price sensitive

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.

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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.

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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.

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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).

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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.

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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 interim report for the first nine months of the year to 30th September 2008, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO

From the beginning of the second half of 2008, as feared, the effects on the real economy of the financial and macroeconomic problems that hade emerged in the preceding period began to be felt and had an immediate and somewhat violent impact on consumer spending. A period of recession is now almost certain, and it is difficult to forecast either the quantitative impact or duration.

In Italy that characterising element of the general situation in the market of reference for the Mondadori Group has been a further marked decline in advertising investments, while there has been a continuation, without particular variations, in the slowdown in circulation and add-on sales. The growth recorded by books in the first months of the year has also come to a halt.

In France, magazine circulation has fallen, but also here it is advertising that has been most affected by the situation of uncertainty about prospects in the short term.

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2008

Despite such a difficult context, the Mondadori Group confirmed its capacity on the revenue front, recording a gross operating profit – net of add-on sales – that was higher than that of the corresponding nine-month period of the previous year, notwithstanding ongoing investments in business development.

This has been made possible by paying close attention to operating costs and efficiencies in all areas of the company that has enabled the Group, also in the third quarter, despite a fall in revenues due to the economic situation, to increase its margins compared with the same period of the previous year.

Consolidated revenues for the first nine months of 2008 came to €1,368.1 million, a fall of 5.1% compared with the €1,441.7 million in the first nine months of 2007 (-1.5% net of add-on sales).

Consolidated gross operating profit at 30 September 2008 came to €168.8 million, a fall on 9.8% on the €187.1 million of the same period of the previous year (+1.8% net of add-on sales). As a proportion of revenues, a fall to 12.3% from the 13% of the same period of 2007.

Net of the impact of add-on sales (-€20.8 million) and non-recurring factors (increased capital gains: +€3 million; personnel: -€1.5 million due to the application of new regulations on leaving entitlements in 2007 and extraordinary charges), operating margin would have grown by €1 million due to improved business results (+€7.2 million) and increased investments in development activities (-€6.2 million).

Consolidated operating profit at 30 September 2008 came to €137.5 million, a fall of 11% on the €154.5 million of the same period of 2007, with amortizations and depreciations of tangible and intangible assets for a total of €31.3 million (€32.6 million in 2007); as a proportion of revenues, a fall from the 10.7% of 2007 to 10.1% this time.

Consolidated profit before taxation amounted to €104.5 million, a fall of 19.8% on the €130.3 million of the first nine months of 2007, with an increase of €8.8 million in net financial charges, essentially due to the increased cost of borrowing (around €4.7 million) and lower returns from financial investments (around €3.1 million) and the IAS regulations regarding leaving entitlements (€1 million).

Consolidated net profit at 30 September 2008 came to €58.8 million, a fall of 16.1% on the €70.1 million for the same period of the previous year.

Gross cash flow in the first nine months of 2008 amounted to €90.1 million, compared with €102.7 million in the first nine months of 2007.

The Group’s net financial position at 30 September 2008 showed a deficit of €644.5 million, compared to a deficit of €535.3 million at the end of 2007. During the period income taxes of €65.5 million and dividends of €83.8 million were paid out.

RESULTS OF THE BUSINESS AREAS

• Libri

In the first nine months of 2008 the Book Division generated revenues of €316.5 million, a fall of 3% on the €326.4 million of the same period of 2007 (-1.8% net of the contribution of the sale of rights for add-on sales initiatives).

During the period the Group confirmed its leadership in the trade segment with a marked advantage over its main competitors, despite a period of recession and a general decline in consumer spending. Particularly positive results were recorded by Edizioni Mondadori, that saw its market share increase by a full percentage point, and Einaudi, which confirmed its position as Italy’s second-largest publisher. In the first nine months of the year, the Turin-based publisher generated net revenues of €37 million, an increase of 5.4% on the same period of 2007.

Among the important events during the period was the exceptional success of La solitudine dei numeri primi, the first novel by a new writer, Paolo Giordano, which also won the 2008 Premio Strega, and has sold more than 800,000 copies; among the long sellers, of special note was Gomorra by Roberto Saviano, which reached one and a half million copies.

• Magazines

The Magazine Division generated revenues of €725.5 million in the period, a fall of 8.4% on the €791.8 million at 30 September 2007, largely due to the fall in add-on sales (net of add-on sales, the fall in the Division’s total revenues would be of just 3%).

