Gruppo Editoriale L’EspressoSocietà per azioni

Half – Yearly Financial Report at June 30, 2012

Gruppo Editoriale L’EspressoSocietà per azioni

Half - Yearly Financial Report at June 30, 2012

Contents

Half – Yearly Financial Report at June 30, 2012

Report of the Board of Directors on the Group Operations at June 30, 2011

• Operating performance and consolidated results for the 1st Half of 2012 Page 11• Market Review Page 11• Operating performance for the 1st half of 2012 Page 11• Results by area Page 12• Subsequent events and outlook Page 16• Consolidated results for the 1st half of 2012 Page 17• Main risks and uncertainties to which the Parent Company

and the Group are exposed Page 24• Other information Page 24• Transactions with subsidiaries and related party transactions Page 24

Half-Yearly Condensed Consolidated Financial Statements of the Espresso Group at June 30, 2012

• Consolidated Statement of Financial Position Page 28• Consolidated Income Statement and Consolidated Statement of

Comprehensive Income Page 29• Consolidated Statement of Cash Flow Page 30• Statement of changes in the consolidated shareholders’ equity Page 31

Notes to the Half – Yearly Condensed Consolidated Financial Statements of Gruppo Espresso at June 30, 2012 Page 33

Attachments Page 87

Certification of the Consolidated Financial Statements pursuant to art. 154 bis of Legislative Decree no. 58 February 24, 1998 Page 93

Auditors’ Review Report of the Half – Yearly Condensed Consolidated Financial Statements Page 97

5| Gruppo Editoriale L’Espresso |

Company Gruppo Editoriale L’EspressoSocietà per Azioni

Share Capital Euro 61,534,498.20

Tax ID and Company Register no. 00488680588

VAT no. 00906801006

Registered office Via Cristoforo Colombo 98, Rome, ItalySecondary office Via Cristoforo Colombo 90, Rome, Italy

Board of Directors:Chairman Carlo De Benedetti

Managing Director and General Manager Monica Mondardini

Directors Agar BrugiaviniRodolfo De BenedettiGiorgio Di GiorgioFrancesco DiniSergio EredeMario GrecoMaurizio MartinettiElisabetta OliveriTiziano OnestiLuca Paravicini CrespiMichael Zaoui

Board of Statutory Auditors:Chairman Giovanni Barbara

Statutory Auditors Enrico LaghiMarina Scandurra

Independent Auditors Deloitte & Touche SpA

7| Gruppo Editoriale L’Espresso |

Report of the Board of Directors on the Group Operations at June 30, 2012

Operating performance and consolidated results forthe 1st Half of 2012

Consolidated results 1st Half 1st Half %change(€ million) 2011 2012 2011/2011Sales, of which: 457.4 419.8 -8.2%• circulation 129.2 127.1 -1.6%• advertising 274.4 251.1 -8.5%• add-on products 40.8 25.6 -37.3%• other 13.0 16.0 +23.1%Gross operating profit 81.5 60.8 -25.4%Operating profit 63.0 42.1 -33.2%Pre-tax profit 55.7 36.2 -35.0%Net profit 31.5 21.2 -32.7%

June 30 December 31 June 30(€ million) 2011 2011 2012Net financial position (150.7) (110.2) (147.1)Shareholders’ Equity before minority interests 546.0 565.0 562.0• Group Shareholders’ Equity 542.4 563.3 560.3• minority interests 3.6 1.7 1.7Employees 2,752 2,673 2,632

Market Review

The deterioration in the economic scenario, char-acterised by a decisively recessionary period andconsiderable uncertainty with regard to prospects,reflects heavily on the publishing segment.The advertising investments were down sharply: inthe first five months of 2012, they disclosed a 9.5%decrease compared to the same period in 2011(Nielsen Media Research data).The trend was negative for all traditional media:press underwent a drop of 13.6%, television 10%and radio 5.5%. Internet revenues continued bycontrast to evolve favourably, with an increase of10.6%.Regarding the press in particular, newspapers andperiodicals reported equivalent decreases (respec-tively -13.5% and -13.8%).

In terms of circulation, ADS figures (average mobileat February 2012, on the same range of products)show a reduction in sales on the news-stands of5.3% for the daily newspapers, 6% for weeklies and9.7% for monthlies.

Operating performance for the 1st Half of 2012

Consolidated net revenues amounted to € 419.8 mil-lion, down by 8.2% on the 1st half of 2011 (€457.4 million). This decrease was attributable tothe performance of collateral products, which wasextraordinarily favourable in the first half of 2011,and the drop in advertising revenues, due to mar-ket trends.

Circulation revenues excluding collateral products,amounted to € 127.1 million and disclosed relat-ed stability with respect to the same period last year(€ 129.2 million), also thanks to the progressiveadjustment of the sales prices of newspapers. On the basis of the latest ADS (May 2012) and Audi-press (Survey 2012/I) figures, la Repubblica is con-firmed in its leadership position in terms of newsstandsales and as the leading information newspaper interms of average daily readership (3.5 million). Again according to the latest Audipress surveys, L’E-spresso is in pole position among current affairsmagazines with 2.6 million readers, up by 4.2%when compared with the previous survey. In conclusion, a vast renewal programme was com-pleted in June 2012 for the 18 local newspaperswhich now present a new graphic layout, are in fullcolour and avail themselves of a totally integrated,press-web, publishing system.

Advertising revenues, totalling € 251.1 million,reported a drop of 8.5% on the first half of 2011,in a decreasing market as of May down 9.5%.By segment, the trends reflect the general marketperformances: the press lost 12.6% and radio lost5%. The progress of advertising on the internet was

11Financial Report at June 30, 2012 | Gruppo Editoriale L’Espresso |

Report of the Board of Directors on the Group Operations at June 30, 2012

by contrast very positive, up 13.2%, confirming thebrilliant dynamics of the last few years even in adecidedly unfavourable general context.

Revenues from add-ons, amount to € 25.6 millionand disclosed a significant drop (- 37.3%) withrespect to the same period in 2011; this reflects onthe one hand the impact on the segment of the gen-eralised depression in consumption and, on the oth-er hand, the particular success which characterisedthe initiatives in the first half of last year.

Sundry revenues amounting to € 16 millionincreased by more than 20% with respect to thefirst six months of 2011, thanks to the increasein rentals to third parties of digital terrestrial TVbandwidths and to the positive developments insubscriptions to digital products.

Total costs reported a reduction of 4.2%, thanksmainly to the new plans for reducing the workforceand costs undertaken during 2011.

Consolidated operating profit was equal to € 60.8 mil-lion, down by 25.4% on the € 81.5 million in the 1sthalf of 2011. Around 50% of this decrease was attrib-utable to the reduction in the margin on collateralproducts and the remaining part derives from pressand radio activities, hit by a decrease in advertisingrevenues, while internet and TV results improved.

The consolidated operating profit was € 42.1 million,down 33.2% on the € 63 million in the same peri-od last year.

The Consolidated net profit amounted to € 21.2 mil-lion against € 31.5 million in the 1st half of 2011.

The consolidated net financial position, taking intoaccount dividends of € 25 million and the purchaseof treasury shares for € 1.2 million, came as at June30, 2012, to -€ 147.1 million, compared with -€150.7 million as at June 30, 2011.The group payrolls, including short-term contracts, atJune 30, 2012, numbered 2,632 employees, down41 units with respect to December 31 2011. The aver-

age workforce for the period was 4.8% lower thanin the first half of 2011.

Results by area

Repubblica Division

OperationsThe “Repubblica Division” includes the development,production and marketing of publishing productsrelating to newspaper la Repubblica (national news-paper, 9 local editions, weekly supplementsAffari&Finanza, Il Venerdì and D-la Repubblica).On the basis of the latest ADS (May 2012) and Audi-press (Survey 2012/I) figures, la Repubblica is con-firmed in its leadership position in terms of newsstandsales and as the leading information newspaper interms of average daily readership (3.5 million).

The national newspapers marketThe circulation of newspapers at February 2012(source: ADS) declined by 4.9% and newsstandsales declined by 5.3%. Advertising sales from for-pay newspapers record-ed a decrease of 12.3%, with national advertisingdropping by 11.2% and local and other types ofadvertising dropping by 13.5%.

Operating highlights *

1st Half 1st Half %change(€ million) 2011 2012 2012/2011Sales 154.0 142.2 -7.7%Operating and personnel costs (128.9) (125.1) -2.9%Gross operating profit 25.1 17.1 -32.0%Depreciation, amortisation and write-downs (4.9) (3.0) -40.3%Operating profit 20.2 14.1 -30.0%

* excluding revenues and profit margins of add-on products

Total revenues for the division amounted to € 142.2million, down 7.7% with respect to the € 154 mil-lion in the first half of 2011, mainly due to adver-tising revenues.

