertising sold.

88 Revenues from Construction and maintenance of TV equipment refer to the sale of equipment by Elettronica Industriale S.p.A. to third customers for a total amount of approximately Itl. 3.8 billion (approximately Itl. 16.0 billion in the first six months of 1999) and sales of equipment and maintenance services for TV sets on behalf of the Telepiù Group for a total amount of approximately Itl. 12.5 billion (approximately Itl. 12.7 billion in the first six months of 1999).

The decrease in this item is related to the transfer to third parties of Elettronica Industriale S.p.A.’s division, completed as of January 1st, 2000, concerning the design and assembly activities of broadcasting equipment.

The significant decrease of the item “Revenues from the sale of records “ is the result of the transfer of P.D.U. S.A. in 1999 and R.T.I. Music S.r.l.’s division relative to the recording activity.

The item “ Other revenues” includes sundry revenues deriving from the consolidation of the Epsilon Group for a total amount of Itl. 2.5 billion.

Inventory variation for semi-finished and finished products

This item shows a positive value of Itl. 0.4 billion which is mainly the result of the movement by R.T.I. S.p.A. of the TV productions developed which are stored until broadcasting; this movement is partially compensated by the reduction of the inventory of Elettronica Industriale S.p.A. resulting from the transfer of the above mentioned company division.

Increase in fixed assets by internal production

During the first six months of the year the costs relative to equipment and machinery dedicated to the maintenance and management of the broadcasting network were capitalized for Itl. 2.9 billion (Itl. 18.1 billion in the first six months of 1999). Other revenues and proceeds

This item is detailed below:

1° half-year 2000 1° half-year 1999

Lighting service 5.4 5.3 Other recording revenues - 1.8 Compensation from Fininvest S.p.A. 3.4 12.0 Other 15.0 12.9

Total 23.8 32.0

Other revenues deriving from Lighting service refer to the sublet of TV positions and cost charging for energy consumption used by the Telepiù Group.

The zero setting of the item Other recording revenues is the result of the transfer of P.D.U. S.A. and of the corporate division of R.T.I. Music S.r.l. relative to recording.

The item “Compensation from Fininvest S.p.A.” refers to indemnity requests raised against the holding Fininvest S.p.A. in relation to liabilities (mainly lawsuits and other similar charges, transactions with the personnel and tax remission) covered by the guarantee granted by the same on June 6th, 1996.

The item Other mainly includes cost recovery.

89 Production cost

Costs for purchases of raw, ancillary and consumable materials and goods

This item is detailed below:

1° half-year 2000 1° half-year 1999

Raw and ancillary materials and goods 27.4 52.9 Consumable materials 5.1 5.5 Advertising spaces 16.3 - Other purchases 12.9 15.1

Total 61.7 73.5

The main elements of the item Raw and ancillary materials and goods are broken down as follows: n Purchases by the company managing the activity of exchange of goods for a total amount of Itl. 6.9 billion (Itl. 14.9 billion in the first half of 1999). The decrease is due to the gradual restructuring of the activity of exchange of goods carried out by Promoservice S.r.l.; n Purchases from third suppliers of rights for resale for a total amount of Itl. 16.0 billion (Itl 14.4 billion in the first half of 1999); n Purchases of material for the development of TV machinery and equipment for resale and purchases for the maintenance of owned equipment and machinery for a total amount of Itl. 4.5 billion (Itl. 23.3 billion in the first half of 1999). The decrease is due to the transfer of the equipment design and assembly activity.

The purchase of Advertising spaces is entirely composed of the share held by the Mediaset Group for the cost borne by Publieurope Ltd., in relation to its activity of advertising sub-contractor.

The main elements of the item Other purchases are represented by prizes for quiz shows for a total amount of Itl. 4.3 billion (Itl. 7.0 billion in the first half of 1999) and purchases of materials for scene de- signing for a total amount of Itl. 7.1 billion (Itl. 7.0 billion in the first half of 1999).

90 Costs for services

This item is broken down as follows:

1° half-year 2000 1° half-year 1999

Consulting, collaborations and services 156.0 141.4 Compensations to Directors and Auditors 2.1 2.4 Provisions and commissions 19.0 17.6 SIAE, AFI and FIMI rights 59.8 50.8 Productions 84.3 78.6 Publishing rights 41.9 9.2 Auditel 8.4 8.0 Advertising spaces and external relations 14.8 12.2 Maintenance costs 13.6 18.2 Travel expenses 9.9 10.8 Electricity, water and gas 9.6 8.7 Postal and telephone expenses 7.6 8.3 EDP 14.0 11.1 Cafeteria, cleaning and vigilance services 13.3 14.1 Head hunting, training and other personnel costs 1.4 1.0 Transports and shipments 6.3 7.5 Bank expenses and commissions 1.0 1.7 Insurances 3.0 3.8 Other services 20.9 18.3

