FY

The Board of Directors of Arnoldo Mondadori Editore S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2009 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

2009 saw the full effects of the international financial crisis that was the forerunner to a recession that has severely undermined on the real economy, with a well-documented impact on production, consumer spending and employment.

During the year economic indicators continued to worsen, with an inevitable knock-on effect on corporate decisions, not merely on costs, but also and above all on investments, penalising any possible recovery which continued to be seen as difficult and far off.

Brief outline of business trends

In the sectors in which Mondadori operates the really critical element was the trend in advertising investments in magazines, which resulted for the Group in a sharp fall in revenues, despite sales, both in France and Italy, being better than the reference markets.

In the magazine sector Mondadori in Italy, thanks to the quality of its titles, was able to hold circulation relatively steady, while the market for add-on sales continued the expected sharp fall. In France, where a review of the product portfolio was completed, positive circulation figures were confirmed, also thanks to the contribution of subscriptions. At the end of August, the weekly women’s title Grazia was launched, with better than expected results, both in terms of sales and advertising.

In a book market which in Italy showed a slight tendency to buck the prevailing trends in consumer spending, Mondadori produced results, both in terms of revenues and profitability, in line with 2008, which was a record year due to the number of bestsellers, thanks to the publication of a number of successful new titles.

There was increased attention for the activities of other business. R101, the group’s radio station, in the last months of the year saw an upturn in advertising sales, anticipating what is hoped will be a recovery in 2010. There was a particularly intense expansion of the retail sector thanks to franchising agreements and a further push was given to the digital area, both for book sales and in magazines with sites for the main titles in Italy and France, as well as advertising sales, also through new joint ventures.

Significant events during the year

In addition to a sharp focus on the business, as indicated above, Mondadori’s reaction to an extraordinarily complex and negative market situation included a number of specific operations:

• the sale of 80% of the printing business, finalised at the end of 2008, a year in which there was a marked improvement in the financial position and consistent capital gains. In 2009 the partnership generated the expected positive impact, both in terms of the maintenance of standards of printing quality and flexibility, and reductions in costs;
• the continuation, with increased commitment, of a four-year plan for operating cost reductions begun in 2008 and centred on actions on cost structures, without sacrificing product quality, and a wide-ranging restructuring programme, both in Italy and in France.

The plan, that has already generated cost savings during 2009 of around €110 million, aims, by the end of 2011, to achieve total savings, on a like-for-like basis of €170 million;

• debt restructuring, begun and completed during 2009, led in the final months of the year to an improvement in the financial flexibility of the business, with the expansion of covenants and the extension of terms on credit lines from banks.

GROUP PERFORMANCE IN THE YEAR TO 31 DECEMBER 2009

An outline of the results for the year 2009 will include the effects of some of the operations described above, particularly in the differences with 2008, in terms of capital gains and restructuring charges. Consequently, what follows is an indication of normalized operating profit, excluding the effects of the changes mentioned above.

Consolidated revenues in 2009 came to €1,540.1 million, a fall of 15.3% on the €1,819.2 million of 2008. On a like-for-like basis, excluding the printing business sold last year, revenues (€1.695,3 million in 2008) were down by 9.2% (only -2.6% in the last quarter of the year).

Consolidated gross operating profit for 2009 amounted to €106.2 million, a fall of 57.4% on the €249.2 million of the previous year.

Excluding the results from the printing business (on a like-for-like basis), capital gains and charges for organisational restructuring, normalized consolidated gross operating profit came to €133.1 million, a fall of 34.3% on the €202.7 million of 2008; a reduction essentially due to the downturn in advertising revenues and investments for the launch of Grazia in France; the impact of these two factors were mitigated by the growing results of efforts to reduce operating costs.

In this regard, it is worth underlining that in the last quarter of 2009 the fall was of 8.5% (-€4.8 million) compared with the same period of the previous year, which provides a clear indication of a significant slowdown in the downward trend.

Consolidated operating profit for 2009 amounted to €71.8 million, a 64.7% fall on the €203.5 million of 2008, with amortizations and depreciations on tangible assets of €13.4 million (€31.1 million in 2008) and intangibles of €20.9 million (€14.6 million in 2008).

Consolidated pre-tax profit came to €63.9 million, a fall of 57.8% on the €151.4 million of 2008, with an improvement of €44.2 million in net financial charges, the result of the lower cost of money, as well as lower average indebtedness and capital gains from debt restructuring activities (€14.5 million).

Consolidated net profit for 2009 amounted to €34.3 million, a 64.7% reduction on the €97.1 million (around €32 million of which from capital gains) of the previous year.

Consolidated gross cash flow (net profit plus amortizations) at 31 December 2009 came to €68.7 million compared with €142.8 million in 2008.

The consolidated net financial position went from -€490.3 million at the end of 2008 to -€372.9 million on 31 December 2009, an improvement of €117.4 million; compared with 30 September 2008 (i.e. before the sale of 80% of Mondadori Printing) the improvement was of €271.6 million.

Information concerning personnel

On 31 December 2009 permanent and temporary contract staff employed by the companies of the Group amounted to 3,750 (3,925 on 31 December 2008).

The consolidated figure, therefore, shows a fall of 175 (-4.5%), obtained through a block on turnover and efficiency policies related to the launch of the restructuring plan.

Personnel costs for 2009 came to €302.8 million, a fall of 15% compared with the previous year. However, the figure is not comparable in that the figure for 2008 includes, for ten months, the printing business. In fact, excluding the labour costs for Mondadori Printing and costs related to restructuring, the reduction was of 8%.

As already indicated, the Group will pursue, both in Italy and France, a reorganisation plan, begun in 2008, with the aim of achieving further significant efficiency gains by the end of 2011.

THE BUSINESS AREAS

· Books

The Mondadori Book Division recorded total revenues in 2009 of €425.7 million, compared with €434.3 million in the previous year (-2%); excluding add-on sales, the fall was of 1%.

During 2009 the Group published 2,449 new titles (2,695 in 2008) and 5,137 reprints (5,225 in 2008), a total of 51.6 million copies, compared with 53.4 million in previous year.

Over the year the Mondadori Group confirmed its leadership position, with a 28.4% market share in terms of value, an with a clear advantage over its competitors. The slight fall in the Group’s overall share was due to the expected downturn by Edizioni Mondadori compared with 2008, a year that was positively conditioned by the success of Paolo Giordano, winner of the Premio Strega with La solitudine dei numeri primi. Of note, compared with the previous year, was the growth in the market share of Einaudi, which, once again in 2009, was Italy’s second largest publishing house.

As regards the performance of the individual companies, Edizioni Mondadori generated revenues of €142 million, a slight fall on the previous year (-1.4%). Two new titles published in 2009 met with particular success among readers: Il simbolo perduto by Dan Brown, published in October, sold more than a million copies in just over two months (and became the year’s biggest selling title). There was also great success for Il tempo che vorrei by Fabio Volo, which in just over a month sold over 600,000 copies. Of particular note was Venuto al mondo by Margaret Mazzantini, winner of the Premio Campiello Letteratura. Published in November 2008, the novel had sold, by the end of 2009, a total of more than 500,000 copies. Remaining with Italian fiction, the exceptional sales of La solitudine dei numeri primi by Paolo Giordano continued which, two years after it was first published, has now sold more than 1,300,000 copies in Italy, and been published in 30 foreign translations.