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Operating costs decreased by 2.9% compared tothose in the same period of the previous year, obtain-ing additional benefits from the reorganizationimplemented.

Operating profit amounted to € 14.1 million, with amargin of 9.9% (13.1% in the first half of 2011).

Sales from add-on products sold by the division,not included in the above figures, amounted to €15.4 million, compared to € 31.3 million in thesame period of 2011.

Local newspapers

OperationsThe “Local Newspapers Division” includes 18 localnewspapers that have an average daily readership of3.4 million (Audipress 2012/I) in 10 Italian regions. During the first half of 2012, a widespread restylingwas completed of the 18 local daily newspapers interms of format, graphics and colour.

The local newspapers marketAt the end of February, the local newspaper segmentreported a drop in circulation of 5.7% on the previ-ous year (source: ADS), disclosing a deterioration withrespect to the trend in the entire newspaper segment(-4.9%).Advertising revenues dropped 13.1% (source FCP),a slightly more negative trend than that for nationalnewspapers (-10.7%, source FCP).

Operating highlights

1st Half 1st Half %change(€ million) 2011 2012 2012/2011Sales * 110.8 104.3 -5.8%Operating and personnel costs (89.6) (83.8) -6.5%Gross operating profit 21.2 20.5 -3.1%Depreciation, amortisation and write-downs (4.7) (4.5) -3.7%Operating profit 16.5 16.0 -2.9%

* net of intragroup revenues

Total Revenues for the Group’s local newspapersamounted to € 104.3 million, down 5.8% with respectto the first half of 2011: circulation revenues were in linewith the same period last year, while advertising revenueslost 13.2%.

Operating costs fell 6.5% with respect to the first sixmonths of the previous year, mainly thanks to newreorganisation action undertaken during 2011.

Operating profit amounted to € 16 million, in line withthe first half of 2011, with a margin of over 15%.

Periodicals Division

OperationsThe “Periodicals Division” includes the magazinesL’Espresso, Velvet, XL, National Geographic, Limes,Micromega and Le Guide de L’Espresso.According to the latest Audipress surveys (Survey2012/I), L’Espresso is in pole position among currentaffairs magazines with 2.6 million readers, up by 4.2%when compared with the previous survey.

The periodicals marketAccording to ADS figures (average mobile last 12months to February 2012), the periodicals segmentreported a drop of 7.6% in newsstand sales on a com-parable basis, affecting in particular monthly period-icals (down 9.7%) and, to a lesser extent, weeklies(down 6%).Advertising sales recorded a decline of 13.8%,demonstrating a performance more or less in line withthat of the entire press segment (-13.6%).

Operating highlights *

1st Half 1st Half %change(€ million) 2011 2012 2012/2011Sales 25.3 21.7 -14.1%Operating and personnel costs (28.0) (24.5) -12.8%Gross operating profit (2.8) (2.8) +0.4%Depreciation, amortisation and write-downs (0.3) (0.2) -25.6%Operating profit (3.1) (3.0) +2.8%

* net of intragroup revenues

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Total revenues for the division amounted to € 21.7 mil-lion, down 14.1% with respect to the first half of 2011,both with regard to circulation and above all else adver-tising.

Operating costs fell 12.8% when compared with the sameperiod last year, thanks to the containment of all the mainexpenditure items.

The division recorded an operating loss of € 3 million(-€ 3.1 million in the first half of 2011).

Sales from add-on products sold by the division, notincluded in the above figures, amounted to € 8.8 mil-lion, compared to € 8 million in the same period of 2011.

Digital Division

OperationsThe “Digital Division” is responsible for develop-ing and managing the Espresso Group’s digital busi-ness on all the brands and platforms, from websitesto Apps for mobile phones, tablets and SmartTV.The Group websites reported an average annualtotal of 1.8 million individual daily users in the firstfive months of 2012 (source: Audiweb/AWDB).Repubblica.it continued to be the leading Italiannews website with a period average of 1.5 millionindividual daily users and a lead of over 17% onthe second leading news website.From a development standpoint, the first half of theyear was focused on a number of strategic areaswhich in particular concerned: the total renewal ofthe Repubblica.Sport section, with two areas ded-icated to the 2012 European Cup and the LondonOlympic Games, and the Casa&Design section; theenhancement of the “D” site, which in just one yearfrom its launch has become the fourth leading Ital-ian women’s website; the enrichment of the videorange, which during the period reached more than100 daily clips produced; the coverage of the socialnetwork, with the launch of a Facebook App,Repubblica Blu, dedicated to a younger target audi-ence; the enhancement of the local editions ofRepubblica.it and the website of the Local News-

papers with service contents linked to the area, aproject which will be completed during the secondhalf of 2012.Following the launch on the Italian market in 2010,the Group created an increasingly numerous rangeof products for tablets: Repubblica+, digital trans-position of the La Repubblica newspaper, wasenhanced by means of an evening edition (Repub-blica Sera), “ad hoc” versions were created ofEspresso and Velvet, as well as a specific Radio Dee-jay App. During the period, the Group completedits range of magazines for tablets launching the iPadversions of National Geographic, Limes andMicromega.In conclusion, with regard to mobile applications,the new version of la Repubblica was seen, furtherenhanced by contributions from the paper-basededitions, and in May 2012 achieved an audiencerecord with 1.4 million individual users (+43% withrespect to May 2011). It should be noted that the Apps for tablets andmobile phones are mainly for payment and that atthe end of the period under review the Group count-ed on more than 60 thousand paying subscribers.

Operating highlights

1st Half 1st Half %change(€ million) 2011 2012 2012/2011Sales 21.3 25.8 +21.1%Operating and personnel costs (15.3) (19.3) +25.8%Gross operating profit 6.0 6.5 +9.3%Depreciation, amortisation and write-downs (0.2) (0.2) +15.3%Operating profit 5.8 6.3 +9.1%

Revenues of the division, equal to € 25.8 million, grewby 21.1% with respect to the first half of 2011, thanksto the increase in advertising sales and the positive con-tribution provided by for-pay digital products.

Operating costs up + 25.8%, reflect the commitmenttowards the development and promotion of the prod-ucts.

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Operating profit was equal to € 6.3 million, up com-pared to € 5.8 million in the 1st half of 2011, witha margin of 24.6%.

Radio Division

OperationsThe “Radio Division” includes the three nationalradio stations Radio Deejay, Radio Capital andm2o.In June, after two years of absence of surveys on radiolisteners, the Eurisko Radio Monitor figures were pub-lished, surveys into listener figures for Italian broad-casters which the majority of the radio segment tookpart in. Given the different method, it is not possi-ble to compare the results of this research with thoseof the previous Audiradio surveys. Despite this, the new survey confirmed the satisfac-tory listener results of the Espresso Group’s three radiostations: on an average day, Radio Deejay achieved5.4 listeners and is the second leading broadcaster interms of listeners among all the national radio sta-tions; Radio Capital and m2o reported an audienceof 1.6 million and 1.7 million listeners respectively,clear growth, especially for m2o.

The radio segmentAccording to the Eurisko survey, total daily listenersover the age of 14 came to 34.3 million comparedwith 37.9 million in the last Audiradio survey (2009). Radio advertising revenues in the first 5 months of2012 reported a drop of 5.5%, attributable to thedecrease in advertising investments in Italy.

Operating highlights

1st Half 1st Half %change(€ million) 2011 2012 2012/2011Sales 35.0 32.9 -6.0%Operating and personnel costs (18.0) (21.4) +19.4%Gross operating profit 17.0 11.4 -32.9%Depreciation, amortisation and write-downs (1.6) (1.4) -10.3%Operating profit 15.4 10.0 -35.2%

Revenues of the Group’s radio stations recorded a totaldrop of 6%, which reflects the negative performance ofadvertising in the reference market

Operating costs increased significantly due to the risein promotional investments made during 2012, ayear in which the 30th anniversary of Radio Dee-jay was celebrated. Therefore, the increase shouldbe considered to be related to the business trend.

Operating profit remained extremely positive, € 10million, with profitability of 30.4%.

Television Broadcasting Division

OperationsThe division is divided up into two activities: thatas network owner-operator of an analogue chan-nel and two digital multiplex frequencies (NetworkA) and that as television broadcaster, essentially theDeejay Tv channel.

Operating highlights

1st Half 1st Half %change(€ million) 2011 2012 2012/2011Sales 11.9 14.2 +19.6%Operating and personnel costs (12.6) (11.0) -12.8%Gross operating profit (0.7) 3.2 n.s.Depreciation, amortisation and write-downs (2.5) (3.7) +51.0%Operating profit (3.2) (0.5) +84.1%

Revenues, € 14.2 million, rose by nearly 20% with respectto those in the first half of 2011. The increase was duein particular to the digital band rental activities.