Italy

Revenues generated in Italy in the first nine months of 2008 amounted to €440.9 million, a fall of 12.5% compared with the €504 million of the same period of 2007.

The shortfall in revenues is attributable to the following factors:

– weakness in circulation revenues (-5.2%) in line with the reference market, marked by a decline in all segments of the business;

– as already indicated, a marked fall (-29.9%) in revenues from add-on sales, in line with the main competitors. The on-going decline in this type of activity has necessitated a stricter selection of the initiatives in order to maintain significant margins while reducing the risks of failure.

– a downturn in magazine advertising (-2.1%) which, after an encouraging start in the first quarter, saw an abrupt slowdown, above all from the summer period.

On the circulation side, Mondadori consolidated its market share, maintaining its position of absolute leadership. The best performances were recorded in the news segment with Panorama, in women’s weeklies with Donna Moderna and in the up-market segment by Grazia and Flair, which also performed well on the advertising front.

France

In the first nine months of the year Mondadori France generated revenues of €284.6 million, essentially in line (-1.1%) with the €287.8 million of the same period of 2007.

Over the same period, the company continued its efforts to reduce costs, generating important savings on both the production and distribution fronts.

The circulation revenues of Mondadori France remained at the levels of the previous year (+0.1%). In particular Closer and Biba recorded excellent performances; Modes & Travaux and Top Santé held up well, as did Le Chasseur Français and Télé Star Jeux, following their re-launches, while difficulties continued in the TV guides segment. Overall, also subscription revenues remained at the levels of the previous year, thanks to marked increases for Closer and Auto Plus.

On the advertising side, France saw a continuation in the third quarter of the marked slowdown in advertising sales.

Mondadori France, while safeguarding its market share, was particularly penalised by a downturn in sales in the Femme Grand Public, TV and auto segments; while results were positive in the people and up-market segments, driven by strong growth in the circulation of Closer and Biba.

In this context, Mondadori France in the first nine months of the year recorded advertising revenues of €75 million, an 8.4% fall on the €81.9 million of the same period of the previous year.

International activities

During the period there was a continuation in the rise in revenues from the international editions of Mondadori titles. The network, which as of 30 September had reached 15 units, either licensing agreements or joint-ventures, expanded further in October with the launch of Sale&Pepe in Romania, Grazia Casa in Croatia and Casaviva in Bulgaria, followed in November by the launch of a Serbian edition.

• Advertising

Mondadori Pubblicità recorded revenues for the period of €244.7 million, a fall of 1.6% on the €248.8 million of the first nine months of the previous year.

After a positive first half, the third quarter saw a reflection, albeit to a lesser degree, of the worrying downturn in the market as a whole in the period.

As regards individual titles, there was expansion for the Grazia “system” (+9%) and a positive trend for Flair as well as TV Sorrisi e Canzoni and Panorama, despite a critical moment for the segments typically characterised as “male”. In other media, there was further consolidation in radio with a substantial (+33.3%) increase for R101, while in the Internet area, in line with the market, there was an excellent performance by the web site www.donnamoderna.com.

• Printing

The situation at 30 September 2008 saw a significant fall in revenues compared with the same period of the previous year, due to a general decline in the market.

During the third quarter there was a further marked reduction in pages due to the sudden arrest in advertising compared with the first half, and there was a confirmation of the slowdown in the market for newspaper and magazine supplements.

In the first nine months of the year the Printing Division recorded total revenues of €281.2 million, in fall of 15.6% on the €333.3 million of the same period of the previous year, mainly due to the absence of activities for Mondadori Education, that were present in 2007.

As for other areas, the market for catalogues and commercial products was stable and in line with expectations; illustrated books showed signs of recovery in the volume of printing in Europe, compared to the Far East, and interesting printing contracts for the American market.

There was a slight increase in the cost of paper in the period, in particular for the paper used in the printing of magazines. Utilisation of plant capacity was lower than the budget, despite a significant reduction in outsourcing.

• Direct marketing

In the first nine months of the year Cemit operated in an increasingly difficult market, characterised by reductions in communication investments. During the period the company recorded revenues of €15.9 million, a fall of around 7% on the €17.1 million of the same period of the previous year, while maintaining a good level of profitability thanks to an improvement in the mix, which was more focused of higher value added activities and the ongoing control of costs.