Total 486.9 423.7

Here below is an analysis of the principal items included in the “Costs for services” item: n Consulting, collaborations and services: they mainly refer to art services for Itl. 83.2 billion (Itl.93.7 billion in the first half of 1999), TV filming for Itl. 12.5 (Itl.28.0 in the first half of 1999) and journalistic services for Itl. 9.6 billion (Itl. 9.6 billion in the first half of 1999). n Compensations to Directors and Auditors: they include compensations to Directors for Itl.1.7 billion (Itl. 1.9 billion in the first half of 1999) and Auditors for Itl. 0.4 billion (Itl. 0.5 billion in the first six months of 1999). n Provisions and commissions: they include Itl. 19.0 billion relative to commissions due to agencies and media centers in relation to the sale of advertising spaces (Itl. 15.1 billion in the first six months of 1999). n SIAE, AFI & FIMI rights: they correspond to the amount due to the aforementioned associations in relation to the use of the intellectual properties they protect. In the first half of 2000, the overall amount includes both costs and allowances linked to the legal requirements on the use of the copy- right (fair compensation).

th n Publishing rights: as of June 30 , 2000 this item included Itl. 13.8 billion (Itl.9.2 billion in the first half of 1999) relative to the rights deriving from the static advertising collection and on the Internet and Itl. 28.1 billion relative to the consolidated value of the brokerage charges of Beta Film GmbH. n Productions: this item has increased by Itl. 5.7 billion against 1999 as a result of the events which characterized the first six months of 2000. n Advertising spaces and external relations: this item includes the purchases of advertising space made by Publitalia ’80 S.p.A. for static advertising in stadiums and the purchases of advertising spaces from third publishers for the promotion of the Group’s activity. The increase against the same period

91 in 1999 is essentially due to the increase in the collection of static advertising achieved by Publitalia ’80 S.p.A. and to the intensive promotion on the press of the self-produced fictions.

Costs for third party assets use

This item is broken down below:

1° half-year 2000 1° half-year 1999

Property leases due 22.1 19.5 Royalties 13.0 19.2 Signal broadcasting and transmission 15.2 14.1 Rents and leases 22.8 22.6

Total 73.1 75.4

Costs for Leases refer to the leases of the offices of the companies and of the broadcasting stations. Our share in relation to the offices of the Epsilon Group is equal to Itl. 0.2 billion as of June 30th, 2000.

Costs for Royalties mainly include recording royalties from recording equal to Itl. 1.4 billion (Itl. 8.6 billion in the first half of 1999) and royalties on licences relative to TV production equal to Itl.8.6 billion (Itl. 6.1 billion in the first half of 1999); this item also encompasses true value and market value royalties relative to the use of the “Biscione” trademark owned by Fininvest S.p.A., which was granted free of charge for the promotion of the listing project from 1996 to 1998. Costs for Leases and rents refer to the use of studios and TV equipment as well as vehicles.

Costs for the personnel

During the first half of 2000, the costs for the Group’s employees, excluding the costs for the personnel of the companies included in the consolidation area according to the proportional method (joint venture), are detailed below:

Mediaset Group Employees 01/01/2000 30/06/2000 Medio

Executives 267.0 270.0 265.5 Managers 612.0 609.0 593.7 Employees 3,304.0 3,158.0 3,199.7 Workers 99.0 68.0 71.3 Journalists 280.0 277.0 277.2 Total 4,562.0 4,382.0 4,407.3

The decrease in the number of employees equal to 180 people is due to the transfer by Elettronica In- dustriale S.p.A. of the division specialized in the design and development of broadcasting equipment to third parties. This transfer has involved 113 people. The decrease of these first six months is also attributable to the cyclical decrease in the number of productions during summer and has clearly affected the entertainment division.

The costs for personnel have increased from Itl. 288.2 billion in the first half of 1999 to Itl 291.9 billion in the same period of 2000; this increase is equal to Itl. 3.7 billion (+1.28%).

As described in the Board of Directors’ Report, increases are mainly in relation to the contract renewals occurred during the period of reference and to the extensions of contract renewals made in the preceding years.

92 Costs for personnel are broken down as follows:

1° half-year 2000 1° half-year 1999

Ordinary compensations 142.2 140.2 Extraordinary compensations 5.4 6.9 Special indemnities 25.2 34.6 13^ and 14^ monthly bonus 20.9 20.3 Holidays with pay 9.1 8.7 Total salaries and wages 202.8 210.7 Social security charges 61.8 59.4 Employee severance indemnity 18.9 16.6 Retirement benefits and similar commitments 0.6 0.6 Other costs 7.7 0.9

Total personnel costs 291.9 288.2

As of June 30th, 2000, Epsilon Group’s personnel includes 63 people distributed as follows: – Beta Film GmbH: n. 42 people

– Publieurope Ltd.: n. 16 people

– Publieuros Ltd.: n. 5 people The period’s average is 63 people since no variations were identified against December 31st, 1999.