Operating costs and depreciation/amortisation remainedmore or less stable despite the increase in costs linkedto the development of the digital network, in relation tothe national switch off plan.

The operating profit despite remaining slightly nega-tive (-€ 0.5 million), disclosed a further improvement

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with respect to the 1st half of 2011, drawing close tobreak-even.

Subsequent events and outlook

In light of the general situation of the economy andthe negative short and mid-term prospects, it can beenvisaged than the difficulties seen at segment levelduring the first half of the year are destined to con-tinue, in particular with regard to advertising revenues.Despite this, the Group closed the first half with aparticularly positive result and confirms the forecastfor a positive result for the rest of the year as well,albeit down significantly with respect to 2011. The structural nature of the crisis underway requiresthe Group to once again commit itself with regardto measures for protecting its cost efficiency over theshort and mid-term.

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17Report of the Board of Directors | Gruppo Editoriale L’Espresso |

Consolidated Results at June 30, 2012

Consolidated Income Statement The Group’s Consolidated Statement of Comprehensive Income for the first half of 2012 is pre-sented below, on a comparative basis with the same period in the previous year.

1st Half 1st Half€mn 2011 2012Revenues 457.4 419.8 Change in inventories 0,5 (0.0) Other operating income 6.5 15.0 Purchases (49.1) (46.7) Services received (185.3) (176.2) Other operating charges (9,0) (16.2) Investments valued at equity 0.5 0.5 Personnel costs (140.0) (135.4) Depreciation, amortization and write-downs (18.5) (18.7)

Operating profit 63,0 42.1

Financial income (expense) (7.3) (5.8)Pre-tax profit 55.7 36.2Income taxes (24.3) (15.1)Net profit 31.4 21.1Minority interests 0.0 0.0

GROUP NET PROFIT 31.5 21.2

Consolidated Statement of Comprehensive Income

1st Half 1st Half€mn 2011 2012NET PROFIT 31.4 21.1 Other comprehensive income components:Profit/(loss) on restatement of financial assets held for disposal (0.5) 1.4 Tax effect of other profit/(loss) 0.1 (0.4) Other comprehensive income components, net of tax effect (0.4) 1.0 TOTAL COMPREHENSIVE INCOME 31.1 22.2 Total comprehensive income attributable to:Shareholders of the Parent Company 31.1 22.2 Minority interests (0.0) (0.0)

Revenues and operating results were discussed in detail in the first part of this Report, to whichwe make reference for a more detailed analysis.

18 | Gruppo Editoriale L’Espresso | Report of the Board of Directors

Consolidated Statement of Financial PositionBelow we report the Consolidated Statement of Financial Position.

ASSETS December 31, June 30,€mn 2011 2012Intangible assets with an indefinite useful life 659.8 659.8 Other intangible assets 1.8 2.7 Intangible assets 661.7 662.5 Property, plant and equipment 162.8 153.6 Investments valued at equity 28.9 28.5 Other investments 2.5 2.5 Non-current receivables 1.1 1.1 Deferred tax assets 28.9 25.9 NON-CURRENT ASSETS 885.9 874.1 Inventories 22.0 20.6 Trade receivables 248.5 236.1 Marketable securities and other financial assets 48.7 49.8 Tax receivables 10.5 14.6 Other receivables 14.1 26.3 Cash and cash equivalents 141.4 75.7 CURRENT ASSETS 485.3 423.2 TOTAL ASSETS 1.371.2 1.297.3

LIABILITIES AND SHAREHOLDERS’ EQUITY December 31, June 30,€mn 2010 2011Share capital 61.5 61.5 Reserves 183.3 178.3 Retained earnings (loss carry-forwards) 259.8 299.3 Net profit (loss) 58.6 21.2 Group shareholders’ equity 563.3 560.3 Minority interests 1.7 1.7 SHAREHOLDERS’ EQUITY 565.0 562.0 Financial debt 285.1 250.3 Provisions for risks and charges 40.0 32.0 Employee termination and other retirement benefits 68.1 66.3 Deferred tax liabilities 118,2 121.1 NON-CURRENT LIABILITIES 511.3 469.8 Financial debt 15.2 22.3 Provisions for risks and charges 39.0 39.3 Trade payables 133.3 111.6 Tax payables 31.6 23.2 Other payables 75.7 69.2 CURRENT LIABILITIES 294.9 265.6 TOTAL LIABILITIES 806.2 735.4 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,371.2 1,297.3

Consolidated Statement of Financial Position

Intangible assets amounting to € 662.5 million, rose € 0.9 million when compared with December31 2011 (€ 661.7 million) mainly as a result of the capitalisation, carried out according to segmentpractice, of the TV rights acquired from Disney and made available during the period.

Property, plant and equipment amounted to € 153.6 million, down by € 9.2 million compared tothe end of 2011 (€ 162.8 million), as a result of net investments for the period of € 8.6 million anddepreciation charges of € 17.9 million.

Investments amounted in total to € 31 million, down € 0.4 million when compared with December31 2011 (€ 31.4 million) due to dividends distributed by the affiliated companies Le Scienze SpA,Editoriale Libertà SpA and Altrimedia SpA.

Non-current receivables amount to €1.1 million and consist of security deposits. The item is essentiallyin line with December 31, 2011.

Deferred tax assets amount to € 25.9 million and include temporary differences between amountsrecorded in the Statement of Financial Position and those recognized for tax purposes. The reductionof € 3.1 million with respect to the balance of € 28.9 million at December 31, 2011 is mainly theresult of the use of prior losses by the subsidiary Elemedia.

Inventories amount to €20.6 million and include inventories of paper, printing materials, publicationsand add-on products. The decrease of € 1.4 million with respect to December 31, 2011 is due totargeted inventory rationalisation activities, which is leading to a significant reduction in quantitiesof paper and materials in stock.

Trade receivables amount to € 236.1 million, down € 12.5 million on December 31, 2011 due tothe seasonal effect of and drop in advertising revenues.

Marketable securities and other financial assets amount to € 49.8 million, up € 1.1 million on December31, 2011, following the revaluation of the outstanding securities portfolio.

Tax receivables amounted to € 14.6 million, up € 4.1 million with respect to the € 10.5 million as atDecember 31, 2011 mainly due to the effect of the IRES and IRAP credit accrued in the period; atDecember 31, 2011, advances were in fact reported net of the theoretical tax liability, while at June30, 2012 the tax receivable emerging at the time of payment of the first advance instalment and thetax payable were reported separately. This effect was only partly balanced by the netting, for a totalof € 8.6 million, between amounts due from the tax authorities and the tax bill referring to the year1993 and 1994, in relation to which the Company has an appeal outstanding; the amount nettedwas therefore recorded under “Other receivables”.

Other receivables amount to € 26.3 million and include advances to suppliers, agents and freelanceassociates, prepaid rent and prepaid distribution rights for optional products and radio/TV programmesto be launched in the second half of the year. The increase of € 12.3 million with respect to December31, 2011 is essentially attributable to the amount receivable following the appeal as indicated above.

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Cash and cash equivalents amounted to € 75.7 million, down € 65.7 million on December 31, 2011.The reduction is firstly due to the transaction for the partial repurchase of Group bonds maturing inOctober 2014 for an equivalent nominal value of € 28.8 million, at a price equating to 99.85% ofthe nominal value. Secondly, the positive cash flow from operations, equal to 5.3 million, was morethan absorbed by the payment of dividends for € 25 million, the purchase of treasury stock for € 1.2million and the other investment and financing activities, amounting to a total of € 16 million.

Shareholders’ Equity at June 30, 2012 amounted to € 562 million (€ 565 million at December 31,2011), of which € 560.3 million belonging to the Group (€ 563.3 million at the end of 2011), and€ 1.7 million relating to minority interests (unchanged from December 31, 2011). Treasury sharesheld by the parent at June 30, 2012, whose value is subtracted from the Shareholders’ Equity, were13,884,969, representing 3.39% of the share capital.

Non-current financial debt amounted to € 250.3 million and included €300 million (now decreasedto a nominal value of €227.4 million further to repurchases and the related cancellations) of bondsissued on October 27, 2004, as well as the residual value of subsidized 10-year loans extended inthe last quarter of 2005.

Provisions for current and non-current risks and charges amounted in total to € 71.3 million, downby € 7.6 million with respect to December 31, 2011 mainly as a result of the release of a tax-related provision associated with share beneficial interest transactions; this release took placefurther to the sentence of the Supreme Court of Cassation which declared the trial in which theCompany and the Tax Authorities were involved with regard to the despite on beneficial interestsfor 1992. With regard to the disputes relating to the other years under dispute (1991, 1993 and1994), the provisions present as at December 31, 2011 remain, since the Company has not changedits opinion on the degree of risk attributed to the same.