• Retail

Total revenues from the Retail Division in the first nine months of 2008 came to €128.6 million, an increase of 7.3% compared with the €119.9 million of the same period of the previous year.

Mondadori Franchising recorded revenues of €44.2 million, an increase of 13.3% on the €39 million of the same period of 2007, thanks above all to new affiliations. The company’s expansion programme continued during the period raising the number of its outlets to a total of 369, making it Italy’s largest network of outlets for the sale of editorial products, of which 212 are bookshops (205 on 30 September 2007) and 157 Edicolè newsstands (117 at the same point of 2007).

Mondadori Retail revenues in the first nine months of the year came to €84.4 million, an increase of 4.3% on the €80.9 million of the same period of 2007. During the period the number of directly controlled outlets rose to 30.

• Radio

The net revenues of R101 in the first nine months of the year amounted to €11.1 million, a 50% increase on the €7.4 million of the same period of 2007, and corresponding to gross advertising revenues of €16 million (€12 million at 30 September 2007).

The good audience ratings for the station were confirmed in the period, reaching an average daily audience of 2.1 million (+4.85% in the 5th Audiradio cycle compared to the same period of the previous year), in a slightly falling market.

SIGNIFICANT EVENTS AFTER THE CLOSE OF THE PERIOD

Sale of 80% of Mondadori Printing S.p.A.

As previously communicated on 14 October, Arnoldo Mondadori Editore signed a preliminary contract for the sale of 80% of the subsidiary Mondadori Printing S.p.A. to the Gruppo Pozzoni. The value of the transaction was defined on the basis of an enterprise value for 100% of Mondadori Printing of €145 million. The impact of the operation on the consolidated net financial position of the Mondadori Group will be of €123 million.

The operation should be seen in the context of a general trend toward consolidation and concentration among the qualified players that characterises the printing sector at an international level in response to new competitive pressures, overcapacity and a fall in demand.

The agreement gives to the Gruppo Pozzoni an option to buy the remaining 20% of Mondadori Printing, that may be exercised from December 2011, at a cost determined by the fair market value of the company on the date of the operation. Mondadori will retain an option to sell the same 20%, from January 2017, at a price to be determined by the abovementioned criteria.

The agreement also includes an 8-year printing contract – renewable on terms in line with the best market benchmarks – guaranteeing Mondadori an improvement in terms of costs and the maintenance of high standards of quality.

The terms of the operation and the signing of the preliminary contract are subject to the approval of the Italian Competition Authority.

EXPECTATIONS FOR THE FULL YEAR

The current economic and financial situation is marked by exceptional factors and consequent uncertainties that cannot be compared to the past. Both the scale and, above all, the timing with which critical factors become evident, make it difficult to make forecasts about both the medium and the short term.

What is clear is that, even in these recent difficult months, the Mondadori Group has been able to face the inevitable downturn in business with results that are in line with the best expectations, and even better than the previous year, if the add-sales are excluded. At the same time, the company has created the conditions for further improvements in efficiency through an industrial partnership in printing.

As a result, it is possible to confirm, in line with the projections made at the time of the report on the first half of the year to 30 June, that, the management results for the core business, excluding add-on sales activities, at the end of 2008 are in line with those of the previous year.

§

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 Board of Directors of Arnoldo Mondadori S.p.A. met today to examine and approve the management report for the first six months of the year to 30th June 2008, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

The first six months of 2008 saw a sharpening of the uncertainties in the short and medium term and an acceleration in price increases for fast moving consumer goods, with a negative impact on consumer and investor confidence.

Over the last two months, in the reference market for the Mondadori Group in Italy, the downturn in magazine circulation was accompanied by a slowdown in advertising expenditure; at the same time, there was a continuation of the decline in add-on sales during the period, while the book market displayed encouraging signs of growth.

In France, magazine circulation remained essentially stable, while advertising investments were down compared to the same period of 2007.

Group performance in the period to 30 June 2008

When comparing the results for the period with those at 30 June 2007 the same considerations made at the end of the first quarter apply: the essential stability in business profitability and the growing performance of Radio R101 have made it possible to amply compensate for the investments made in development (digital and international activities), while the impact of the decline in add-on sales has been marked the effects are expected to be less significant in the second half of the year, given that at 30 June 2007 Mondadori had already generated 65% of the result for the entire year.

Consolidated revenues for the first half of 2008 came to €930.1 million, a fall of 3.2% compared with the €960.6 million in the first half of 2007. Net of add-on sales, revenues were up by 1.1%.