The labor cost to be borne by Mediaset Group according to its 50% interest owned is equal to Itl. 1.8 billion.

Amortization, depreciation and write-downs

Amortization, depreciation and write-downs relative to intangible and tangible fixed assets are shown in the corresponding tables.

As of June 30th, 2000, the overall amount of this item included the effect of the proportional consolidation of the Epsilon Group as shown here below.

With reference to Intangible fixed assets, the amounts relative to the joint venture are detailed as follows: n Start up and expansion costs for Itl. 0.3 billion following the capitalization of the expenses for the establishment of the company and the registration fee on the capital increases of Euroset S.a.r.l. and Euroset Television S.a.r.l.; n Other intangible fixed assets for Itl. 2.0 billion relative to amortization for third party assets improvements and the capitalization of the put option granted by Kirch Group to Euroset Television S.a.r.l., as described in the comments to the intangible fixed assets item included in these Notes; n Consolidation difference for Itl. 5.6 billion regarding the depreciation of the net goodwill which the operation of the joint venture has brought about on the Mediaset Group and which is further detailed in the specific section included in these Notes.

Amortization and depreciation of tangible fixed assets of the Epsilon Group, equal to Itl. 0.1 billion, refer to industrial buildings and equipment.

The bad debt write-down includes the amount for the period of reference necessary to correct the bad debt value against the corresponding scrap value.

93 Reserves for risks and other reserves

The most important elements of the Other reserves item, which is shown net of utilizations, include allowances for risks deriving from controversies arisen by the personnel and lawsuits (arisen in the time span following Mediaset S.p.A.’s listing and for this reason not covered by the guarantee granted by Finin- vest S.p.A.) and allowances for risks of losses whose recovery through TV productions is unlikely.

As of June 30th, 2000, this item also includes Itl 1.5 billion of provisions against possible risks vis-à-vis Epsi- lon Group’s suppliers.

Sundry charges

The breakdown of this item is shown below:

1° half-year 2000 1° half-year 1999

Tax obligations 3.6 2.1 Other 39.5 14.0

Total 43.1 16.1

The most important element of the increase of this item against the preceding six-month period is represented by the introduction of the new criteria for the determination of the yearly fees relative to TV concessions in compliance with the newly enforced legislation.

94 Financial revenues and charges

This item is detailed below:

1° half-year 2000 1° half-year 1999

Revenues from investments: Dividends 0.1 0.1 Other financial revenues: from receivables listed under fixed assets 0.1 0.1 from securities listed under fixed assets 0.1 - from securities listed under working capital 7.2 13.4 Revenues different from the preceding: Interests due on bank accounts and deposits 6.8 2.1 Exchange gains 31.2 44.7 Interests on trade receivables 0.6 0.5 Other 7.3 2.5 Total revenues 53.4 63.4 Interests and financial charges: Interests on bank accounts (2.3) (0.1) Interests on short-term loans (6.9) (0.5) Exchange losses (49.2) (38.3) Currency losses towards companies of the Fininvest Group - - Interests due on advancesand discounts (0.7) (1.0) Interests on trade payables (0.1) (0.1) Swap charges - (0.4) Depreciation of securities listed under working capital (15.6) (2.0) Other (0.4) 0.1 Total charges (75.2) (42.3)

Total financial revenues (charges) (21.8) 21.1

The Revenues from investments includes the distribution of dividends of E.I.S. S.p.A..

The Other financial revenues item groups profits resulting from the transfer of treasury shares for a total amount of Itl. 2.5 billion (Itl. 1.8 billion in the first half of 1999).

The exchange gains and exchange losses items show a net negative balance of Itl. 18.0 billion (Itl. 6.4 billion as positive balance in the first half of 1999). Losses amounted to Itl. 49.2 billion, of which 23.5 billion have not been realized but pertain to the end-of-period increase deriving from the financial positions denominated in a different currency. These positions are subject to multi-year coverage operations, whose financial effect will become evident in the upcoming years.

The Epsilon Group’s negative balance of Itl. 2.2 billion is entirely due to the strong currency (dollar) debt exposure of MiReg I GmbH and Reg II GmbH vis-à-vis Monarchy Holding, as described in the “Other payables” item section included in these Notes.

The Depreciation of securities listed under working capital item includes unrealized charges relative to the market price evaluation of the securities held by Mediaset Investment S.a.r.l. equal to Itl. 4.6 billion as of the date of closing and treasury shares owned by Mediaset S.p.A. for Itl. 11.0 billion.