Employee termination indemnities and other retirement benefits amounted to € 66.3 million in total(€ 68.1 million at December 31, 2011). The € 1.8 million decline is due to the employee terminationindemnities and fixed indemnities paid out in the period (€ 3.9 million), offset only in part by thefinancial effect of the valuation of provisions (interest cost) and the discounted-back value of accrualsrelating to Fixed Indemnities (service cost), equal in total to € 2.1 million.

Deferred tax liabilities amount to € 121.1 million (€ 118.2 million at December 31, 2011) and include€ 36.6 million relating to the tax impact of the recording of TV broadcasting frequencies.

Current financial debt totalling € 22.3 million, recorded a € 7 million increase compared to the figurefor December 31, 2011, primarily due to the effect of accrued interest payable on the bond loanand on subsidized loans.

Trade payables amounted to € 111.6 million, involving a decrease of € 21.7 million essentially linkedto the decrease in payable for investments (-€ 2.9 million) and lower costs incurred during the secondquarter of 2012 when compared with those in the last few months of 2011.

Tax payables amounting to € 23.2 million, reported a reduction of € 8.4 million at December 31,2011 due to the effect of the payment to the parent company CIR, as part of the tax consolidation

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scheme, of the residual debt relating to the previous year, only partly offset by the IRES and IRAPtax amounts due accrued in the period. You are in fact hereby reminded that in all the interim accounts,tax receivables and payables accrued in the period are reported separately.

Other payables amount to € 69.2 million, down € 6.5 million on € 75.7 million at December 31,2011, mainly due to the settlement of employee termination indemnities to complementary pensionfunds, offset only in part by payables to personnel for thirteenth monthly wage and salary payments.

Changes in the Consolidated Net Financial Position

1st Half 1st Half€mn 2011 2012SOURCES OF FUNDSNet profit (loss) for the period, including minority interests 31.4 21.1 Depreciation, amortization and write-downs 18.5 18.7 Fair value of stock options - stock grants 1.3 1.0 Net change in provisions for personnel costs (2.2) (1.8) Net change in provisions for risks and charges (2.6) (7.6) Losses (gains) on disposal of fixed assets (2.3) 0.0 Adjustment for investments valued at equity 0.2 0.4 Self-financing 44.3 31.8 Decrease (Increase) in non-current receivables (0.0) (0.1) Increase in payables/Decrease in deferred tax assets 6.4 6.0 Increase in tax payables/Decrease in tax receivables 1.8 (12.5) Decrease (Increase) in inventories (1.7) 1.4 Decrease (Increase) in trade and other receivables (9.4) 0.2 Increase (Decrease) in trade and other payables (15.3) (25.3) Changes in current assets (18.3) (30.3) CASH FLOW FROM OPERATING ACTIVITIES 26.0 1.5 Increases in capital and reserves 0.6 - Other changes - 1.0 TOTAL SOURCES OF FUNDS 26.6 2.5 USES OF FUNDSNet investment in fixed assets (11.7) (13.3) Net investment in shares (0.1) - Acquisition of own shares (0.2) (1.2) Dividends paid (29.8) (25.0) Other changes (0.6) (0.0) TOTAL USES OF FUNDS (42.3) (39.4) Financial surplus (deficit) (15.7) (36.9) BEGINNING NET FINANCIAL POSITION (135.0) (110.2) ENDING NET FINANCIAL POSITION (150.7) (147.1)

22 | Gruppo Editoriale L’Espresso | Report of the Board of Directors

Consolidated Statement of Cash Flows and Net DebtThe comparison between cash flows from January 1, 2012 to June 30, 2012 and those for thecorresponding period in 2011 are reported in the table that follows.

1st Half 1st Half€mn 2011 2012

OPERATING ACTIVITIESNet profit (loss) for the period, including minority interests 31.4 21.1 Adjustments:- Depreciation, amortisation and write-downs 18.5 18.7 - Fair value stock option - stock grant 1.3 1.0 - Net change in provisions for personnel costs (2.2) (1.8) - Net change in provisions for risks and charges (2.6) (7.6) - Losses (gains) on disposal of fixed assets (2.3) 0.0 - Losses (gains) on disposal of equity investment - (0.0) - Adjustment for investments valued at equity 0.2 0.4 - Dividends (received) (0.0) (0.0) Self-financing 44.3 31.8 Changes in current assets and other flows (13.2) (26.5)

CASH FLOW FROM OPERATING ACTIVITIES 31.0 5.3 of which:Interest received (paid) (0.4) 0.1 Income taxes (paid) received (14.0) (26.9)

INVESTING ACTIVITIESOutlay for purchase of fixed assets (16.1) (13.6) Outlay for purchase of investments (0.1) - Received on disposals of assets 4.5 0.4 (Purchase) sale of marketable securities (21.1) 1.5 Dividends received 0.0 0.0CASH FLOW FROM INVESTING ACTIVITIES (32.8) (11.7)

FINANCING ACTIVITIESIncreases in capital and reserves 0.6 - (Purchase) sale of own shares (0.2) (1.2) Issue (repayment) of bonds - (28.8) Issue (repayment) of other financial debt (7.0) (5.5) (Dividends paid) (29.8) (25.0) Other changes (0.3) (0.0) CASH FLOW FROM FINANCING ACTIVITIES (36.7) (60.4)Increase/(Decrease) in cash and cash equivalents (38.5) (66.9) Cash and cash equivalents at beginning of the period 134.5 141.4

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 96.0 74.5

23Report of the Board of Directors | Gruppo Editoriale L’Espresso |

Cash flow from operating activities in the first half of 2012, € 5.3 million, was down € 25.8 millionwith respect to that generated in the same period in 2011 (€ 31 million): the drop in self-financing (€ 31.8 million in the first six months of 2012 compared with € 44.3 million in thesame period of 2011), deriving from lower profits generated by operations, was joined bythe negative change in the working capital (-€ 26.5 million in the first half of 2012 comparedwith -€ 13.2 million in the same period of 2011) essentially attributable to tax-related itemslinked to the tax consolidation scheme, which had favourably affected the flow for the firstsix months of 2011. In greater detail, during the first half of 2012, taxes were paid for € 26.9million and a liability accrued for € 9.2 million on the profits generated in the period, duringthe first six months of the previous year, the taxes paid amounted to € 14 million against aliability accrued on profits for the period of € 17.4 million.

Cash flow from investing activities is negative by € 11.7 million due primarily to capital expendituremade in the period (€ 13.3 million, net of transfers), partly offset by the revaluation of portfoliosecurities (€ 1.5 million). With regard to capital expenditure, in the 1st half of 2012 investments were made in rotarypresses and other printing equipment of la Repubblica and of local publications (€ 1.2 million);the switch off of the analogue signal of Rete A was carried forward (€ 6 million), offices andeditorial offices were renovated (€0.7 million); information and publishing systems were updatedand networks upgraded (€0.2 million), low- and high-frequency broadcasting equipment wasupgraded (€0.9 million) and television programme rights were acquired (€ 1.6 million). Duringthe six-month period, a portion of payables on capital investments outstanding at December31, 2011, amounting to € 2.9 million, was settled. With regard to the securities, during the first half of the year the process for the reorganisationof the portfolio continued, whilst keeping the overall value of the investments held more orless unchanged. The increase of € 1.5 million is almost entirely attributable to the revaluationof the securities already held in the portfolio.

Cash flow from financing activities absorbed € 60.4 million in resources. During the year, dividendswere paid for € 25 million, a portion of the bond issue was re-acquired for € 28.8 million,treasury shares were purchased for € 1.2 million and principal on outstanding loans was repaidfor € 5.5 million.

The net financial position of the Group is shown below.

June 30, Dec. 31, June 30,€mn 2010 2010 2011Financial receivables from Group companies 0.2 0.2 0.2 Financial payables to Group companies - - - Cash and bank deposits 97.0 141.3 75.6 Current account overdrafts (1.1) (0.0) (1.3) Net cash and cash equivalents 96.0 141.4 74.5 Marketable securities and other financial assets 82.6 48.7 49,8 Bond issue (284.2) (261.7) (238.3) Other bank debt (44.6) (38.5) (33.0) Other financial debt (0.4) (0.1) (0.1) Other financial assets (liabilities) (246.7) (251.6) (221.6)

NET FINANCIAL POSITION (150.7) (110.2) (147.1)

Main risks and uncertainties to which the parent company and the Group are exposedMain risk factors to which the Espresso Group is exposed as a consequence of the segment inwhich it operates are classified in the following categories:- risks connected with the general performance of the economy;- risks relating to operations;- financial risks.For a description of these risks, reference should be made to the financial statements as of December31, 2011 in the Report on Operations. It is necessary to emphasise that, with regard specifically to risks of a tax-related nature associatedwith the recent sentence of the Regional Tax Commission which concerned the Company, they canbe considered as merely “possible” (see the comments on the “Notes to the half-yearly condensedconsolidated financial statements of the Espresso Group”).