Consolidated gross operating profit at 30 June 2008 came to €104.5 million, compared with the €119.6 million of the same period of the previous year a fall of 12.6%. As a proportion of revenues a fall to 11.2% from the 12.4% of 2007.

Net of add-on sales (-€15.6 million compared with 30 June 2007) and discontinuous non-recurring factors (higher capital gains of €0.6 million; lower personnel costs of -€2.9 million due to the application of new regulations governing leaving entitlements in 2007 and other extraordinary charges) the difference in the operating margin at 30 June 2008 would be +€2.8 million, due to improved business performance business (+€6.8 million) and increased investments in businesses under development (-€4 million).

Consolidated operating profit at 30 June 2008 came to €83.8 million, a fall of 14.4% on the €97.9 million of the same period of 2007, with amortizations and depreciations of tangible and intangible assets for a total of €20.7 million (€21.7 million in 2007); as a proportion of revenues, a fall from the 10.2% of 2007 to 9% this time.

Consolidated profit before taxation amounted to €64.2 million, a fall of 25.3% on the €85.9 million of 2007, with an increase of €7.6 million in net financial charges, essentially due to the increased cost of borrowing (around €4.5 million) and lower returns from financial investments (around €2.7 million).

Consolidated net profit at 30 June 2008 came to €36.7 million, a fall of 20.6% on the €46.2 million for the same period of the previous year.

Gross cash flow in the first half of 2008 amounted to €57.4 million compared with €67.9 million in the first six months of 2007.

The Group’s net financial position at 30 June 2008 showed a deficit of €680.1 million compared to a deficit of €535.3 million at the end of 2007. During the period income taxes of €54 million and dividends of €83.8 million were paid out.

Results of the business areas
• Books

During the first half of 2008 the Book Division generated revenues of €192.7 million, in line with the €192.8 million of the same period of 2007. Net of add-on sales, revenues were up by 1.7%.

During the first six months of the year the Mondadori Group confirmed its leadership in the trade segment, increasing its share to 28%[1], with a marked advantage over its main competitors; in the large-scale retail channel the estimated share is more than 35%[2].

Among the various publishing houses in the Group, there were positive results for the first half for Edizioni Mondadori, which recorded revenues of €68.3 million, (+0.4%) and Mondadori Education which recorded sales of €15.1 million, (+4.9%). Einaudi confirmed net revenues for the first six months of 2008 of €26,4 million, in line with those of the same period of 2007.

• Magazines

During the period the Magazine Division generated revenues of €514.4 million, a 6.3% fall on the €549 million of the same period of 2007.

Italy

The first half of the year has seen a generalised downturn in the market in which the Division operates. A marked fall in consumer spending has consequently also affected the magazine sector, and most particularly and in a predominant manner, the add-on sales phenomenon, which is clearly well on the way to being progressively downsized. To a lesser extent, circulations in almost all segments have continued to display a certain weakness. Advertising, after an initially promising first quarter, was subject to a sharp downturn.

Revenues generated by the Magazine Division in Italy in the first half of 2008 amounted to €319.9 million, a 9.9% fall compared to the €355 million of the same period of last year.

This result was determined by the following factors:

– A sharp reduction in revenues from add-on sales (-24.4%) in a market that in the first five months of the year fell by 26%, and whose overall value has halved compared with the record levels of 2005;

– A fall in circulation revenues of 5.1%, essential due to a reduction in volumes sold (-3.3% on comparable basis);

– A growth in advertising revenues of 1.3% thanks to the performance of leader titles, in an already falling market (-0.7% to May with further falls expected in June).

During the period Mondadori has put in place a number of actions in key segments. The most important include:

– the relaunch of Panorama, in February, with good results in terms of circulation and, in particular, advertising;

– strong support, in a highly competitive market, for TV guides, the results of which have so far been satisfactory;

– the relaunch of Donna Moderna, to mark the weekly’s 20th anniversary, which has achieved wide consent from both readers and advertisers;

– the relaunch of Grazia, completed in June with very satisfactory results, aimed at focusing and further strengthening the magazine’s elements of quality in the fashion area;

– the development of internet activities that have involved a number of titles, in particular Donna Moderna, with the web launch at the end of June of a new hub dedicated to women;

– a strong and sharper control of costs in all areas, which has made it possible to reduce the impact of the fall in revenues.