95 Financial activities value adjustments

Revaluation of investments

This item, which refers to the financial effect of the revaluation of the investments in the “Telecinco Group” (Publiespana S.A., Gestevision Telecinco S.A.) carried out through the equity method, includes:

· A proceed of Itl. 74.2 billion relative to the variation of “Telecinco Group”’s net equity for the interest owned by the Group; this item also includes the dividend distribution for the Group amounting to Itl. 23.3 billion;

· A charge of Itl 19.5 billion relative to the depreciation of the goodwill deriving from the subsidiaries’ activities. The goodwill’s gross value, equal to Itl. 390.1 billion, includes Itl. 143.5 billion relative to the acquisition of the 25% interest in the above mentioned companies by Mediaset S.p.A. in 1996 and 1997 and Itl. 246.6 billion relative to the acquisition as of June 30th, 1999 of an additional 15% interest in the same companies. Both tranches are amortized over a time span of 10 years starting from the date of acquisition. In the first six months of 2000, the amortization included Itl. 7.2 billion relative to the six-month portion of the first investment and Itl. 12.3 billion relative to the six-month portion of the second investment.

Investment write-downs

This item mainly refers to the evaluation of the investment of Albacom S.p.A. through the net equity method and to the effect on the Mediaset Group of the evaluation of PKS GmbH, holding of an interest in Sat 1 GmbH and Media 1 GmbH, through the net equity method. As of June 30th, 2000, this item’s balance was composed as follows: n Itl. 35.2 billion relative to the portion of losses realized by Albacom S.p.A. and sustained by the Group; n Itl. 2.1 billion relative to the Albacom S.p.A.’s goodwill depreciation; n Itl. 4.4 billion relative to the PKS /Sat 1 income for the interest held by the Mediaset Group; n Itl. 8.8 billion relative to the PKS portion of goodwill depreciation generated on the Epsilon Group for the interest owned by our Group.

The balance as of June 30th, 2000 also included Itl. 1.2 billion relative to the coverage of the losses of Blu S.p.A. sustained by the Group and Itl. 0.1 billion relative to the write-down, carried out by Mediaset In- vestment S.a.r.l., of the interest held in R.T.I. Music Espana S.A., which was set to zero following to the liquidation of the company.

96 Extraordinary revenues and (charges)

This item is detailed below:

1° half-year 2000 1° half-year 1999

Revenues: Capital gain on transfers 0.7 3.0 Out of period incomes 0.9 3.6 Charges: Capital loss on transfers - (0.4) Out of period expenses (3.6) (3.5)

Extraordinary revenues and (charges) (2.0) 2.7

The Capital gain on transfer, equal to Itl. 0.7 billion (Itl. 3.0 billion in the first half of 1999), refers to the transfer of the 10% interest in Fivefactor S.p.A. to Mediofactoring S.p.A. completed on March 8th, 2000.

The Board of Directors

97 ATTACHMENTS

The following attachments contain additional information to the Notes to the Financial Statements, of which they are an integrating part:

th n Table of Shareholders’ equity changes as of June 30 , 2000;

th n Table of intangible fixed assets changes as of June 30 , 2000;

th n Table of tangible fixed assets changes as of June 30 , 2000;

th n Table of financial fixed assets changes as of June 30 , 2000;

th th n Table of the financial position for the periods ended June 30 , 2000 and June 30 , 1999; n Table of reconciliation between Mediaset S.p.A. and Mediaset Group consolidated Shareholders’ equity and year’s result as of June 30th, 2000 and June 30th, 1999;

th n Table of stockholding acquisitions included in the consolidated Financial Statement as of June 30 , 2000;

th st th n Balance Sheet and Income Statement as of June 30 , 2000, December 31 , 1999 and June 30 , 1999 converted into Euro.

98 Table of Shareholders' equity changes as of June 30th, 2000

(in billions of Lire)

Stock Additional Legal Treasury Other Retained Year's Total capital paid-in reserve shares reserves earnings income Shareholders' capital reserve (loss) (loss) equity

Balance as of 31.12.1999 1,180.3 1,427.3 74.9 413.5 463.8 656.7 4,216.5

Increase: - paid increase 0.2 5.0 5.2 - free increase 0.7 (0.7) - Destination of the 1999 result 12.6 (178.6) 822.7 (656.7) -

Distribution of 1999 income dividends (418.6) (418.6) Other variations - new acquisitions 55.8 (55.8) - - changes in the consolidation area 0.3 (0.4) (0.1)

Year's income (loss) 901.3 901.3

Balance as of 30.06.2000 1,181.2 1,432.3 87.5 55.8 179.4 866.8 901.3 4,704.3

99 Table of intangible fixed assets changes as of June 30th, 2000

(in billions of Lire)

Initial Consolidation Changes during the period Final balance Epsilon Group Consolidation balance as of Balance as of Acquisitions Other Transfers Amortization and area as of 31/12/1999 31/12/1999 variations depreciation changes 30/06/2000