****

Based on results and the cash flow generated in past financial years and the financial position atJune 30, 2012, the Company does not believe that there exist uncertainties such as to raise significantdoubts with regard to the ability of the Group to continue its activity as an ongoing concern.

Other informationOn 18 May 2012, the Rome Regional Tax Commission filed sentence 64/9/12 which declared thepartial legitimacy of two tax assessment concerning among other aspects the complex corporateevents which led to the division between CIR and FININVEST of the Arnoldo Mondadori EditoreGroup and the subsequent stock market listing of La Repubblica. In detail, the RTC declared that the payment of taxation for Lire 440,824,125,000 for capital gainsrealized and undeclared was legitimate, in its opinion, along with Lire 13,972,000,000 for the recoveryof the costs assumed as non-deductible pertaining to dividends and the tax credit, with applicationof the minimum legal fines and the ordering of payment of the legal costs.The Espresso Group revealed that its appeals against said assessments had been upheld at two previouslevels of jurisdiction and that the circumstances disputed had originally been declared as inexistentat criminal level. The Company took steps to file an appeal before the Supreme Court of Cassation on June 27, 2012and to present the Rome RTC, on June 28, 2012, with an application for the suspension of theeffects of the sentence. The appeal was upheld by means of court order filed on July 19, 2012.For greater details on this aspect, reference should be made to the comments in the “Notes to thehalf-yearly condensed consolidated financial statements of Espresso Group”.

****

At June 30, 2012, treasury shares held by the Parent Company were 13,884,969 (par value € 0.15),representing 3.39% of the share capital.

Transactions with related partsTransactions with related parties, including intragroup transactions, cannot be classified as atypicalor unusual, as they are part of the Group companies’ normal business operations. These

24 | Gruppo Editoriale L’Espresso | Report of the Board of Directors

transactions are settled on an arm’s-length basis, taking account of the characteristics of thegoods and services provided.Information on transactions with related parties, including that required by ConsobCommunication of July 28, 2006, is set forth in Note 14.4 of the half-yearly condensedconsolidated financial statements.

****

A list of companies included in the consolidation is reported in Attachment 1 of the “Notes tothe Half- yearly condensed consolidated financial statements of Gruppo Espresso”.

25Report of the Board of Directors | Gruppo Editoriale L’Espresso |

Half – Yearly Condensed Consolidated Financial Statements at June 30, 2012

Income and Financial position

Consolidated Statement of Financial Position

ASSETS Notes Dec. 31, June 30,(€’000) 2011 2012Intangible assets with an indefinite useful life 659,828 659,828 Other intangible assets 1,849 2,702 Intangible assets (1) 661,677 662,530 Property, plant and equipment (2) 162,828 153,593 Investments valued at equity (3) 28,857 28,500 Other investments (4) 2,518 2,518 Non-current receivables (5) 1,073 1,123 Deferred tax assets (6) 28,945 25,868NON-CURRENT ASSETS 885,898 874,132 Inventories (7) 22,006 20,635 Trade receivables (8) 248,545 236,093 Marketable securities and other financial assets (9) 48,735 49,796 Tax receivables (10) 10,513 14,633 Other receivables (11) 14,072 26,331 Cash and cash equivalents (12) 141,407 75,725 CURRENT ASSETS 485,278 423,213

TOTAL ASSETS 1,371,176 1,297,345

LIABILITIES AND SHAREHOLDERS’ EQUITY Notes Dec. 31, June 30,(€’000) 2011 2012Share capital (13) 61,534 61,534 Reserves (14) 183,300 178,302 Retained earnings (loss carry-forwards) (14) 259,796 299,306 Net profit (loss) 58,648 21,164 Group shareholders’ equity 563,278 560,306 Minority interests (15) 1,719 1,657SHAREHOLDERS’ EQUITY 564,997 561,963 Financial debt (16) 285,099 250,330 Provisions for risks and charges (17) 39,969 32,019 Employee termination and other retirement benefits (18) 68,100 66,334 Deferred tax liabilities (6) 118,160 121,114NON-CURRENT LIABILITIES 511,328 469,797 Financial debt (16) 15,248 22,283 Provisions for risks and charges (17) 38,970 39,327 Trade payables (19) 133,270 111,587 Tax payables (20) 31,632 23,204 Other payables (21) 75,731 69,184

CURRENT LIABILITIES 294,851 265,585

TOTAL LIABILITIES 806,179 735,382

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,371,176 1,297,345

The notes from page 35 to page 86 constitute an integral part of these half-yearly condensed consolidated financial statements

28 | Gruppo Editoriale L’Espresso | Financial Statements at June 30, 2011

Consolidated Income Statement

Note 1st Half 1st Half(€’000) 2011 2012Revenues (22) 457,357 419,780 Change in inventories (7) 535 (41) Other operating income (23) 6,549 15,032 Purchases (24) (49,075) (46,745) Services received (25) (185,315) (176,185) Other operating charges (26) (9,048) (16,161) Valuation of investment at equity (3) 493 471 Personnel costs (27) (140,038) (135,389) Depreciation, amortization and write-downs (28) (18,464) (18,704) Operating profit 62,994 42,058 Financial income/(expense) (29) (7,268) (5,809) Pre-tax profit 55,726 36,249 Income taxes (30) (24,280) (15,112) Net profit 31,446 21,137 Minority interests (31) 8 27 GROUP NET PROFIT 31,454 21,164 Earnings per share, basic (32) 0,078 0,053 Earnings per share, diluted (32) 0,073 0,050

Consolidated Statement of Comprehensive Income

Note 1st Half 1st Half(€’000) 2011 2012NET PROFIT 31,446 21,137 Other comprehensive income components:Profit/(loss) on restatement of held for disposal financial assets (9) (498) 1,440

Tax effect of other profit/(loss) 137 (396)

Other comprehensive income components, net of tax effect (361) 1,044 TOTAL COMPREHENSIVE INCOME 31,085 22,181Total comprehensive income attributable to:Shareholders of the Parent Company 31,093 22,208 Minority interests (8) (27)

The notes from page 35 to page 86 constitute an integral part of these half-yearly condensed consolidated financial statements.

29Financial Statements at June 30, 2011 | Gruppo Editoriale L’Espresso |

Consolidated Statement of Cash Flows

Note 1st Half 1st Half(€’000) 2011 2012OPERATING ACTIVITIESNet profit (loss) for the period, including minority interests 31,446 21,137 Adjustments:- Depreciation, amortisation and write-downs (28) 18,464 18,704 - Fair value stock option - stock grant (27) 1,292 958 - Net change in provisions for personnel costs (18) (2,237) (1,766) - Net change in provisions for risks and charges (17) (2,598) (7,593) - Losses (gains) on disposal of fixed assets (2,305) 9 - Losses (gains) on disposal of investments and securities - (31) - Adjustment for investments valued at equity 236 357 - Dividends (received) (24) (19) Self-financing 44,274 31,756 Changes in current assets and other flows (13,236) (26,503) CASH FLOW FROM OPERATING ACTIVITIES 31,038 5,253 of which:Interest received (paid) (409) 111 Income taxes (paid) received (13,990) (26,850) INVESTING ACTIVITIESOutlay for purchase of fixed assets (16,142) (13,624) Outlay for purchase of investments (59) - Received on disposals of assets 4,473 367 (Purchase) sale of marketable securities, and sale assets held for disposal (21,126) 1,502 Dividends received 24 19 CASH FLOW FROM INVESTING ACTIVITIES (32,830) (11,736) FINANCING ACTIVITIESIncreases in capital and reserves 580 - (Purchase) sale of own shares (210) (1,172) Issue (repayment) of bonds - (28,775) Issue (repayment) of other financial debt (7,015) (5,500) (Dividends paid) (33) (29,751) (24,966) Other changes (277) (35)

CASH FLOW FROM FINANCING ACTIVITIES (36,673) (60,448)Increase (decrease) in cash and cash equivalents (38,465) (66,931) Cash and cash equivalents at beginning of the period 134,450 141,400

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 95,985 74,469

The notes from page 35 to page 86 constitute an integral part of these half-yearly condensed consolidated financial statements.