In foreign fiction there was continued success for Marina by Carlos Ruiz Zafon (340,000 copies); of note in non-fiction was the book by Bruno Vespa, Donne di cuori, which sold more than 300,000 copies, making it the year’s top selling non-fiction title. Also the Strade Blu series saw continued success, especially with Roberto Saviano, with Gomorra and La bellezza e l’inferno.

During the period revenues at Einaudi amounted to €50.2 million (-2.9%). The fall was mainly due to a downturn in revenues for the sale of rights for add-on sales initiatives. Among the publisher’s series good performances were recorded Italian fictions (+27%), also as a result of the award of the Premio Strega to Tiziano Scarpa for Stabat Mater (over 140,000 copies), and by Economici (+5.3%). Other successful titles during the period included: Che la festa cominci by Niccolò Ammaniti (300,000 copies), Un luogo incerto and Scorre la Senna by Fred Vargas (a total of over 180,000 copies), Il museo dell’innocenza by Orhan Pamuk (55,000 copies).

Revenues at Sperling & Kupfer were up by 11.5% compared with the previous twelve months, reaching €23.2 million. Actions to re-focus the offer, begun in 2008, continued with a further containment in the number of new titles and copies produced. Among the biggest hits were Il gioco delle verità by Sveva Casati Modignani (170,000 copies).

In 2009 Piemme generated net revenues of €44.4 million (-8.8%). This result was achieved thanks to the excellent performance of the religion and paperback lines, that compensated for an expected downturn in fiction, determined by hard cover sales of Hosseini.

Revenues at Mondadori Electa during 2009 came to €40.3 million, a 5.4% fall on the previous year.

Mondadori Education generated net revenues of €81.7 million (-5.1%), maintaining a significant position in the school textbook sector, with a market share of 13.3%, and confirming its leadership position in the primary school segment.

· Magazines Italy

2009 was strongly characterised by the effects of the crisis in the second half of 2008 which continued to affect also the year just ended.

The fall in consumer spending affected all sectors of print media, impacting readers propensity to buy and, even more markedly, the level of advertising investment in traditional media. In terms of circulation, there was not so much a fall in the number of buyers as a downturn in the frequency of buying.

The fall in advertising revenues was, in turn, affected by both a fall in volumes and an inevitable reduction in ad rates. It should be noted, however, that Mondadori titles outperformed the market, in particular in the most relevant segment, that of weeklies.

In this difficult context, which in any case saw a strong reaction by Mondadori in terms of initiatives and management, the revenues of the Division in Italy came to €494.3 million, a fall of 14.1% compared with the €575.7 million of 2008.

This was largely due to the following phenomena:

• a fall in circulation revenues (-3.6%) mainly the result of a reduction in volumes and only in part compensated by cover price increases;
• a marked slump in add-on sales (-18.4%) which, while sustained by a significant increase in the number of initiatives, recorded an expected fall in average sales per single operation;
• a substantial downturn in advertising revenues (-27.1%) split across, albeit unevenly, all advertising sectors and almost all titles.

Actions taken to face this unfavourable market situation included the support and development of titles, with a priority on actions aimed at improving efficiency and reducing operating and structural costs.

In the last quarter of 2009 the Group was also engaged in the implementation of an ambitious corporate restructuring plan, made possible by agreements reached with the unions in August and October for the adoption of measures foreseen by current norms to be applied at times of crisis, as well as individual incentives, affecting both graphics/layout and journalistic staff.

In terms of circulation, in a market that was a downturn of around 7%, Mondadori confirmed its leadership with a share of around 35%.

In the women’s segment Donna Moderna maintained its circulation revenues thanks also to an increase in the cover price introduced at the beginning of the year, while in the market area Grazia more than confirmed the sales levels of 2008. Of special note were the sales of Tu Style, so radically redesigned as to be considered an authentic “launch”, that drove circulation to 190,000 copies (+45%), increasing circulation revenues by 30%.

In the newsmagazine segment Panorama underlined its position of pre-eminence by further expanding the gap from competitors.

In the TV guides segment, which has been suffering from a long-term decline in circulation, the various titles in the Mondadori portfolio resisted rather well. In particular TV Sorrisi e Canzoni which, thanks to both a cover price increase during the year and constant efforts to renew the title, saw a very contained fall in circulation (-3%).

Among monthly titles there were particular problems with titles in the interiors and design segments (-5% in circulation revenues) while cookery titles performed well, showing growth in both circulation and revenues.

There were also promising prospects for Flair which, after its July relaunch, saw an encouraging increase in newsstand sales.

In add-on sales, that have been particularly relevant in the past for the profitability of a number of publishing groups, there was a continuation of the negative trend (-22.1%). Mondadori nevertheless generated significant revenues, performing slightly better than the market (-18.4%), and confirming its position as market leader, also with respect to the leading national daily newspapers.

Digital

Mondadori is active online with 47 web sites that cover all of the Group’s activities, with 2009 revenues that recorded growth of 13%, in a market that grew by 5.1% (Source: Nielsen).

Particularly positive was the performance of the Group’s sites for women, including Donnamoderna.com, Starbene.it, Grazia.blog.it and Cosmopolitan.it. Leadership in the segment will be further strengthened in 2010 with the GraziaMagazine.it site, launched in February.

International activities

During 2009 the international activities of Mondadori magazines generated total revenues of €118.5 million.

Thanks to a good performance by titles, and in particular an excellent performance by Grazia UK, licensing revenues were up by 15.4%; there was also a sharp increase in revenues from advertising for titles in the network (+34.4%), which partly compensated the fall in syndication revenues.

During the year the intense activities for the launch of new international editions continued: Grazia arrived in China, France, Thailand and Indonesia; Flair in the Czech Republic, Slovakia, Slovenia and Hungary, and Casaviva in India. Despite the overall economic-financial crisis, and the specific difficulties facing the media, the initial indications form these new initiatives are very positive and ahead of expectations.

In February 2010 the ‘Grazia International Network’ expanded again with the launch of the German edition of the magazine.

The subsidiary Attica was affected in Greece and the Balkans by cutbacks in advertising expenditure, but a sharp focus on containing costs was able to counterbalance the fall in revenues (-16.2%).

Among the international editions produced by the Group’s joint ventures, special mention should be given to Grazia Russia and Grazia China, launched in February 2009, that achieved higher than expected levels of circulation, in the face of advertising revenues that were affected by the international economic downturn.

• Magazines France

The Magazine Division in France generated 2009 revenues of €343.5 million, a fall of 8.2% compared with the €374.1 million of the previous year. On a like-for-like basis, i.e. net of titles sold and new launches, the fall was of 6.6%.