Start-up and expansion costs 24.7 2.1 - (0.0) - (9.5) - 17.2

Research, development and advertising costs 4.1 0.7 - (0.7) (0.6) - 3.5

Patents and intellectual property rights 16.2 0.8 0.5 (0.3) (3.7) - 13.5

TV rights 3,341.8 12.8 658.7 18.8 (0.0) (537.0) - 3,495.1

Trademarks 69.1 0.4 - - (8.7) - 60.8

Concessions 0.2 - - - - - 0.2

Goodwill 32.2 - - - (4.0) - 28.2

Work in progress and advances 195.6 14.2 89.3 (42.8) (0.3) - 255.9

Other intangible fixed assets 12.6 11.7 0.2 0.4 (0.1) (5.1) - 19.8

Consolidation difference 45.8 183.3 0.5 - - (9.5) (72.0) 148.3

Total 3,742.3 224.0 750.6 (23.1) (1.5) (578.1) (72.0) 4,042.5

100 Table of tangible fixed assets changes as of June 30th, 2000

(in billions of Lire)

Initial Consolidation Changes during the period Final balance Epsilon Group Consolidation balance as of Balance as of Acquisitions Other Disposal Amortization area as of 31/12/1999 31/12/1999 changes and depreciation variation 30/06/2000

Land and buildings 110.9 0.4 2.4 0.0 (0.6) (2.8) - 110.2

Plant and machinery 185.1 43.2 0.1 (0.4) (23.5) - 204.4

Industrial and commercial equipment 35.0 0.3 0.4 0.6 (2.1) (3.2) - 30.8

Other fixed assets 36.2 0.2 5.5 0.0 (2.1) (5.0) - 34.9

Work in progress and advances 3.1 8.2 (1.0) (0.4) - 10.0

Total 370.3 0.8 59.7 (0.2) (5.6) (34.5) - 390.3

101 Table of financial fixed assets changes as of June 30th, 2000

(in billions of Lire) Initial Consolidation Changes during the period Final balance Epsilon Group balance as of Balance as of Acquisitions / Transfers (Writedowns) Other as of 31/12/1999 31/12/1999 Underwritings revaluations variations 30/06/2000

Investments

Subsidiaries - costing method 380.1 (379.7) (0.1) 0.3

Affiliates - costing method 0.5 0.3 0.8 - equity method 537.7 230.2 27.0 794.7

Other companies - costing method 33.1 38.4 5.1 (2.1) 74.7 - equity method 89.8 (37.3) 52.5

Total 1,041.2 (111.2) 5.4 (2.1) (10.4) - 923.0

Other investments 0.1 (0.1) -

102 Consolidated Financial Position as of June 30th, 2000 and June 30th, 1999

(in billions of Lire) 30/06/2000 30/06/1999

Pre-tax income for the half year period 901.3 752.4 Amortization, depreciation and writedowns 621.8 541.3 Allowances, net 0.1 23.3 Third Shareholders' variations (0.1) (1.9) Operating cash flow 1,523.1 1,315.1

Changes: - accounts receivable (576.5) (389.9) - accrued income and prepaid expenses (10.5) (6.0) - accounts payable 174.9 711.4 - accrued liabilities and deferred income 19.8 54.3 - inventory 8.8 8.7 - tax debt (236.2) (12.7) - severance indemnity 2.2 6.0 - other assets and liabilities 26.8 21.1 Working capital and other assets / liabilities variation (590.7) 392.9

Fin.year's funds 932.4 1,708.0

Revenues from intangible fixed assets transfers 1.4 1.5 Revenues from tangible fixed assets disposal 5.6 2.0 Revenues from financial fixed assets transfers 2.1 0.7 Total revenues from transfers and disposal 9.1 4.2

Total financial year's funds 941.5 1,712.2

Investments in rights (684.3) (1,350.0) Investments in other intangible fixed assets (2.5) (17.0) Investments in tangible fixed assets (59.7) (40.0) Investments in financial fixed assets (5.4) (358.4) Total funds (used) in the accounting period (751.9) (1,765.4)

Consolidation area variation (41.8) 1.1

Additional paid-in capital 5.2 - Distribution of dividends (418.6) (323.5) Tax adjustment - - Other equity changes - (1.0) Group's equity changes (413.4) (324.5)

Variation of the net financial position (265.6) (376.6)

Liquid assets / untied assets 661.5 751.2 Financial receivables towards Fininvest Group - - Financial payables towards banks / other investors (321.6) (67.7) Initial financial position 339.9 683.5 Liquid assets / untied assets 846.3 501.6 Financial receivables towards Fininvest Group - - Financial payables towards banks / other investors (772.0) (194.7) Final financial position 74.3 306.9

Variation of the net financial position (265.6) (376.6)

103 Reconciliation between Mediaset S.p.A. and Mediaset Group consolidated Shareholders' equity and year's result as of June 30th, 2000 and June 30th, 1999

(in billions of Lire)

Shareholders' Year's pre-tax Shareholders' Year's pre-tax equity result as of equity result as of as of 30/6/2000 30/06/2000 as of 30/6/1999 30/06/1999

Values entered in the Mediaset S.p.A.'s Balance Sheet and Income Statement 3,471.2 551.4 3,251.2 174.7

Shareholders' equity overbalance, including the financial year's result, against cancellation of the stockholding item 1,082.5 935.2 804.8 732.6