30 | Gruppo Editoriale L’Espresso | Financial Statements at June 30, 2011

31Financial Statements at June 30, 2011 | Gruppo Editoriale L’Espresso |

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Notes to the Half – Yearly Condensed Consolidated Financial Statements of Gruppo Espresso at June 30, 2012

Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso | 35

Notes to the Half – Yearly Condensed Consolidated Financial Statements

1. General InformationGruppo Editoriale L’Espresso SpA (the “Company” or “Parent Company”) and those companiesin which it holds either directly or indirectly an interest (further on in the present documentreferred jointly to as the “Espresso Group” or the “Group”) operates mainly in the publishingsector and more specifically in the newspapers and periodicals segment, that of radio stations,advertising sales, online publishing, and digital terrestrial and satellite television. Gruppo Editoriale L’Espresso SpA has its registered office in Italy at Via Cristoforo Colombo 98,Rome. CIR Compagnie Industriali Riunite S.p.A. controls the Company and exercises coordination andmanagement functions pursuant to Article 2497 of the Italian Civil Code. Gruppo Editoriale L'Espresso stock is listed on the screen-based trading circuit (MercatoTelematico Azionario, MTA) of Borsa Italiana SpA (Reuters code: ESPI.MI, Bloomberg code: ESIM). This half-yearly financial report at June 30, 2012 was approved by the Board of Directors on July25, 2012.

2. Form and content of the financial statementsThese half-yearly condensed consolidated financial statements were prepared in accordance withinternational accounting standards (International Accounting Standards, – IAS and InternationalFinancial Reporting Standards, – IFRS), as integrated by the related interpretations (StandingInterpretations Committee – SIC and International Financial Reporting Interpretations Committee,IFRIC) issued by the International Accounting Standards Board (IASB) and approved by theEuropean Union.More specifically, this Financial Report was prepared in condensed form in compliance with theinternational accounting standard on interim reporting (IAS 34) adopted by the EU pursuant toArticle 154 ter, paragraphs 2 and 3 of Legislative Decree No. 58, February 24, 1998.The Half-Yearly Financial Statements at June 30, 2012 must be read in conjunction with theAnnual Financial Statements at December 31, 2011.The general principle adopted in the preparation of the financial statements is that of thehistorical cost for all assets and liabilities, with the exception of derivative instruments and certainfinancial assets/liabilities, some of which could be accounted for at their fair value.To allow a more meaningful understanding of the evolution in the year, Statement of FinancialPosition figures provided for comparative purposes in the financial statements and in the relatednotes make reference to December 31, 2011, while operating, Shareholders’ Equity and cash flowfigures are compared with the respective figures for the same period in the previous year.The classification, form, order and nature of items in the financial statements, as well as theaccounting standards adopted (with the exception of those described in paragraph 8 below) areconsistent with those adopted for the preparation of the 2011 financial statements. The classification adopted in the Statement of Financial Position, both for assets and liabilities, isthat of “current” and “non-current” as, contrary to the classification by liquidity, such criteria isdeemed to provide a better representation of the Group’s financial position. The Statement ofFinancial Position is divided into two separate facing sections. The order of reporting is assets,shareholders’ equity and liabilities (from the least current to the most). In order not to make thereporting unnecessarily complex and to use the same format for interim reports, financial

statements include only major captions and all sub-classifications (e.g. nature of the debtor/creditor,expiration term, etc.) are instead disclosed in the notes. The contents of the Statement of FinancialPosition are in compliance with minimum requirements established by IAS 1 as, with theexclusion of publications, radio frequencies and trademarks, classified under “Intangible assetswith an indefinite useful life”, no significant or particular items were deemed to require separatereporting. Income Statement items were classified by nature as, considering the activities of theGroup, it has not been deemed that a classification by destination could better represent theoperating performance of the Company. In the Statement of Cash Flows, prepared according tothe “indirect method”, cash flows from operating, investing and financing activities, and thosefrom discontinued operations are reported separately. The Statement of changes in theshareholders' equity shows income and charges for the period and other changes in reserves.Unless otherwise specified, amounts reported in the financial statements and tables are stated inthousands of euro, rounded off to the nearest unit.

3. Principles of consolidationThe scope of consolidation includes the financial statements of the Parent Company, itssubsidiaries and affiliated companies. Subsidiaries are those companies in which the ParentCompany exercises decisional power over financial and operating policies. Control is deemed tooccur when more than half of actual voting rights or those potentially exercisable at ashareholders’ meeting are held by the company either directly or indirectly at the date of thefinancial statements. Affiliated companies are those in which the parent company exercises a sig-nificant influence. Such influence is deemed to occur when the Group controls 20% or more ofactual voting rights or those potentially exercisable at the date of the financial statements.Subsidiaries are consolidated from the date on which the Group acquires control anddeconsolidated as from the date on which control is lost. Subsidiaries and affiliated companies are recorded at purchase cost. Purchase cost corresponds tothe value of assets acquired, shares issued or liabilities generated at the time of acquisition, inaddition to directly attributable costs. The excess of the purchase cost over the book value ofassets of subsidiaries acquired by the Group is recorded as goodwill, while that of affiliatedcompanies acquired is included in the value of the investment. The accounting treatment ofgoodwill is described in Note 4.1. Subsidiaries were consolidated under the line-by-line method, thus including all assets andliabilities, costs and revenues of subsidiaries, regardless of the share held. The book value of con-solidated companies was therefore netted against the related portion of the shareholders’ equity.Transactions, balances and unrealized gains and losses among Group companies were thereforeeliminated. The portions of shareholders’ equity and profits accruing to minority shareholderswere recorded separately under shareholders’ equity in the consolidated statement of financialposition and under a separate caption in the consolidated statement of comprehensive income.Subsequent to their acquisition, investments in affiliated companies are recorded under the equitymethod, recording the share of the Group in the profit and in the change in reserves, respectivelyin the income statement and in the statement of financial position under shareholders’ equity. Thepertinent portion of unrealised gains and losses on infragroup transactions was eliminated. Whenthe Group’s share in the loss of an affiliated company is equal or higher than the book value ofthe investment, the Group does not recognize further losses unless is has obligations to coverlosses or has made payments on behalf of the affiliated company. The half-yearly condensed consolidated financial statements do not include non operational sub-sidiaries or those in liquidation. Their impact on total assets and liabilities, on the financial

36 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

position and on the share in net profit attributable to the shareholders of the parent company isnot relevant.All financial statements of Group companies for consolidation purposes are prepared at the samedate, using the same accounting standards and relate to a financial year of the same duration.

4. Valuation Criteria4.1 Intangible assetsIntangible assets are initially recorded at acquisition or production cost. The acquisition cost is rep-resented by the fair value of payments and any additional costs directly incurred for preparing theasset for use. The purchase cost is the equivalent price paid in cash at the time of the acquisition.In case the amount paid for the acquisition is deferred beyond normal payment terms, thedifference with respect to the equivalent cash price is recorded as interest over the longer paymentterm. The cost of intangible assets developed internally is recorded by separating costs incurred inthe research phase (not capitalized) and costs incurred in the subsequent development phase (cap-italized). In case the two phases cannot be separated, the whole project is accounted for as research. The book value of intangible assets is in line with the amount expected to be retrieved throughfuture use or disposal. At least once a year and in case there arise doubts as to the possibility ofrecovering the net book value of an asset, the latter is subjected to an impairment test, asdescribed in Note 4.6.

Publications, trademarks and frequenciesThe useful life of newspaper mastheads and trademarks is considered as undefined. Broadcastingfrequencies are also considered as assets having an indefinite useful life as they are used based onconcessions whose term is limited or specific licenses limited in time but renewable subject to thefulfilment of the same objective and specific requisites on which the issue and maintenance of thelicense were based. Such assets are not amortised and are instead subjected annually, or any timethere is an indication that the asset may have experienced a loss in value, to an impairment test.Any loss in value is booked to the income statement under “Depreciation, amortisation and write-downs”.

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

Other intangible assetsOther intangible assets are represented by industrial patents and intellectual property rights, con-cessions, licenses, trademarks and similar rights, and software. They are recorded at cost, net ofaccumulated amortisation calculated on a straight line over their expected useful life, and possiblelosses in value.In detail, the acquisition of long-term rights for television productions, recognised underintellectual property rights, are amortised on an annual straight-line basis over the period of their

37Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

contractual availability, as from the period they are available and ready for use. If the rights haveexhausted their usefulness, irrespective of the amortisation already charged, the residual value offully expended in the period the last use to place. The costs referring to television productionsdestined to be use immediately are booked to the income statement in full in the period of use.In view of the homogeneity of the other assets recorded in the Statement of Financial Position,barring specific relevant cases, the useful life of other intangible assets is estimated at 3 to 6 years.Amortisation criteria, the useful life of assets and their residual value are reviewed and redefinedat least at the end of each financial period to take into account possible significant changes.