During the period the activities of Mondadori France were characterised by the following:

• the launch, at the end of August, of the weekly Grazia France, the upscale women’s title that from its first issues was well received both by readers and by the advertising market. Average circulation reached 180,000 copies (Source: OJD 2009), compared with an initial target of 160,000; while on the advertising side, Grazia France remained at an average of 32 pages per issue (+50% on the target), with a portfolio of upscale clients (fashion and cosmetics);
• the grouping of the magazines Auto-Journal and Sport Auto in the EMAS joint venture, that publishes the weekly Auto Plus, means that it will become the leading publisher in the auto segment in France and a vital point of reference for advertisers in the sector;
• a company reorganisation plan that foresees the cessation of publication of six titles (Mixte, Caméra Video, Le Photographe, ADDX, FHM and La Nouvelle Revue du Son et du Home Cinema) in line with the policy of focusing on more mass market titles, will also make it possible to realise significant cost reductions;
• a plan to optimise costs concerning the company’s offices will be completed in 2010.

These changes, along with significant measures related to the restructuring of the company, had a negative impact at the operating level during the year of around €28 million.

Circulation revenues at Mondadori France, which include newsstand sales and subscriptions (around 70% of the total), were down by 6% (-4.9% on a like-for-like basis).

In detail, newsstand sales fell by 8.9%, while subscriptions were in line with the previous year. According to DFP (Diffusion France Payée) figures, the company saw a shortfall in terms of copies of 1.8%, outperforming the market (-3.5%). Among the best performing titles were the monthlies Biba, Science&Vie Junior, Modes et Travaux and Top Santé, and the weekly Télé Star which was the top performer in the TV guides segment.

2009 was particularly difficult for the advertising market in France, with investments down by 13% (in terms of volume, Source: TNS). Mondadori, meanwhile, performed better than the market with a fall of 10.3% in terms of volume, thanks to the aforementioned launch of Grazia and a good performance by Biba in the upscale monthly segment, recording revenues of €81.6 million (-13.8% compared with the previous twelve months).

· Advertising

Mondadori Pubblicità ended 2009 with revenues of €250.4 million, compared with the €331 million of 2008 (-24.4%), proving able to at least partially contain the slump recorded in the first months of the year, thanks to a decidedly better second half in the markets of reference. The market share in magazines covered by the advertising company in 2009 was of around 26.6% (Source: Nielsen).

The results of 2009 were also characterised by two changes:

– total sales were impacted by the absence, in the last two months of the year, of the titles published by Società Europea di Edizioni S.p.A. (Il Giornale and its supplements);

– the inclusion of sales for Radio Kiss Kiss from the month of March 2009.

The magazine portfolio, essentially unchanged with respect to 2008, recorded a performance that, while decidedly negative (-27.6%), was nevertheless better than the market of reference, despite a slump in some key sectors for the company, including fashion, furnishings, cosmetics, as well as auto, telecoms, finance and FMCGs. This result was made possible thanks to the weekly titles, while monthlies were in line with the market.

Sales for radio in 2009 were above the trend in the market, where R101 ended the year with a fall of 6.4%, but included sales for Radio Kiss Kiss, which entered the portfolio in March 2009, increasing the company’s revenues in the sector to a total of €25.5 million.

On the Internet front, there was a substantial recovery in the summer months, with the Donnamoderna.com site recording an increase in revenues of 13.8%.

Mediamond, the joint-venture between Mondadori Pubblicità S.p.A. and Publitalia ‘80 S.p.A. for online advertising online, began operations in January 2010 and currently can count on a product portfolio that every month reaches around 8 million unique users with 600 million page views.

• Direct marketing

In 2009 the market for direct marketing saw a downturn of 15.8% (Source: Nielsen in terms of value). In this context Cemit Interactive Media reacted by identifying new clients and new operations, which had greatest success among a number of important Italian companies in the consumer. financial-insurance, automotive and non-profit sectors. All of which made it possible to contain the fall in revenues to 6.3%, closing at €20.9 million, compared with €22.3 million in 2008.

• Retail

The total revenues of the Retail Division in 2009 amounted to €194 million, essentially in line (-0.3%) with the €194.5 million of 2008, with different trends in the two halves of the year: the first six months closed with a fall of 3.6%, while the second half recorded growth of 2.4%.

Mondadori Franchising recorded 2009 revenues of €74.2 million, an increase of 11.6% on the €66.5 million of 2008. During the period the company continued with its expansion programme, and the network now has the largest number of outlets for the sale of editorial products in Italy, with 249 bookshops (227 in December 2008) and 203 Edicolè (177 in December 2008).

Mondadori Retail generated revenues in 2009 of €119.8 million (-6.4%), compared with €128 million in 2008. A revenues breakdown shows that trends were different for different categories of goods. Editorial products remained essentially unchanged, stationery and gifts grew while there was a fall in IT and audio-video.

The network continued to expand in 2009 with the opening of three new outlets (Rome, Turin and Palermo), bringing the total to 23 bookstores and 9 Multicenters.

• Radio

Advertising investments in radio market during 2009 were down by 7.7% on the previous year (Source: Nielsen). The excellent performance in the last quarter went a long way to rebalancing the sharp slump in the first months of the year. It also raises hopes for 2010 and confirms the value and the credibility of radio as an effective advertising media.

2009 net revenues at R101 amounted to €13.8 million (-6.8%), compared with €14.8 million in 2008, and correspond to advertising sales of €16.9 million (-6.4% on the €18.1 million of 2008).

I terms of ratings, R101 confirmed its position as the 5th most popular commercial radio network in Italy among those who have participated in the new Audiradio diary panel, with a daily average of around 2 million listeners and around 6.2 million over 7 days, reaching a pool of around 9 million listeners over 28 days.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore S.p.A., for the year to 31 December 2010, shows a net profit of €53.2 million (€66.2 million on 31 December 2008), while gross operating profit came to €43.6 million (€97.9 million in 2008).

The last indicator was particularly affected by the negative performance of the Magazine Division, which was in difficulty in terms of circulation, saw a further fall in the market for add-on sales and for a severe downturn in advertising.

FORECAST FOR THE FULL YEAR

There were no significant changes in prevailing market trends in the first two months of the current year compared with the previous year in terms of consumer spending and , above all, in advertising investments. It is there fore reasonable to presume that there will be a continuing period of uncertainty before any solid recovery.

Given this situation, significant importance should be given to the Mondadori Group’s commitment to reducing operating costs, with the pursuit of measures additional to those that already in the fourth quarter of 2009 allowed the company to record a level of profitability close to that of the same period of the previous year.

The strategic priorities on which the company will focus during the year will include a further focus on product quality and the management of the core business, alongside investments in growth areas, above all digital.

Over the short term it remains difficult to make detailed forecasts for the markets in which Mondadori operates. It is, however, possible to estimate that, unless there is a downturn in the current trends in advertising investments, the company will be able to improve the level of operating profitability compared with last year.

§

PROPOSAL FOR THE DESTINATION OF NET PROFIT FOR THE YEAR ENDED 31.12.2009

The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 27 April 2009 (or 28 April on second calling), the deposit of the entire net profit for the year ended on 31 December 2009 of Arnoldo Mondadori Editore S.p.A., equal to €53,179,772.38, to the extraordinary reserve.