As already mentioned, in the context of a general slowdown, Mondadori recorded a fall in circulation revenues of 5.1% (-3.3% on a comparable basis, considering the closure of Star+TV, Per Me and Creare). There was an improvement, however, compared with the same period of last year, of the competitive position of Grazia, Chi, Tv Sorrisi e Canzoni, Donna Moderna (with a circulation more than double that of its competitors) and Panorama, which confirmed its leadership in its segment, both in terms of circulation and, to a marked degree, in advertising sales. The positive performance of Flair, Casaviva, Casabella and Interni should also be noted.

France

In the first half of 2008 the activities of the Magazine Division in France generated consolidated revenues of €194.5 million, an increase of 0.3% on the €194 million of the same period of 2007.

In general, in a context in which circulations remained essentially in line with the previous year and advertising was affected by a period of difficulty, Mondadori France nevertheless managed to hold on to its market share.

On the circulation side, the Group’s titles acheived good results thanks to redesigns and relaunches completed during the period. Of particular note was the exceptional performance of Closer, which confirmed its leadership position in the segment.

There was a fall in the sale of advertising space in consumer magazines in France of 2.1% in terms of volume at the end of May 2008 (source: TNS-MI), while the reference market for Mondadori France saw a fall of -3.9%. Bucking this trend was the upscale segment (+5.1%), in which Mondadori is not yet present.

The advertising revenues of Mondadori France in the first six months of the year came to €53.5 million, compared with the €57.2 million of the same period of last year (-6.5%).

In particular, television titles have been affected by a reduction in investments by large-scale retailers and direct marketing. There were also difficulties for women’s titles, while those in the car segment showed signs of improvement compared to the first quarter of the year, with a result in line with the same period of 2007.

As already announced, June 30 saw the closing of an agreement for the sale to Motor Presse France, of six specialised titles published by the Mondadori France Group. This operation is part of the plan for the rationalisation of the Mondadori France portfolio, with a focus on the development of segments with high potential also in terms of advertising, such as the upscale (and activities have continued for the launch of a magazine in this segment) and the mass-market segments.

International activities

During the period there was a further improvement in the already notable performance of international activities. In particular Grazia UK confirmed its position as the publishing phenomenon of the moment, marking itself out even more in a market showing clear signs of a downturn.

Advertising planning for the first issues of Grazia Australia, launched on July 21, was way beyond expectations; while there were also excellent initial results for Grazia India (where a contract has also been signed for the launch of Casaviva, the Group’s leading interiors title) and the now consolidated joint venture with Sanoma, which publishes Grazia and Interni in Russia; excellent performances were also recorded by Flair Austria and Casaviva Greece.

• Advertising

In the first half of 2008 Mondadori Pubblicità recorded revenues of €178.2 million (+1% on the €176.4 million of the first half of 2007), with a performance above the market average, despite the significant slowdown of the second quarter.

Advertising sales for magazines were sustained by a good performance for weeklies, with significant increases being recorded above all by Grazia (up more than 10%) and Tv Sorrisi e Canzoni (+10%); Panorama performed well (+1.6%); while Donna Moderna and Chi remained stable; among the monthlies, there were stand out performances by Flair (+5%) and the specialised titles in the upscale Design and Interiors segment, which were up by around 10%.

In other media, in a difficult half year for il Giornale (-18%), there was a particularly positive performance on the internet (+15%), with an absolutely stand out performance by the new Donna Moderna site. There was also a significant increase in radio, with R101 which, with a growing audience, saw its advertising grow by 43.9% compared with the first half of 2007, and well above the market trend.

• Printing

In the first six months of 2008 the Printing Division generated revenues of €196.1 million, a 11.8% fall against the €222.4 million of the same period of the previous year. On a comparable basis, excluding the printing activities for Mondadori Education, no longer managed in 2008, the fall would be 7.4%.

The fall in like-for-like revenues was the result of a marked downturn in printing contracts for add-on sales initiatives for both the Group and third parties and the exceptional increase in the value of the euro against the dollar and the pound, while in terms of volume, the foreign market for catalogues and commercial products remained essentially stable.

During the period the cost of paper increased by between 1 and 2%, while energy costs (gas and electricity) continued to increase substantially.

The level of plant use was satisfactory and in line with the budget, having significantly reduced outsourcing activities; this was made possible also by the full use of recent investments which are now fully operational.