4.2 Property, plant and equipmentProperty, plant and equipment at the beginning are recognized at purchase price or at productioncost. Cost includes associated expenses and any direct and indirect costs incurred to make theasset ready for use. The capitalization of costs for the upgrade, update or improvement ofstructural elements owned or leased from third parties is carried out exclusively when the samefulfil the requisites that allow their separate classification as assets or part of assets. Ordinarymaintenance costs are charged to the income statement.After the initial recording, property, plant and equipment are carried at cost, net of accumulateddepreciation (with the exception of land) and any losses in value. The depreciable value of eachsignificant component of a tangible asset having a different useful life is calculated on a straightline over its expected useful life. Depreciation criteria, the useful life of assets and their residual value are reviewed and redefinedat least at the end of each financial period to take into account possible significant changes. Capitalized costs relating to leasehold improvements are amortised over the shorter between theresidual term of the lease and the residual useful life of the asset to which the leaseholdimprovement relates.The book value of property, plant and equipment is in line with the amount expected to beretrieved through future use. In case doubts arise as to the possibility of recovering the net bookvalue of an asset, the latter is subjected to an impairment test, as described in Note 4.6. Theoriginal value is reinstated when the reasons that gave rise to the impairment cease to exist.

4.3 Leasing Leasing contracts relating to assets for which the Group bears all costs and benefits deriving fromownership are classified as financial leases. Assets held under a financial lease are recorded at thelower between the current value of the asset leased and the present value of minimum leasepayments provided for in the lease contract. Such payments are accounted for as interest andprincipal so as to obtain a fixed rate of interest on the residual part of the debt. Residual leasepayments, net of interest, are recorded as financial debt. Borrowing costs are charged to theincome statement over the life of the lease. Assets held under a financial lease are depreciated inline with the nature of the good. Leasing contracts in which the lessor holds a significant share of risks and benefits deriving fromownership are classified as operating leases. Lease payments are recorded in the income statementin equal instalments over the life of the lease contract.In sale and lease-back operations, the difference between the sale price and the book value of theasset is not recorded, except in the case of a write-down in the value of the asset.

4.4 GrantsGrants are recorded when there exists, regardless of the formal granting of the amount,

38 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

reasonable certainty that the company will meet the conditions for the entitlement to the grantand that the same will actually be received.Capital grants are recorded in the statement of financial position as deferred income. The grantis credited to the income statement based on the useful life of the asset for which it is granted bydiscounting it so as to net out the related amortisation recorded.Grants receivable as compensation for expenses and costs already incurred or aimed at providingimmediate financial help to the company not correlated to future costs are recorded as income inthe year in which they become receivable.

4.5 Financial expensesBorrowing costs incurred for an investment in assets which normally require a certain period oftime to be prepared for use or for sale, are capitalised and amortised over the life of the assets towhich they relate. All other borrowing costs are recorded in the income statement in the year inwhich they are incurred.

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

4.7 Investments valued at equityInvestments in affiliated companies or those in which the Parent Company exercises a significantinfluence, are recorded at equity.For a more detailed analysis of accounting principles regarding financial assets, see Note 4.12.

4.8 Other investmentsInvestments in companies in which the parent company does not exercise a significant influenceare valued at fair value, or at cost, net of any loss in value, in case the current value of theinvestment cannot be determined in a reliable manner.For a more detailed analysis of accounting principles regarding financial assets, see Note 4.12.

4.9 InventoriesInventories are recorded at the lower of the acquisition or production cost, determined applyingthe weighted average cost method, and the presumed net realizable value. The cost is representedby the fair value of the price paid and any other cost that may be attributed, with the exception

39Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

of interest expenses. The net realizable value is represented by the estimated sale price undernormal conditions, net of completion costs and costs to sell. Write-downs are reversed insubsequent years when the reasons for their recording cease to exist.

4.10 Trade receivablesTrade receivables are recorded at the fair value of future cash flows, written-down for losses invalue.

4.11 Cash and cash equivalentsCash and cash equivalents are represented by short-term investments in highly liquid assets thatmay easily be converted in known amounts of cash posing a minimal risk of fluctuation in value,and by transactions carried out in the context of centralised treasury management. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash, demanddeposits with banks, other highly liquid short-term financial assets with an original maturitygenerally not exceeding 3 months, and bank overdrafts. For the purposes of the statement offinancial position, the latter are included among financial payables under current liabilities.

4.12 Financial assetsFinancial assets are classified into the following categories:• financial assets valued at fair value, recorded also in the income statement; • financial assets held to maturity; • loans and other financial receivables;• available-for-sale financial assets.The Group carries out the classification of financial assets at the time of acquisition. Financial assets are classified as follows:• financial assets valued at fair value, recorded also in the income statement, consisting of

financial assets acquired primarily with the intent of realizing a gain from short-term trading(over a term no longer than 3 months), or financial assets designated as such from inception;

• financial assets held to maturity, consisting of financial assets having a set maturity andgenerating a fixed cash flow or one that may be determined, which the Group intends and hasthe ability to hold to maturity;

• loans and other financial receivables, consisting of financial assets generating a fixed cash flowor one that may be determined, not listed on a market and different from those classified frominception as financial assets valued at fair value, recorded also in the income statement asavailable-for-sale financial assets;

• available-for-sale financial assets, consisting of financial assets other than the above or thosedesignated as such from inception.

Acquisitions and sales of financial assets are recorded at the settlement date. The acquisition costcorresponds to the fair value at the acquisition date, inclusive of transaction costs. After the initial recording, financial assets valued at fair value, recorded also in the incomestatement and available-for-sale financial assets are valued at fair value, while financial assets heldto maturity and loans and other financial receivables are valued at the amortised cost. Realized and unrealized gains and losses resulting from fluctuations in the fair value of financialassets valued at fair value, recorded also in the income statement are recorded in the incomestatement in the year in which they occur. Unrealized gains and losses resulting from fluctuations in the fair value of available-for-salefinancial assets are recorded under shareholders’ equity, while realized gains and losses are

40 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

recorded in the income statement in the year in which they are generated, together with those pre-viously recorded under shareholders’ equity.The fair value of financial assets is determined according to listed bid prices or through the useof financial models. The fair value of unlisted financial assets is estimated using specific estimationtechniques adjusted to the specific condition of the issuer. Financial assets for which the currentvalue cannot be reliably determined are recorded at cost, adjusted downwards for losses in value. At each financial closing date, the presence of factors indicating loss of value is assessed, and therelated write-down in value is recorded as appropriate in the income statement. Losses in valueaccounted for are reversed in case the circumstances that led to their recording no longer exist,with the exception of assets valued at cost.

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

4.14 Own sharesTreasury shares are recorded in a specific shareholders’ equity reserve. Gains or losses on thepurchase, sale, issue or cancellation of treasury shares are not recorded in the income statement.

4.15 Fair value reservesFair value reserves include changes in the fair value, net of the related tax effect, of items recordedat fair value with compensation in the shareholders’ equity.

4.16 Other reservesOther reserves are represented by specific capital reserves.

4.17 Retained earnings (loss carry-forwards)Retained earnings (loss carry-forwards)” includes the part not distributed and not accrued to themandatory reserve (in case of profits) or not balanced (in case of losses), of profits and lossesaccrued. The item also includes transfers from other equity reserves freed-up, in addition to theeffect of the change in accounting principles and relevant errors.

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

Post-retirement benefitsThe Italian Law No. 296/2006 (2007 Budget Law) and related implementation regulations intro-duced, from January 1, 2007, substantial changes in norms regarding Employee TerminationIndemnities (TFR), among which the choice left to workers as to the destination of individualindemnities accruing from such date. In particular, new norms provide for the payment by thecompany of indemnities accrued to the pension fund of choice or, in case the worker has optedto maintain accrued benefits with the company and the company has less than 50 employees, intoa treasury account set-up with INPS – the national Social Security Fund. These regulatory changesresulted in a new accounting treatment of Employee Termination Indemnities.

41Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Before the reform introduced with Italian Law No. 296/2006, under international accountingprinciples Employee Termination Indemnities were considered as a “defined benefit plan”, whilenow only indemnities accrued up to December 31, 2006 by companies with more than 50employees continue to qualify as such, and indemnities accrued after such date are treated as a“defined contribution plan”. All obligations of the company are thus now fulfilled with theperiodical payment of a contribution to other entities. The amount recorded in the IncomeStatement is therefore no longer that of discounted back indemnities, but the amounts actuallypaid to the pension fund of choice of the employee or the INPS treasury account, calculatedpursuant to article 2120 of the Italian Civil Code.