The proposal of the Board of Directors not to pay out a dividend for 2009 is consistent with the context indicated in the forecast for the full year and will also to allow the company to successfully complete the ongoing process of reorganisation and to pursue the activities indicated above.

§

SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD ALREADY COMMUNICATED TO THE MARKET

On 8 February 2010, Arnoldo Mondadori Editore S.p.A. signed a preliminary agreement with Società Holding Industriale di Grafica S.p.A. for the acquisition of 50% of the share capital of Mondolibri S.p.A., 50% of which is already owned by Mondadori in a joint-venture with Direct Group Bertelsmann.

§

DECLARATION BY THE EXECUTIVE RESPONSIBLE FOR THE COMPANY’S ACCOUNTS

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

§

The results of 2009 will be outlined by the deputy chairman and chief executive, Maurizio Costa, and the CFO, Carlo Maria Vismara, at a meeting with the financial community to be held today at 14.30 pm at the company’s headquarters in Segrate.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2008 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

As is well known, there was a further worsening of the macro-economic scenario in the last three months of 2008. Indeed, the downturn was worse than the already pessimistic forecasts and the crisis that affected the financial sector at an international level had a serious impact on the productive sectors, on employment and on consumer spending in industrialised countries, as well as slowing growth in developing countries. Confirmation of the depth of the current recession comes also from the extremely negative perceptions regarding the evolution of the situation in the short to mid-term, with an inevitable impact on investments and spending. Also in Italy, where the banking system has been less exposed to assets risks than other European countries and the United States, the crisis has, nevertheless, had a serious effect on the real economy, with a fall in GDP of 1%, something not seen since 1975.

For Mondadori and its markets of reference, the following observations can be made:

– in Italy, while there was not an acceleration in the downturn in both circulation and add-on sales, the Group’s market share remained essentially unchanged. On the advertising front, investments, in the last part of the year, saw a marked fall. Meanwhile, the volume of business in the book sector, in which the Mondadori Group consolidated its position of absolute leadership, remained essentially unchanged;

– in France the downward trend in advertising continued, while magazine circulation, both newsstand sales and subscriptions, were in line with the previous year.

MANAGEMENT RESULTS AT 31 DECEMBER 2008

As communicated to the market in October 2008, Mondadori sold 80% of the share capital of Mondadori Printing S.p.A. to Gruppo Pozzoni; a comparison between the Mondadori Group’s consolidated revenues and gross operating profit in December 2008 and the figures for the previous year are consequently also represented on a like-for-like basis, excluding. Consequently, the results, both for 2007 and 2008, of printing activities sold with effect on the company’s accounts from the month of November 2008 and, therefore, consolidated for only ten months of 2008.

Consolidated revenues for 2008 came to €1,819.2 million (-7.1% on the €1,958.6 million of 2007).On a like-for-like basis, the fall was of 6%. While, net of the add-on sales, turnover recorded a fall of 2.5%.

Consolidated gross operating profit for the year amounted to €249.2 million (-7.3% compared with the €268.9 million in the previous year). As a proportion of revenues, the figure is 13.7%, in line with 2007.

Excluding the activities of Mondadori Printing, the difference in operating profit was -€2.7 million (-1.2%), essentially due to: the positive business performance (+€6.5 million); a fall in add-on sales (-€13.3 million); increased investments in business development (-€7.9 million); higher organisational restructuring costs (-€4.7 million) and increased capital gains (+€16.7 million).

Consolidated operating profit came to €203.5 million, (-9.6% on the €225.2 million of 2007), with amortizations and depreciations of fixed assets of €31.1 million (€36.5 million in 2007) and of intangible assets of €14.6 million (€7.2 million in 2007).

As a proportion of revenues, as shift from 11.5% in 2007 to 11.2%.

Consolidated profit before taxation amounted to €151.4 million (-20.1% compared with the €189.5 million of 2007). Net financial charges increased by €16.4 million due to the higher cost of debt (around €6 million), lower returns on financial assets (around €8.3 million, partly due to writedowns) and financial charges for actualization of the deferred part of the payment for Mondadori Printing (€2.1 million).

Consolidated net profit on 31 December 2008 amounted to €97.1 million (-13.8% compared with €112.6 million in the previous year).

Gross cash flow for came to €142.8 million, compared with €156.3 million in 2007.

The net financial position went from -€535.3 million at the end of 2007 to -€490.3 million on 31 December 2008; during the period payments for tax of €80.4 million and dividends of €83.8 million were made, while the positive financial effect of the sale of 80% of Mondadori Printing S.p.A. amounted to €121.4 million.

THE BUSINESS AREAS

· Books

Against a general background of falling consumer spending, the performance of the trade segment of the Italian book market in 2008 was essentially in line with that of 2007 (-0.6% in terms of value, for medium to large sized bookstores: source Nielsen Bookscan).

In this context the Mondadori Book Division confirmed, by a wide margin, its leadership, with a market share of 28.8%; total revenues amounted to €434.3 million (-2.4% on the €445 million of the previous year).

The slight downturn in revenues, largely the result of a marked fall in the sale of rights for add-on sales initiatives, would, therefore, net of add-on sales, be -1.1%.

During the period Mondadori maintained the excellent levels of profitability of the previous year, with a gross operating profit, as a proportion of revenues of 19.1%.

In 2008 the Group published 2,695 new titles (compared with 2,742 in 2007) and 5,225 reprints (5,242 in 2007), a total of 53.4 million copies, compared with 54.6 million in 2007.

Among the Group’s publishing houses, Edizioni Mondadori recorded 2008 revenues of €144 million (+4.7% compared with €137.6 million the previous year). Of note during the year was the success of two first-time authors whose books sold more than one million copies: Paolo Giordano, winner of the Strega Prize with his novel La solitudine dei numeri primi and Roberto Saviano with the long seller Gomorra, first published in 2006. Also of note was the new novel by Margaret Mazzantini, Venuto al mondo, which sold more than 300,000 copies. There were also good results for Idi di marzo by Valerio Massimo Manfredi (250,000 copies) and Storia di neve by Mauro Corona (100,000 copies).

Einaudi generated revenues for the year of €51.7 million, an increase of 3.6% on the €49.9 million of 2007. This increase was the result of excellent sales through the bookshop and large-scale retail channels, thanks to the very positive sales of numerous books with average and high print runs.

With a market share of 13.4%, Mondadori Education in 2008 maintained a significant position in the educational market and leadership in the primary school textbook segment: net sales revenues generated by the company in the period amounted to €86.1 million (-1.1% on the €87.1 million of the previous year).

· Magazines

The Magazine Division generated consolidated revenues in 2008 of €949.8 million (-9.3% on the €1,047.7 million of 2007).

Italy

Mondadori maintained in 2008 its position of absolute pre-eminence, with revenues in Italy of €575.7 million (-12.5% compared with €657.8 million in 2007); net of add-on sales, the fall was of 4.4%.

Performace during the year was characterised by the following phenomena

– A fall in circulation revenues of 5.1%, in line with the market of reference;

– A marked decline in add-on sales (-28.6%) in line with the sector, but with good levels of profitability;

– A fall in advertising revenues of 5.3%, in a market that fell by 7.1%: it is a downturn that was especially marked in the second half of the year.