• Direct marketing

In the first half of 2008 Cemit Interactive Media generated revenues of €12 million, a 9.1% fall compared with the €13.2 million of the previous year. The sales mix has improved, in favour of activities with greater added value.

Continuing cost controls, along with a organisational structure review, has made it possible to safeguard levels of profitability in a difficult market context.

• Retail

Revenues from the Retail Division in the first half of 2008 rose to €86.2 million from the €77.8 million of 2007, an increase of 10.8% compared with the same period of the previous year.

Mondadori Franchising recorded first half revenues of €28.3 million (+18.7% compared with the €23.8 million in the first half of 2007). The network development programme continued during the period which, with 209 bookstores (compared with 191 on 30 June 2007) and the 152 Edicolè outlets (compared with 104 at the same point of the previous year), is now the most extensive in Italy for editorial products.

Mondadori Retail generated first half revenues in 2008 of €58 million, an increase of 7.6% on the €53.9 million of 2007, despite a difficult context for consumer spending in the non-food sector.

Following the opening of the new Multicenter store in Marcianise (CE), the company now has 29 outlets and has focused on the integration of the former Messaggerie Musicali (Mondadori Shop) stores and the rationalisation of the chain.

• Radio

During the first half of 2008 gross advertising revenues for Radio R101 amounted to €11.8 million, which corresponds to a net figure of €8.2 million, and increase of 54.7% on the €5.3 million of the same period of the previous year.

In an essentially stable market in terms of audience, in the first half of 2008 R101 reached a daily average of 2.1 million listeners, a 7% increase compared with the first half of 2007. Over the seven-day period, Radio R101 confirmed its position among the top six Italian commercial radio stations with more than 8.8 million listeners.

Expectations for the full year

In the second quarter of the year the market saw an intensification of the same critical elements that characterised the first. Of particular relevance was the negative effect of the real and perceived situation in terms of consumer spending and investment.

In this context the Mondadori Group has set in motion actions to safeguard the profitability of its core business, establishing further and significant efficiency objectives, and has continued with growing commitment, its development policy for new activities both in Italy and abroad.

Mondadori’s demonstrable managerial competence and leadership position in its reference markets are expected to allow the company, despite the difficult situation, to confirm its management results, net of the downturn ion add-on sales, a decline which shows no sign of ending in the short term.

§

As per article IA.2.9.3 n.4 of Rules for the Regulation of Markets, it should be noted that the following bonded loans are due to expire in the eighteen months subsequent to 30 June 2008:

Date of issue: 20/10/2003;

Amount: €109,900,000 corresponding to n°. 1,099 bonds of a value of €100,000 each, convertible in ordinary shares of Arnoldo Mondadori Editore S.p.A.;

Issuer: Mondadori International S.A., wholly owned by 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 Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the management report for the first three months of the year to 31st March 2008 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The scenario

The first months of 2008 confirmed fears about a general slowdown in the broader economy and there were no signals of a reversal of the trend in the Mondadori Group’s reference market. In fact, Italy saw a continuation of the decline in magazine circulation, which was counterbalanced in January and February by a recovery in advertising. The add-on sales market saw a further marked slump (-26%) after the slowdown of 2007. The trade books market, meanwhile, remained essentially stable.

In France, in the same period, there was a slight fall in circulation, while there was a continued decline in the advertising market, which is compared to Q1 2007, in which the impact of regulatory changes, which made it possible for large-scale retailers to advertise on television, had not been fully felt.

Group performance in the period to 31 March 2008

During the first quarter of the year the general holding up of all the businesses – due also to a focused cost control policy – and, in particular, the excellent performance of Radio R101 more than compensated for the higher investments for the development of the international and digital activities, and despite the negative impact of the add-on sales business.

The lower contribution to margins by add-on sales (a total shortfall of €10.1 million compared with 2007) was essentially due to:

– for Magazines Italy, a comparison with Q1 2007 in which add-ons had obtained 40% of their results for the full year;

– for Magazines France, the negative impact of the launch of new initiatives in the first months of the year;

– for the Book and Printing Divisions, from the market slowdown.

In the first quarter of 2008 consolidated revenues came to €460,3 million, a fall of 1.7% on the €468.1 million of the first quarter of 2007.

Consolidated gross operating profit came to €48.4 million, compared with €54.5 million in the same period of the previous year, a fall of 11.2%. As a proportion of revenues, the figure is 10.5%, compared with 11.6% in Q1 2007.