Consolidation adjustments

Cancellation of adjustments and allowances relative to taxation and standardization to the Group's accounting principles 414.7 (592.3) 319.9 (135.4)

Elimination of inter-Group unattained income and losses (68.5) 7.2 (93.1) (8.6)

Deferred taxation (187.7) 0.0 43.1 (0.4)

Other variations (4.4) 0.0 (14.4) (10.0)

Total 4,707.8 901.5 4,311.5 752.8 Third Shareholders' interest (3.5) (0.2) (4.1) (0.4)

Values entered in the Group's consolidated Financial Statements 4,704.3 901.3 4,307.4 752.4

104 Table of stockholding variations entered in the consolidation area as of June 30th, 2000

(in millions )

Companies evaluated according to the global integration method Legal Offices Currency Stock capital Group's share Mediaset S.p.A. Milan Lire 1,181,228 - Publitalia '80 S.p.A. Milan Lire 100,000 100.00% Promoservice Italia S.r.l. Milan Lire 4,000 100.00% R.T.I. S.p.A. Rome Lire 109,022 100.00% Mediatrade S.p.A. Milan Lire 500 100.00% Videotime S.p.A. Milan Lire 100,018 97.49% Elettronica Industriale S.p.A. Lissone (Mi) Lire 10,000 100.00% Rti Music S.r.l. Milan Lire 500 100.00% International Media Services Ltd. Malta Lire 100 99.99% Mediaset Investment S.a.r.l. Luxembourg Lire 120,090 100.00% Mediadigit S.r.l. Milan Lire 11,000 100.00%

Companies evaluated according to the proportional integration method Legal Offices Currency Stock capital Group's share * Euroset S.a.r.l. Luxembourg Lire 100,000 50.00% * Euroset Television S.a.r.l. Luxembourg Lire 100,000 50.00% * Publieuros Ltd. London GBP 5 50.00% * Publieurope International Ltd. London GBP 0.6 50.00% * Beta Film GmbH Munich DM 0.05 50.00% * Beta International GmbH Munich DM 0.05 50.00% * MiReg I GmbH Munich DM 0.05 50.00% * MiReg II GmbH Munich DM 0.05 45.20%

Compnnies evaluated according to the equity method Legal Offices Currency Stock capital Group's share Albacom S.p.A. Rome Lire 543,423 19.50% Gestevision Telecinco S.a. Madrid Pesetas 15,394 40.00% Publiespana S.a. Madrid Pesetas 100 40.00% * PKS GmbH Munich DM 1 24.50% * Sat 1 GmbH Berlin DM 200 14.45% * Media 1 GmbH Berlin DM 1 14.45%

Companies evaluated according to the costing method Legal Offices Currency Stock capital Group's share Auditel S.r.l. Milan Lire 60 26.67% Beigua S.r.l. Milan Lire 99 24.50% Blu S.p.A. Naples Lire 300,000 9.00% Class Financial Network S.p.A. Milan Lire 1,200 10.00% Consorzio Aeromobili Fininvest (Cafin) Milan Lire 1,000 45.00% Consorzio Servizi Vigilanza Milan Lire 1,000 8.95% D.M.T. S.p.A. Lissone (Mi) Euro 0.5 30.00% E.I.S. S.p.A. Sesto S. Giovanni (Mi) Lire 1,000 10.00% * Kappalibrae Gmbh Munich DM 0.05 50.00% Mediaset Ireland Ltd. Dublin Lire 0.1 100.00% * Mercury Film Gmbh Munich DM 1 25.00% * Monarchy Holding USA USD 0.05 1.98% Radio e Reti S.r.l. Milan Lire 500 10.00% Società Consortile Fonografici per Azioni Milan Euro 0.5 12.50% * Thasos Gmbh Munich DM 0.05 50.00% TV Breizh S.A. Boulogne (France) Euro 15.00 13.00% (*) companies belonging to the Euroset Group