Among women’s titles, Donna Moderna consolidated its leadership; in newsmagazines, Economy saw a significant increase in its newsstand sales.

In the TV listings segment, which has been hit by a generalised fall in circulation, TV Sorrisi e Canzoni bucked the trend by maintaining weekly sales of more than one million copies. In the entertainment segment, Chi remained the most vivacious magazine with sales in line with 2007. In the up market women’s segment, while Grazia and Flair recorded more limited circulation, sales were still in line with the previous year and they had a marked penetration in the advertising market. Good results were recorded by both the cooking and design titles.

France

In 2008 Mondadori France generated total revenues of €374.1 million (-4.1% compared with the €389.9 million of 2007).

Circulation revenues by Mondadori France, which account for 70% of the total, remained at the level of the previous year (+0.6% on a like-for-like basis, net of the sale of niche title in the Sport e Loisirs area), thanks also to the positive performance of the leading titles, as Closer that confirmed its leadership in its segment; there was a positive performance in the up market segment Haut de gamme, in which Mondadori has Biba, and as a consequence of re-designs on a number of titles in the Femme Grand Public segment. There was a drop, in line with the market, for TV titles.

On the add-on sales front, the initiatives launched by the company during the year generated an increase in revenues of 7.2% compared with the previous year, but with the negative contribution being the result of a market that is structurally still not ready for development.

The revenues of Mondadori France from the sale of advertising saw a downturn of 14.5% in 2008, in line with a market in considerable difficulty; on a comparable basis the fall was of 12.3%.

The company, which is also penalised by its poor presence in the up-market segment, the only sector that grew compared with the previous year, did, in any case, safeguard its market share.

In terms of profitability Mondadori France in 2008 generated a gross operating profit, as a proportion of revenues, of 10.5% (12.5% net of add-on sales), thanks also to the ongoing control and reduction of costs that have generated savings in industrial distribution and labour costs.

International activities

2008 was characterised by intense number of new launches of the Mondadori Group titles in international markets, including Flair in Austria, Casaviva in Greece, Bulgaria and Serbia, Sale e Pepe in Romania, Grazia Casa in Croatia. The Grazia network expanded during the period to include new editions in India and Australia, both of which generated positive results from the first months of publication.

During the year the stage was set for the launch of Grazia in China and Casaviva in India, which went ahead in the first quarter of 2009.

Overall, at the end of the year, the Mondadori titles in world markets numbered nineteen, with revenues from licensing and commissions from the sale of advertising up by 30% on 2007.

There were also positive results from the Greek subsidiary Attica, leader in circulation and advertising in Greece and with a significant presence also in Romania and Bulgaria.

· Advertising

Mondadori Pubblicità ended the year with revenues of €331 million (-5.3% on the €349.5 million of 2007). Thanks to a good performance in the first half of the year, the company was able to at least partially offset the marked downturn in the market in the second half.

In particular, in a magazine market that lost 7.3%, the company recorded sales on its portfolio of titles of €242.6 million (-4.8%).

In the radio market, meanwhile, which showed an overall increase of 2.3%, R101 saw its advertising revenues grow by 23.9%. There was also a significant increase in advertising sales for the Group’s web sites (+27%), in a market that grew by 13.9%.

• Grafica

As mentioned above, the consolidated revenues from the Group’s printing activities refer only to the first ten months of the year. During this period there was a marked downturn in turnover, which came to €316.3 million (-28.1% on the €439.9 million of 2007).

This fall was the result of, in addition to two fewer months of business, the loss of the contribution of Mondadori Education that had been present in 2007, a marked reduction in magazine paginations and a sharp fall in the market for add-on sales.

• Direct marketing

In 2008 Cemit Interactive Media recorded revenues of €22.3 million, a fall of 6.7% on the €23.9 million of the previous year, while maintaining an excellent level of profitability (+18.4%).

• Retail

Total revenues by the Retail Division in 2008 amounted to €194.5 million (+6.2% on the €183.2 million of 2007). During the period the Group’s network of stores reached 434 units, making it Italy’s most extensive network of sale outlets for editorial products.

Mondadori Retail S.p.A. generated 2008 revenues of €128 million (+2.7% on the €124.6 million of 2007). During the year, having completed the integration of the ex-Messaggerie Musicali, there was an increase in the number of outlets (up to 30 from the 29 in 2007) and a simultaneous rationalisation of the chain.

Mondadori Franchising S.p.A. generated revenues of €66.5 million (+13.7% on the €58.5 million of 2007). During the period there was an increase in the number of bookstores, from 212 in 2007 to 227 in December 2008, while the number of Edicolè outlets rose from 136 in 2007 to 177 in 2008. Of note was also the testing of and formats were, including a children’s bookshop and a new form of franchising that combines the traditional bookshop and the book club.

• Radio

In 2008 R101 recorded net revenues of €14.8 million (+31% on the €11.3 million of 2007), which corresponds to gross advertising sales of €21.8 million (+23.9% on the €16 million of 2007), in a market that grew by just 2.3%.

In terms of ratings, the Mondadori Group’s radio reached an average daily audience of 2.1 million listeners, an increase of 7%, confirming its position among the top six Italian commercial radio stations, with around 8.4 million listeners over the 7-days.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2008, shows a net profit of €66.2 million (€90 million on 31 December 2007).

FORECAST FOR THE FULL YEAR

As is known, figures for consumer spending in the first months of the current year, in all the principal economic sectors, show a further decline compared to the end of 2008 and a climate of great uncertainty means that also investments are down or, at least, postponed.

In the previous year, the Mondadori Group was able to safeguard its levels of profitability thanks to the diversification of the business and, above all, to cost cuts, in anticipation of the growing crisis.

For a 2009 that is already heavily influenced by the consequences of the general situation in the publishing sector and the impact of technological changes, the company will continue to pursue cost savings, organisational simplification and the re-engineering of processes, also through the specific allocation of dedicated investments.

The trend in revenues in the first months of the year and the objective difficulty in foreseeing developments and the evolution in consumer spending and investments, especially in advertising, over the coming months, suggest a prudent approach in forecasting the company’s performance in 2009, which, in any case, is not expected to be at the same level as the previous year.

§

PROPOSAL FOR THE ALLOCATION OF THE NET PROFIT FOR THE YEAR 2008

The Board of Directors will propose to the Annual General Meeting of the Shareholders, to be held on 29 April 2009 (on first calling, or 30 April on second calling), the allocation of the entire net profit for the year to 31 December 2008 of Arnoldo Mondadori Editore S.p.A., amounting to €66,197,031.51 to an extraordinary reserve.

Given the lack of clear signs of an improvement in the market, the Board’s proposal to not distribute a dividend for 2008 is aimed at allowing Mondadori to maintain its financial solidity, maintain the necessary levels of investment in products, finance the reorganisation process, and to ensure that the company is ready to take advantage of possible opportunities deriving from a recovery in the economic cycle.