The difference in the operating margin, net of the aforementioned effect of the performance of add-on sales, would show an improvement of €4 million, essentially due to improved results by the businesses.

Consolidated operating profit came to €38.2 million, a fall of 12.8% on the €43.8 million of Q1 2007, after amortization and depreciation of tangible and intangible assets for a total of €10.2 million (€10.7 million in 2007); 8.3% as a proportion of revenues, compared with 9.4% in Q1 2007

Consolidated profit before taxation in the period came to €27.9 million, a fall of 25.8% on the €37.6 million of the same period of the previous year, with an increase of net financial charges (€4.1 million) largely due to the effects of changing conditions in financial markets (the impact of increased interest rates for around €1.9 million and a fall in returns from financial assets for around €1.7 million).

Consolidated net profit amounted to €17.7 million, a fall of 25% on the €23.6 million of the first quarter of 2007.

Gross cash flow in the first quarter of 2008 amounted to €27.9 million compared with €34,3 million in Q1 2007.

The Group’s net financial position on 31 March 2008 showed a deficit of -€567.1 million compared with -€535.3 million at the end of 2007.

Business Area Results
• Books

In the first quarter of 2008 the Book Division generated revenues of €94.1 million (-2.5% on the €96.5 million of the same period of the previous year).

The Mondadori Group confirmed its leadership in the trade book segment, consolidating its value market share (29.7%[1]); in the large-scale retail area the figure is estimated at more than 35%.

Among the Group’s publishing houses, the performance of Edizioni Mondadori was particularly noteworthy, with revenues of €39.3 million (+1.8% on the €38.6 million of Q1 2007), as was that of Piemme, which had revenues of €14.6 million (+15% on the €12.7 million of Q1 2007).

• Magazines

First quarter 2008 consolidated revenues generated by the Magazine Division amounted to €260.2 million (-2.3% on the €266.4 million of the same period of the previous year).

Italy

Revenues generated in Italy amounted to €162.3 million (-4.7% on the €170.2 million of Q1 2007).

This result was due to the following phenomena:

– a fall in circulation revenues, the result of a negative trend in the market that has affected almost all of the segments in which the Division operates;

– a decline in the revenues from add-on sales in a rapidly declining market, in which Mondadori, nevertheless, was less affected than its competitors;

– an increase in advertising revenues, thanks also to a new organisational structure at Mondadori Pubblicità and targeted commercial policies that have led to results above the market average and to the growth in radio.

Facts of relevance affecting the Division in the period included:

– the re-launch of Panorama, in the first half of March, with results that have so far proved encouraging;

– the redesign and review of Donna Moderna;

– the development of internet activities and the re-design of a number of sites;

– the continuation of a management policy focused on efficiency gains in all areas, in particular on the industrial side (foliations and technical costs associated with product characteristics), editorial (editorial costs and staffing) and commercial (returns).

In a market in which, as already indicated, there is a continuing decline in sales, heavily influenced by the lower performance of add-ons, Mondadori saw a fall in circulation of 4.7%, also due to the exit from the portfolio of three titles: Star+TV, Per Me and Creare (on a like-for-like basis, the shortfall would be 2.9%).

Regarding add-on sales, there was a sharp fall in the market in the first quarter (-26%): and in the context of this overall decline, Mondadori’s performance was better (-12.9%) also when compared to the major newspapers that operate in the segment

France

The activities of the Magazine Division in France generated first quarter 2008 consolidated revenues of €97.9 million (+1.8% on the €96.2 million of the same period of the previous year).

In general, the good performance in terms of circulation and constant cost controls, alongside the ongoing restructuring plan, made it possible to maintain the level of profitability, net of investments for development and the launch of add-on sales new initiatives.

On the circulation side, the Group’s titles confirmed the positive results of 2007, with an increase of 1.8% compared with Q1 2007.

The redesign and re-launch of a number of titles have been well received by readers and resulted in a positive impact on sales; a positive performance in newsstand sales and subscriptions, with excellent results for Closer and Auto Plus.

Mondadori France saw a fall in advertising sales of 7.5% compared with the same period of the previous year: as already mentioned, the year is feeling the effects of an unfavourable moment in the French advertising market, which continues to decline, and in which, nevertheless, the up-market segment is bucking the trend (+5.6%).