105 MEDIASET GROUP Consolidated Balance Sheet as of June 30th, 2000 (in millions of Euro)

ASSETS 30/06/2000 31/12/1999 30/06/1999

A) RECEIVABLES DUE FROM SHAREHOLDERS FOR OUSTANDING PAYMENTS - - -

B) FIXED ASSETS I Intangible fixed assets 1 Start-up and expansion costs 8.88 12.76 14.56 2 Research, development and advertising costs 1.81 2.12 3.05 3 Patents and intellectual property rights 6.97 8.37 4.44 4 Concessions, licenses, trademarks and similar rights a) TV rights 1,805.07 1,725.90 1,777.39 b) trade marks 31.40 35.69 40.08 c) concessions 0.10 0.10 1.91 5 Goodwill 14.56 16.63 18.70 6 Work in progress and advances 132.16 101.02 100.76 7 Other intangible fixed assets 10.23 6.51 8.73 8 Consolidation difference 76.59 23.65 28.97 Total 2,087.77 1,932.75 1,998.59 II Tangible fixed assets 1 Land and buildings 56.91 57.28 56.09 2 Plant and machinery 105.56 95.60 96.58 3 Industrial and commercial equipment 15.91 18.08 15.18 4 Other assets 18.02 18.70 19.01 5 Work in progress and advances 5.16 1.60 2.01 Total 201.56 191.26 188.87 III Financial assets 1 Investments in: a) subsidiaries 0.15 196.31 2.01 b) affiliates 410.84 277.96 289.37 c) other companies 65.69 63.47 59.75 Total 476.68 537.74 351.13 2 Accounts receivable: a) Fininvest Group companies 0.05 0.05 - b) other companies 8.21 7.49 7.44 Total 8.26 7.54 7.44 3 other investments - 0.05 0.05 Total 484.94 545.33 358.62

TOTAL FIXED ASSETS (B) 2,774.27 2,669.34 2,546.08

106 MEDIASET GROUP

Consolidated Balance Sheet as of June 30th, 2000 (in millions of Euro)

ASSETS 30/06/2000 31/12/1999 30/06/1999

C) WORKING CAPITAL I Inventory 1 raw, ancillary and consumable materials 1.86 3.20 4.75 2 work in progress and semi-finished products 1.86 4.39 3.82 3 contract work in progress - 0.36 1.03 4 finished products and goods 11.62 11.93 19.63 Total 15.34 19.88 29.23 II Accounts receivable 1 customers 713.54 573.07 616.24 2 subsidiaries 8.42 4.60 5.16 3 affiliates 3.46 7.33 9.97 4 parent company 4.85 6.15 13.63 5 Fininvest Group companies 20.19 18.49 17.35 6 other 245.06 122.25 192.74 Total 995.52 731.89 855.09 III Financial assets (not listed under fixed assets) 5 own shares 28.82 - 15.80 6 other securities 174.20 166.82 148.38 7 receivables from others - - - 8 receivables from subsidiaries and affiliates - - - Total 203.02 166.82 164.18 IV Liquid asset 1 bank and post office deposits 232.04 174.72 94.77 3 cash and valuables in safekeeping 2.01 0.10 0.10 Total 234.05 174.82 94.87

TOTAL WORKING CAPITAL (C) 1,447.93 1,093.41 1,143.37

D) ACCRUED INCOME AND PREPAID EXPENSE 1 Accrued income 5.37 3.62 4.13 2 Prepaid expense 10.43 6.77 8.93

TOTAL ACCRUED INCOME AND PREPAID EXPENSE (D) 15.80 10.39 13.06

TOTAL ASSETS 4,238.00 3,773.14 3,702.51

107 GRUPPO MEDIASET

Consolidated Balance Sheet as of June 30th, 2000 (in millions of Euro)

LIABILITIES 30/06/2000 31/12/1999 30/06/1999

A) SHAREHOLDERS' EQUITY I Share capital 610.04 609.57 608.64 II Additional paid-in capital 739.72 737.14 735.28 III Revaluation reserve - - - IV Legal reserve 45.19 38.68 38.68 V Treasury shares reserve 28.82 - 15.82 VI Statutory reserve - - - VII Other reserve 92.65 213.57 197.60 VIII Retained earnings (loss) 447.66 239.53 240.00 IX Fin. year's income (loss) 339.15 Half-year's pre-tax income (loss) 465.48 388.60 Total Group's Shareholders' equity 2,429.56 2,177.64 2,224.62 Third party interest and reserve 1.81 1.86 2.12

TOTAL SHAREHOLDERS' EQUITY (A) 2,431.37 2,179.50 2,226.74

B) FUND FOR RISKS AND CHARGES 1 retirement benefits 2.69 2.43 2.17 2 taxes 58.98 58.98 55.42 3 other 32.12 31.61 42.76

TOTAL FUND FOR RISKS AND CHARGES (B) 93.79 93.02 100.35

C) EMPLOYEE SEVERANCE INDEMNITY FUND 81.91 80.77 76.44

D) ACCOUNTS PAYABLE 3 banks 394.68 163.30 96.68 4 other financial institutions 4.03 2.79 3.87 5 advances 2.89 3.67 3.46 6 suppliers 1,056.51 970.07 1,036.43 8 subsidiaries - 0.52 1.81 9 affiliates 0.98 0.52 4.49 10 holding 4.18 0.26 2.84 10-bis Fininvest Group companies 11.83 23.75 17.92 11 tax obligations 41.01 162.94 28.97 12 social security 12.60 10.95 11.47 13 other 72.36 61.38 41.94

TOTAL ACCOUNTS PAYABLE (D) 1,601.07 1,400.15 1,249.88

E) ACCRUED LIABILITIES AND DEFERRED INCOME 1 Accrued liabilities 14.62 3.56 31.04 2 Deferred income 15.24 16.04 18.08