§

PROPOSAL TO THE SHAREHOLDERS FOR A STOCK OPTION PLAN FOR THE THREE-YEAR PERIOD 2009-2011

Following the termination of the Stock Option plan for the previous three-year period 2006-2008, the Board of Directors have resolved, following the recommendations of the Remuneration Committee, to propose to the Annual General Meeting of the Shareholders, to be held on 29 April 2009 (on first calling, or 30 April on second calling) a Stock Option Plan for the three-year period 2009-2011, as per Art 114 bis of Legislative Decree, 58/1998.

The purpose of the Plan is essentially to give the company and its subsidiaries access to a tool with which to promote loyalty and render the management more directly involved in the results.

In conformity with art. 114 bis of legislative decree N°58 of 24 February 1998, the fundamental characteristics of the Plan to be approved by the shareholders are as follows:

Participants in the Plan

Participants in the Plan will be identified by the Board of Directors from: managers of the company or its subsidiaries with functions critical for the attainment of the group’s strategic objectives; directors of the company and its subsidiaries; journalists of the company and its subsidiaries with the position of editor or co-editor; managers of the holding company who carry out their function in the interest of the company.

Participants may therefore also include “relevant subjects” belonging to the categories, as at Art. 152 sexies, para. 1, C.1), C2) of CONSOB Regulation 11971/1999.

Implementation of the Plan

The Plan is organised in annual allocations to the participants of options, which are personal and non-transferable, for the acquisition of shares of the company, held in the portfolio or through subsidiary companies. Implementation of the plan is subordinate to the attainment of the company’s performance objectives as determined by the Board of directors following the recommendations of the Remuneration Committee. Exercise of the allocated options will be further subordinate to a lock-up period and will be possible only within a defined period.

Criteria for the determination of the purchase price of shares

The price of such shares will be calculated on the basis of the arithmetical average of the reference price of Mondadori ordinary shares, in the period measured by the Borsa Italiana that goes from the date of allocation to the same day of the previous month.

Subject to the approval by the AGM, Board of directors will define, in the light of the above, Regulations for the implementation of the Stock Option Plan.

§

RE-ATTRIBUTION OF POWERS AS PER ARTT. 2443 AND 2420 TER OF THE CIVIL CODE

Following the expiry of the five-year attribution of powers made by the Shareholders’ Meeting of 2004, the forthcoming AGM (the extraordinary part), to be held on 29 April 2009 (on first calling, or 30 April on second calling), will be asked to approve the re-attribution of powers to the Board of Directors to resolve capital increases and the issue of convertible bonds, as per artt. 2443 and 2420 ter of the Civil Code.

The new powers are in line with the previous expiring powers, both in terms of duration (five years, in accordance with current legislation) and for the maximum sums (a nominal €78 million and €260 million respectively).

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

§

The results of 2008 will be outlined by the deputy chairman and chief executive, Maurizio Costa, and the CFO, Carlo Maria Vismara, at a meeting with the financial community to be held today at 2.30 pm at the company’s headquarters in Segrate.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2007 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

During 2007 Mondadori consolidated its leadership position in Italy in an essentially stable market for books and a magazine market in which a downward trend continued, especially for add-on sales.

Organisational changes and improvements in efficiency across the group, combined with the integration of Mondadori France, nevertheless made it possible to record results for the overall performance and that of activities in France that were better than expected, in a market that, especially in terms of advertising investments, is going through a difficult phase.

Consolidated revenues for 2007 came to €1,958.6 million, an increase of 11.9% on the €1,750.2 million of 2006 (+16.8% with a like-for-like inclusion of the distribution business)[1].

Consolidated gross operating profit amounted to €268.9 million, compared with €240.3 million in the previous year, an increase of 11.9%, and 13.7% as a proportion of revenues, a figure in line with that of 2006.

Net of non-recurring and extraordinary items, thanks to the performance of the various divisions, there was a 16.7% increase in the group’s operating margin, despite increased investments in business development of €8.8 million.

Consolidated operating profit came to €225.2 million, an increase of 11.8% on the €201.4 million of 2006, after increased amortizations of around €4.8 million resulting from the acquisitions in France and of Messaggerie Musicali. As a proportion of revenues, the figure of 11.5% was in line with the previous year.

Consolidated profit before taxation amounted to €189.5 million, a slight rise (+0.3%) on the €189 million of 2006. This result felt the impact of higher financial charges of €23.3 million, around €13.7 million due to the higher average indebtedness during the year and the rest from increases in interest rates resulting from the general economic climate.

Consolidated net profit came to €112.6 million, an increase of 3.3% on the €109 million of 2006. There was a benefit in 2007 from lower tax charges, despite a higher level of non-taxable income in 2006 and the difference in the results of holdings consolidated on an equity basis.

This is essentially the result of the net effect of the use of deferred tax liabilities and the replacement tax applied, in line with the provisions of the last government budget regarding the taxation of certain corporate assets. There was an insignificant improvement (+€0,4 million) form the application of new IRES and IRAP rates to both deferred and advance taxes.

Gross cash flow for came to €156.3 million, compared with €147.9 million in 2006.

The overall net financial position showed a deficit of €535.3 million on 31.12.2007, compared with a deficit of €554.7 million on 1 January 2007, an improvement of €19.4 million despite net investments of €58.9 million, share buy-backs for €10.3 million, dividend payments of €84.7 million and taxes of €86 million.

THE BUSINESS AREAS

· Books

In 2007 the total revenues of the Mondadori Group’s Book Division came to €445 million, an increase of 1.3% on the €439.5 million of the previous year.

The gross operating margin, as a proportion of turnover, was 19.7%.

The Division saw a marked confirmation in 2007 of its leadership in the book market, overtaking the already excellent result of the previous year, with a value market share of 29% just in the mid-to- large bookstores; in the large-scale retail sector, the market share of the Mondadori Group’s publishing houses is estimated at more than 35%[2].

There were no significant changes during the year to the overall structure of the Division and the balance between its various sectors. The trade books sector (fiction and non-fiction, for adults and children) and accounts for 61.5% of revenues; educational publishing, which is managed by Mondadori Education (a new name adopted on 1 January 2008) accounts for 20%; while books in the Art, Architecture, along with cultural heritage activities, make up 11.7% of revenues.

During 2007 the Book Division published 2,742 new titles (2,787 in 2006) and 5,242 reprints (4,937 in 2006), a total production of 54.6 million books, compared with 56.4 in 2006.

Among the Group’s various publishing houses, the performance of Einaudi and Piemme has been particularly good.

In 2007 Giulio Einaudi Editore saw a 4.4% increase in revenues, to €49.9 million, compared with €47.8 million the previous year. This improvement was due to excellent bookstore sales as well as add-on sales operations.

Piemme generated revenues in the period of €55.7 million, an 18% increase on the €47.2 million of the previous year. This growth was mainly in the fiction area which saw an increase of around 90%, thanks to the exceptional sales of new titles published in May by Khaled Hosseini, Mille splendidi soli (which sold more than 1 million copies during the year) and Il Cacciatore di aquiloni (more than 800,000 copies in the year), both of which were at the top of the best sellers lists for 2007.