In April, as already communicated, an agreement for exclusive negotiations was reached with Motor Presse France for the sale of a package of six titles specialised in the Sports sector. This operation is part of the often announced strategy of rationalising the portfolio: the focus and development – also through the sale of niche titles – on market areas, such as the up-scale and mass market segments, with higher potential, also in terms of advertising sales.

International activities

Of note during the period was the important launch of two up-market brands: Casaviva in Greece (February) and Flair in Austria (March), followed by the announcement of the publication from April 2008 of Grazia in India.

The positive performance of Attica in Greece and the Balkans continued, as did that of the joint-venture with Sanoma in Russia.

• Advertising

Mondadori Pubblicità ended the first quarter of 2008 with sales of €78.9 million (+6.5% on the €74.1 million of the previous year), outperforming the market average in a number of areas thanks to a new organisational model and targeted commercial policies aimed at making the most effective use of the rich portfolio available.

For Mondadori Magazines, advertising sales were up by 7.7%, thanks to a positive performance of Grazia and Chi; as well as Panorama and TV Sorrisi e Canzoni; noteworthy among the monthlies, was Flair and the up-scale specialised titles in the Design and Furinishing segment.

The performance should also be underlined in the period of Radio R101, which grew by 55% compared with Q1 2007 and the performance, higher than the market average, of Mondadori’s online activities (+41%).

• Printing

In the first quarter of 2008 the Printing Division generated total revenues of €102.7 million (-9.3% on the €113.2 million of the same period of the previous year).

This fall in sales is almost entirely due to the decline of the add-on sales market that has affected both newspapers and magazines.

There were significant increases in raw materials and energy costs, but, for the moment, these remain in line with forecasts.

Despite this fall in business, profitability has been maintained, thanks to continued production cost controls and structural adjustments, there was a satisfactory use of capacity, following a significant reduction in outsourcing and also in relation to making full use of recent investments that are now fully operative.

• Direct marketing

In the first quarter of the year Cemit Interactive Media generated revenues of €5.3 million (-11.7% on the €6 million of Q1 2007): during April, however, this shortfall was recovered.

Consequently Cemit, having implemented structural changes to adapt to a changing market scenario, is now facing the challenge of development and integration of various data bases ( the company’s principal assets) by keeping abreast of continuing technological developments and reviewing the strategic approach to the market of reference.

• Retail

The overall revenues of the Retail Division in the first quarter of 2008 amounted to €43.3 million (+13.1% on the €38.3 million of Q1 2007).

Mondadori Franchising saw a significant increase in revenues in the period, with sales of €14.3 million (+22% on the €11.7 million of Q1 2007), thanks mainly to new affiliations over the twelve-month period of reference: the number of bookstores rose from 187 to 208, and the Edicolè outlets from 86 in the first quarter of last year to 149 on 31 March 2008.

Mondadori Retail generated sales in the first three months of the year of €29 million (+9.3% on the €26.5 million in Q1), thanks also to an important development plan that was launched in 2007.

• Radio

In the first three months of 2008 gross advertising revenues of Radio R101 amounted to €5.1 million (+55% on the €3,3 million of Q1 2007), which translates into net revenues of €3.6 million.

The activities of Radio R101 during the period have been focused on continuing to improve the product and ongoing communication efforts both for the brand and the new programmes. In particular, in the first three months of the year a “local” communication campaign was conducted (using print media, outdoor and events) with the aim of reinforcing awareness in areas with the best growth opportunities.

On the frequencies side, signal distribution is now widespread across the country, thanks to the numerous acquisitions made in recent years.

www.r101.it recently generated record traffic of more than 250,000 visitors and around 3 million page views per month.

Expectations for the current year

The current economic climate has had a worse than expected impact on consumer spending in the first three months of the year and there appears to be no let up in the rise in the cost of energy and raw materials or of essential consumer goods.

The situation in the sectors of reference for the Mondadori Group remains similar to that seen in recent quarters, with a general trend fro slight falls in the circulation of magazines, and a more marked fall in add-ons. Advertising recovered to February, but slowed in March and the book market remains essentially stable.

In this context, the considerations made at the presentation of the Group’s 2007 results remain operative: a close focus on the management of the core business and recent investments (Radio), effective control of operating costs, combined with the development of activities focused on the product (Magazines and Digital) and the market (international network).

Despite the unfavourable economic situation, unless there is a further significant downturn in the area in which the company operates, it is possible to forecast a level of operating profit for the current year, net of extraordinary elements and investments in development, in line with that of the previous year

§

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 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.