TOTAL ACCRUED LIABILITIES AND DEFERRED INCOME (E) 29.86 19.60 49.12

TOTAL LIABILITIES 1,806.63 1,593.54 1,475.79

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 4,238.00 3,773.14 3,702.51

108 MEDIASET GROUP

Consolidated Balance Sheet as of June 30th, 2000 (in millions of Euro)

MEMORANDUM ACCOUNTS 30/06/2000 31/12/1999 30/06/1999

Collaterals 4.03 6.77 18.10 Secured guarantees given - - - Obligations 1,433.12 1,311.53 1,315.58 Risk accounts 11.93 8.08 23.93 Potential liabilities counter-guaranteed by parent company 10.64 11.66 11.31

TOTAL MEMORANDUM ACCOUNTS 1,459.72 1,338.04 1,368.92

109 MEDIASET GROUP Income Statement as of June 30th, 2000 (in millions of Euro)

INCOME STATEMENT 30/06/2000 31/12/1999 30/06/1999

A) PRODUCTION VALUE 1 Revenues from sales and services 1,273.22 2,008.81 1,101.32 2 Variation of semi-finished and finished goods 0.21 (4.49) (2.69) 3 Variation of contract work in progress (0.15) (1.86) (1.19) 4 Increases in fixed assets by internal production 1.50 20.25 9.35 5 Other revenues and proceeds 12.29 39.92 16.53

TOTAL PRODUCTION VALUE (A) 1,287.07 2,062.63 1,123.32

B) PRODUCTION COST 6 Raw, ancillary and consumable materials and goods 31.87 66.21 37.96 7 Services 251.46 423.96 218.84 8 Third party assets use 37.75 75.92 38.92 9 Personnel: a) salaries and wages 105.72 198.37 108.82 b) social security contributions 31.92 59.03 30.68 c) severance indemnity 9.76 17.97 8.57 d) retirement benefits and similar 0.31 0.57 0.31 e) other costs 4.03 13.33 0.49 Total cost of personnel 151.74 289.27 148.87 10 Amortization, depreciation and write-downs: a) amortization of intangible fixed assets 298.56 557.46 261.64 b) depreciation of tangible fixed assets 17.87 34.29 16.78 c) other assets write-downs - 9.20 - d) bad debt entered in the working capital 3.93 11.93 4.29 Total amortization, depreciation and write-downs 320.36 612.88 282.71 11 Variation of raw, ancillary and consumable materials and goods (1.96) 8.68 1.55 12 Allowance for risks 0.77 - - 13 Other allowances 0.93 1.81 12.34 14 Sundry charges 22.26 23.71 8.33

TOTAL PRODUCTION COST (B) 815.18 1,502.44 749.52

VARIATION BETWEEN PRODUCTION VALUE AND COST (A-B) 471.89 560.19 373.80

C) FINANCIAL REVENUES AND CHARGES 15 Income from investments a) Fininvest Group companies and affiliates 0.05 0.10 0.05 b) other - - - Total financial revenues 0.05 0.10 0.05 16 Other financial revenues a) receivables listed under fixed assets 0.05 0.15 0.05 b) securities listed under fixed assets 0.05 - - c) securities listed under working capital 3.72 9.81 6.92 d) other 23.71 41.01 25.74 Total other financial revenues 27.53 50.97 32.71 Total financial revenues 27.58 51.07 32.76

110 MEDIASET GROUP

Income Statement as of June 30th, 2000 (in millions of Euro)

INCOME STATEMENT 30/06/2000 31/12/1999 30/06/1999 17 Interests and financial charges a) subsidiaries - - - b) parent company (0.05) - - c) Fininvest Group companies - (0.15) - d) other companies (38.79) (32.33) (21.86) Total interests and financial charges (38.84) (32.48) (21.86) TOTAL FINANCIAL REVENUES AND CHARGES (C) (11.26) 18.59 10.90

D) FINANCIAL ACTIVITIES VALUE ADJUSTMENTS 18 a) Revaluations of investments 28.25 21.85 10.62 19 a) Write-downs of investments (22.26) (19.42) (7.90) TOTAL FINANCIAL ACTIVITIES VALUE ADJUSTMENTS (D) 5.99 2.43 2.72

E) EXTRAORDINARY REVENUES AND CHARGES 20 Revenues a) capital gains on transfers 0.36 5.63 1.55 b) out of period incomes 0.46 2.75 1.86 Total revenues 0.82 8.38 3.41 21 Charges a) capital losses on transfers - (0.31) (0.21) b) out of period expenses (1.86) (3.16) (1.81) Total charges (1.86) (3.47) (2.02) TOTAL EXTRAORDINARY REVENUES AND CHARGES (E) (1.04) 4.91 1.39

Pre-tax result 465.58 586.12 388.81

Third party income (loss) 0.10 0.10 0.21 GROUP'S PRE-TAX INCOME 465.48 586.02 388.60 22 Income tax a) current taxes 243.15 b) deferred taxes 3.72 Total taxes 246.87

26 YEAR'S INCOME (LOSS) 339.15

111