Edizioni Mondadori generated 2007 revenues of €137.6 million, essentially in line with the €137.9 million of 2006 (-0.2%); a result which remains very positive if the further reduction in the Dan Brown effect and the fall in the sale of rights for add-on sales initiatives are taken into consideration.

2007 was a particularly difficult year for Sperling & Kupfer with a 13.7% fall in revenues to €25.3 million, from the €29.3 million of 2006.

The revenues of Mondadori Electa in 2007 came to €51.1 million, a fall of 5.2% on the €53.9 million of the previous year. This was due to the sharp fall (around 40%) in add-on sales, which was partly compensated by stability in the cultural heritage and books area. In particular, book sales increased by 11.4% compared with the previous year, with an improved performance across all lines.

The net 2007 revenues of Edumond Le Monnier (as mentioned earlier, since 1 January 2008 Mondadori Education S.p.A.), came to €87.1 million (-0.7%), compared with €87.7 million in the previous year.

The company maintained its leadership in the educational market with a share of 13.9% and an analysis of the various segments shows that Mondadori Education remains the leader, among the big publishers, in the primary and middle schools sector, and is in the number two position in the high school sector.

On the distribution and logistics front, the Division’s revenues for the period amounted to €33.7 million, in line with the previous year.

The distribution of Piemme products, for the whole of 2007 (compared with just five months in 2006), had a marked impact and, over the year, saw an increase of almost 50% in the number of dispatches, while managing to keep the average days of delivery (2.1), essentially unchanged alongside further improvements in efficiency.

· Magazines

The Group’s Magazine Division generated consolidated revenues in 2007 of €1,047.7 million, an increase of 20.8% on the €867.2 million of 2006.

In a difficult market scenario, Mondadori was able to improve its levels of profitability compared with the previous year, thanks to ongoing efforts to contain costs and returns. Gross operating profit as a proportion of revenues was 14.8%.

The year was also affected by the inclusion of Mondadori France (twelve months in 2007 compared with only four in 2006) and by the contribution of distribution activities, in Italy, to Press-Di Distribuzione Stampa Multimedia S.r.l.: a reclassification on a like-for-like basis of the distribution business and net of the impact of Mondadori France, revenues for the period would be essentially in line with the previous year.

Italy

The revenues of the Magazine Division Italy came to €657.8 million, in line with the €657.9 million of the previous year, net of the effect of the abovementioned Press-Di.

The performance during the year was characterised by the following:

– a fall in circulation revenues (-3.7%) where there was a drop in the number of copies sold, also as a consequence of a number of titles being closed down;

– an excellent performance in add-on sales, in a market in marked decline (-19.4% in terms of volume), with revenues which increased by 3.4% compared with the previous year;

– a fall (-1,7%) in advertising revenues which were penalised by a reduction in the amount of space sold, and only partially compensated by rate rises;

– the launch of two titles with high advertising potential, First, a monthly supplement to Panorama, and Grazia Casa which completes Mondadori’s offer in the interiors segment;

– the closured of the monthly Per Me and the sale of the weekly Star+TV, penalised by both overcrowding in their respective segments and poor advertising sales;

– the development of internet activities which affected a number of titles. In this context, online advertising sales saw an above market average increase of 54%;

– strong operation cost controls, especially in the technical, commercial and editorial areas, which led to a marked recovery in efficiency.

On the circulation side, Mondadori’s performance was slightly better than the market, which overall saw a fall in terms of copies of around 4.7%, confirming the company’s absolute leadership in the sector (38%).

In women’s titles Donna Moderna confirmed its strength by maintaining circulation revenues. In the male lifestyle and newsmagazine area, Panorama saw a fall in circulation of around 3%, while confirming its consolidated leadership in the segment. First, meanwhile, made a significant contribution to the weekly title’s advertising revenues; positive results were also recorded by Panorama Travel, Economy and PC Professionale.

In the TV-entertainment and family segments (which saw a fall of 6% in copies) Mondadori titles had the best performance in the reference market. TV Sorrisi e Canzoni continues to sell around twice as many copies as its direct competitor and continues to generate revenues with add-on sales initiatives.

Chi maintained its circulation revenues while recording a significant increase in advertising sales.

The up market segment maintained its 2006 level, thanks to a stable performance by Grazia and growth in the design-architecture and cooking segments, which compensated for a downturn in interiors.

In terms of add-on sales, there was acceleration in the downturn in the market as a whole (-19.4%) even though the phenomenon continued to make a significant contribution to the revenues of publishing companies.

In such a difficult context, which has also affected newspapers, Mondadori was able to buck the trend with revenues that increased by 3.4% on 2006, confirming the company’s leadership with a market share of 36%.

In the distribution of editorial and multimedia products, in its first year of business Press-Di generated results that were widely ahead of expectations, thanks to the fine-tuning of the organisational structure and operations, increased efficiencies generated during the year and the expansion of services to new third-party clients.

On the digital side, the excellent performance of the Donna Moderna, Panorama, MyTech e Cosmopolitan sites made it possible to increase advertising revenues by 54%, in a market that grew by 42.7%.

France

Mondadori France ended its first full year as part of the Mondadori Group with consolidated revenues of €389.9 million.

During the year a number of actions were taken aimed at:

– carrying out a complete review of all titles, starting with the most important, and consolidating leadership positions;

– encouraging greater integration with the Italian parent company;

– redefining the area for online activities and testing the market for add-on sales;

– redefining the organisational model and cost structure.

In terms of circulation Mondadori France recorded positive results: in particular, the weekly Closer (+28% on the previous year) improved its position at the top of its segment; Auto Plus continued the positive trend with an increase of 11%; in a difficult, Télé Star performed well, thanks to the successful launch of the first add-on sales operation in the French magazine market.

The advertising market in France saw an overall slowdown in investments (-3.6%, source: Secodip) with a fall in space sold compared with the previous year, due to the election held in the first half and new opportunities for retailers to advertise on television, something that was previously not permitted by law.

In this context Mondadori France generated advertising revenues of €115 million, closing the year in line with the performance of the market, after having recovered during the summer the shortfall of the first half of the year.

International activities

On the international side the development of the “Grazia International Network” continued with the launch of Grazia in Russia and Holland: the revenues of the network grew by 35%, including not only licensing fees, but also the contribution of advertising sales in Italy for the foreign editions and syndication activities.

2007 also confirmed the prospects for other Mondadori brands in addition to Grazia:, Sale&Pepe in Serbia and Interni in Russia, as well as Casaviva, the first international edition of which was launched in Thailand in 2006.

Mondadori also formalised an agreement with SEEC Media Group Ltd. to create a joint venture in China for the launch of Grazia in 2008. During the current year the Mondadori title will also be published in Australia, following a licensing agreement reached with the Australian publisher ACP Magazines.

There was an excellent performance by Attica, thanks to a positive trend in circulation for TV guides and the exceptional performance of add-on sales of DVDs. During 2007 the expansion of the Greek company’s activities continued in the Balkans, the effects of which will be seen in this year.

· Advertising

Mondadori Pubblicità closed 2007 with revenues of €349.5 million, and increase of 1.9% on the €342.9 million of the previous year, thanks to a marked upturn in the fourth quarter compared to the same period of the previous year.

There were no significant changes to the portfolio during the period, excluding the addition of Famiglia Cristiana and the exit of the Disney titles.

Advertising sales during the period were characterised by a positive performance in the fashion sector, with a positive impact on women’s and family titles: of these Grazia (+3.5%) and Chi (+7.4%). The situation was more stable among titles for men, in which the strengths of the tried and tested Panorama “system” were confirmed, strengthened further by First and Travel; the up scale design and architecture segment also performed well (in particular Interni and Casabella), while for the magazines managed in joint-ventures, of particular note was the positive performance (+8%) of Focus (Gruner+Jahr/Mondadori).

Sales for R101, sustained by the marked increase in listeners, were up by 24.8%, decidedly ahead of the market (+8%).

· Printing

The 2007 revenues of the Printing Division came to €439,9 million, compared with €447.9 million in the previous year, a fall of 1.8%,.

Captive revenues totalled €279.2 million, and increase of 7.7%, while third-party revenues (€160.7 million) saw a fall of 14.8%, above all as a result of the decline in the add-on sale of editorial products with magazines and newspapers.

The foreign market for rotary printed commercial products was stable in terms of volume and in this context there was a positive consolidation of the company’s position with its main clients despite the European competitive scenario being affected by increased competition and price tensions.

The market for monochrome books, both hardcover and paperbacks. Linked to add-on sales initiatives by magazines and newspapers saw a marked fall compared to previous years. Meanwhile the performance of trade books was very positive, the foreign illustrated book market was stable, even though increased competition from the Far East continues to increase the pressure on prices.

Since 2007, four monthlies published by Mondadori France have been printed by Mondadori Printing; and further synergies have been developed for the supply of paper.

During the year there was a marked increase in energy costs due to the trend in oil prices, which increased by 5.7 % on 2006.

There was a slight increase in the cost of paper, continuing a trend that had been noted the previous year.

• Direct marketing

In 2007 the Direct Marketing sector, through the activities of Cemit Interactive Media S.p.A., recorded revenues of €23.9 million, in line (-0.4%) with the €24 million of the previous year.

After the fall off of business in the communication area due to the introduction of new privacy legislation in 2005, the company has brilliantly conducted a reorganisation of its structure and processes, refocusing its business on customer loyalty, an area in which Cemit continues to be the only operator able to offer a complete range of services.

• Retail

The total revenues of the Retail Division in 2007 came to €183.2 million, an increase of 33.4% on the €137.3 million of 2006.

Mondadori Retail generated revenues in the period of €124.7 million, an increase of 38.6% on the previous year, thanks to the opening of three bookstores in shopping malls in Lonato (BS), Rome and Nola (NA), the new Multicenter in Piazza Duomo in Milan and the contribution made by the incorporation of the two Mondadori Shop S.p.A. stores (formerly Messaggerie Musicali S.p.A.).

On a like-for-like basis, excluding for 2007 the revenues of Mondadori Shop S.p.A. and in 2006 the sales of big clients, the increase would be 10.6%.

Having brilliantly refocused the book offer, the performance of Messaggerie Musicali was particulalry positive, generating revenues of €35.5 million.

Mondadori Franchising saw significant growth in 2007, recording an increase in revenues of 23.7% to €58.5 million: the number of outlets rose form 266 in 2006 to 349 (of which 141 with the new Edicolè formula).

• Radio

The Radio Division’s revenues for 2007 came to €11.3 million, an increase of 21.5% on the €9.3 million of 2006.

During the year Radio R101 saw a further improvement in the quality of the product, enriching the schedule with new programmes and new presenters. At the same time brand-building and content communication efforts continued along with the significant implementation of the signal distribution for national coverage continued, thanks to frequency acquisitions made during the year (in particular in the Lazio, Campania, Emilia Romagna, Veneto and Puglia regions) increasing the level of coverage to 90%.

Audiradio figures for 2007 show a progressive increase in the number of listeners to R101 to an average daily level of more than 2 million. Compared with 2006, R101 recorded the best performance in the public and private radio market, with an increase of more than 40% in the daily average. Over the 7 days, listening figures, at more than 8.4 million, put the station among Italy’s top six commercial stations, after just two years.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2007, shows a net profit of €90 million, in line with the €90.2 million of the previous year.

DIVIDEND PROPOSAL

The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 22 April 2008 (or 23 April on second calling), a gross dividend, before tax, of €0.35 for each ordinary share in circulation on the date of coupon detachment.

In line with the terms outlined by the regulations for markets organised and managed by Borsa Italiana S.p.A., dividends will be payable from 22 May 2007 (coupon detachment: 19 May 2008).

FORECAST FOR THE FULL YEAR

Economic forecasts for 2008 continue to evolve, with negative indicators for production, consumer spending and the industrial costs.

The situation is complicated by the ongoing liquidity crisis making it both expensive and difficult to finance development while encouraging the recourse to low risk investment. In addition, differing monetary policies in Europe and the United States have led to acceleration in the strength of the euro, with inevitable consequences for companies involved in international trade.

In this context, in which the Italian economy would appear to be among the most exposed and fragile, the Mondadori Group will pay particular attention to managing its core business, which is less susceptible to such factors, and the international activities that reduce the dependence on the domestic market. During the year the development will continue of the international network, digital activities and the product portfolio in France.

The current situation makes it especially difficult to make forecasts for companies’ 2008 results, however Mondadori’s track record in recent years makes it possible to hypothesise operating results for the current year, net of development costs and extraordinary items, in line with the positive results of 2007.

§

As per article IA.2.9.3 n.4 of Italian Market Regulations document, bonded loans expiring over the 18 months from 31 December 2007 are hereby indicated:

– date of issue: 20/10/2003;

– amount: €109,900,000, corresponding to 1,099 bonds of €100,000 each, convertible in ordinary shares of Arnoldo Mondadori Editore S.p.A.;

– issued by: Mondadori International S.A., a wholly-owned subsidiary of da Arnoldo Mondadori Editore S.p.A.;

– guarantor: Arnoldo Mondadori Editore S.p.A.;

– date of expiry: 20/10/2008.

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

§

The results of 2007 will be outlined by the deputy chairman and chief executive, Maurizio Costa, and the CFO, Carlo Maria Vismara, at a meeting with the financial community to be held today at 3.00 pm at the company’s headquarters in Segrate.

[1] From 1 January 2007, following the contribution of the distribution activities for Italian magazines to Press-Di Distribuzione Stampa Multimedia S.r.l. (a wholly-owned subsidiary of Arnoldo Mondadori Editore S.p.A.) the method of accounting has changed from that of costs and revenues to a premium method.

A reclassification of such distribution activities, using the same method for 2006, shows that the increase in consolidated revenues would have been 16.8%. Excluding the effect of Mondadori France (included for the whole of 2007, compared with only four months in 2006 the volume of business would show an increase of 1.8%.

[2] Since January 2007 the measurement of sales for trade books (fiction and non-fiction) has been conducted by Nielsen Bookscan. Due to the different methodology adopted by this company and that used by Demoskopea, starting with the sample, the figures for 2007 cannot be compared with those of the previous year.