Defined benefit plansEmployee termination indemnities (limited to the share accrued up to December 31, 2006 bycompanies with more than 50 employees) and Fixed indemnity for managers of newspapers aredetermined by independent actuaries to estimate the amount of the future benefits that theemployees have accrued at the statement of financial position date. All non-actuarial effects arerecorded in the income statement.

Defined contribution plansThe Group participates in defined contribution plans contributing to mandatory, contractual orvoluntary public or private pension plans. As already mentioned, Employee TerminationIndemnities accrued by companies with more than 50 employees, calculated pursuant to Article2120 of the Italian Civil Code, are paid out to the different pension plans or to the separatetreasury service offered by INPS, as determined by individual employees. The payment of contri-butions extinguishes the obligation of the Group towards its employees. Contributions constitutetherefore costs for the period in which they are due.

Benefits based on financial instrumentsThe Group recognizes additional benefits to certain top managers through plans based onfinancial instruments.Plans adopted by the Group over time provide for the awarding of rights to participate in the sharecapital of the Parent Company (so-called “stock options” or “stock grants”) or the allocation ofrights resulting in the receipt of extraordinary bonuses contingent on the achievement of a certainstock market price by the shares of the Company (phantom stock options).

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

42 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Phantom stock optionsThe cost of such operations, recorded in the income statement, is calculated based on the fairvalue of options at the time they are assigned. The cost is recorded in the period included betweenthe date rights are assigned and that when they become exercisable, and is recorded also underthe related liability item.Until the liability is cancelled, the fair value is recalculated at each accounting date and at the dateof the actual outlay, recording all changes in the income statement.

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

4.20 Financial liabilitiesFinancial liabilities are recorded initially at the fair value of amounts received or to be paid, netof transaction costs, and subsequently carried at amortised cost.

4.21 Derivative instrumentsDerivative contracts are recorded in the statement of financial position at fair value. Therecording of differences in the fair value varies according to the purpose of the derivativeinstrument (speculative or hedging) and the nature of the risk hedged (fair value hedge or cashflow hedge).In the case of contracts designated as speculative, changes in the fair value are recorded directlyin the income statement. In the case of contracts designated as hedging contracts, the Group documents the relationshipwith the instrument hedged at the time it enters into the contract. The documentation includes the identification of the hedging contract, the item or operationhedged, the nature of the risk hedged, the criteria with which the effectiveness of the hedgingcontract will be evaluated, and the related risk. The effectiveness of the hedge is evaluated bycomparing fluctuations in the fair value or the cash flow of the instrument hedged withfluctuations in the fair value or the cash flow of the hedging instrument. The effectiveness of thehedge is evaluated both at the start of the operation and regularly throughout the duration of thehedge. The evaluation is in any case carried out at least at each accounting date. More specifically,the hedge is considered as efficient when the fluctuation in the fair value or the cash flow of theinstrument is “almost entirely” offset by the fluctuation in the fair value or cash flow of thehedging instrument and results are included in an interval between 80% and 125%.Fair Value Hedge instruments are accounted for by recording in the income statement changes inthe fair value of the hedging instrument and the instrument covered, regardless of the valuation

43Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

criteria adopted for the latter. Adjustments to the book value of hedged financial instrumentsgenerating interest are amortised in the income statement over the residual term of theasset/liability hedged using the effective interest rate method. Cash Flow Hedge instruments are accounted for by suspending under shareholders’ equity theportion of the change in the fair value of the hedging instrument which is recognized as effective,while recording the ineffective part in the income statement. Changes recorded directly under shareholders’ equity are released to the income statement in thesame year or in the years in which the asset or liability hedged influences the income statement.The effects on the financial statements of the termination of a hedge contract are recordeddifferently for Fair Value Hedges and Cash Flow Hedges. In the case of Fair Value Hedges, theunderlying instrument recorded in the financial statements ceases to be hedged from the date atwhich the hedging contract is terminated or the instrument is thus again valued according to themethod used in absence of a hedge. In case of financial instruments valued at amortised cost, thedifference between the valuation at the fair value of the risk hedged and the amortised cost at thedate of termination of the hedge accounting period is amortised over the residual life of thefinancial instruments, based on rules used in the calculation of the effective rate of interest. In thecase of Cash Flow Hedges, the gain or loss suspended in the shareholders’ equity remain suspendeduntil the transaction takes place, when it is no longer probable or it is no longer expected to becarried out, or when flows originally hedged have an impact on the income statement.

4.22 Cost and revenue recognitionRevenues from the disposal of assets are valued at the fair value of the amount received or

receivable, taking into account trade discounts, where appropriate. Revenues from the provision of services are accounted for under the percentage of completion

method, defined as the ratio between the amount of services provided at the accounting dateand the total value of services to be provided.

Revenues are recorded in accordance with the following criteria:• revenues from the sale of publications are recorded at the time of shipping, net of related

returns;• revenues from the sale of advertising are recorded at the time of publication. Costs are recorded according to criteria in line with those applied for revenues, and in any caseunder the accrual method.Interest received and paid is recorded based on the accrual method, taking into account theeffective rate of interest applicable to maturity. Dividends are recorded in the period in which distribution is resolved

4.23 TaxesIncome taxes are calculated based on expected taxable income and current tax regulations. Deferred and prepaid taxes arising from timing differences between the profit reported in thefinancial statements and that reported for tax purposes, and the carry-forward of losses and taxcredits not retrieved, are also recorded, provided their retrieval (elimination) reduces (increases)future tax payments with respect to the amount that would be payable in the future in case suchretrieval (elimination) did not have a tax effect. The tax effect of operations or other events arerecorded in the income statement or directly under shareholders’ equity in the same manner asoperations or events that originate a tax liability and on the basis of tax rates applicable at thestatement of financial position date. In case of changes in said tax rates, the book value ofdeferred tax assets and liabilities is adjusted and entries are made in the income statement orunder shareholders’ equity as appropriate.

44 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

45Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

4.24 CurrencyFinancial statements items are recorded in the currency of the primary economic environment inwhich the company operates (“functional currency”). The half-yearly condensed consolidatedfinancial statements are prepared in euro, which is the functional currency of the ParentCompany. Transactions denominated in other currencies are translated into the reporting currency at theexchange rate at the date of the transaction. Foreign-exchange gains and losses arising from thesettlement of these transactions and the translation of assets and liabilities denominated incurrencies other than the functional currency are recorded in the income statement.

5. Segment InformationThe determination of segments of activity of the Group and the presentation of the related infor-mation was carried out on the basis of periodical internal reports used by Group management toallocate resources and analyse results.The structure of the internal management reports is based on goods and services rendered.The Group evaluates the performance of its segments of activity based on Operating profit/(loss).Revenues of the segments presented are those directly achieved or attributable to the segment andderiving from its core business. These include both revenues deriving from transactions with thirdparties and those deriving from transactions with other segments, the latter being carried out atremunerative terms, in line with market conditions.Specifically, in the publishing segments (national newspapers, periodicals, add-on products andlocal newspapers) sales mainly include revenues from the sale of publications and/or productssold optionally with publications (at newsstands, through subscription and through other lessimportant channels) and advertising revenues. In the radio segment, sales are represented by spotson the three Group radio stations as well as the sale of programs and services to third parties. Inthe digital segment, advertising revenues from all Group internet sites as well as revenues fromthe sale of subscriptions and services on various digital platforms (web, tablets and mobilephones) are recorded; the TV sector includes advertising revenues from the Deejay Tv channelsas well as revenues from the rental of digital bands. The advertising sales segment accounts forthe revenues realized by the concessionaire A.Manzoni&C. through both Group means and vis-à-vis third party publishers. Lastly, other activities essentially include inter-segment revenues fromother printing and subscription management activities as well as services carried out by the ParentCompany for other segments.Information regarding taxes and financial management is set forth without distinction in the con-solidated results column, in line with the structure of internal reporting and, also because specificallocation would not be significant.For assets or liabilities that cannot be attributed to an individual segment, specific parameterswere applied in their attribution. Assets and liabilities of the “National newspapers-Periodicals”and “Radio-Internet” segments, are grouped together because the specifics of the segments, withparticular reference to the marketing of editorial products, do not allow for an objectiveassessment of individual values. Assets and liabilities that may not be attributed using specificparameters are reported separately in the table below.Accounting principles under which segment information is reported in the notes are consistentwith those adopted in the preparation of the consolidated financial statements.

46 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Segment information

1st HALF 2012 National Add-on Local Other Elisions and in millions of euro newspapers Periodicals products newspapers Radio Digital Television Advertising activities adjustments TOTAL

Circulation revenues 57.6 11.4 23.7 60,5 0,2 - - - - (0.7) 152.7 Advertising revenues 83.5 10.0 0.3 42.8 31.2 21.8 6.0 228.9 - (173.4) 251.1 Other revenues 1.1 0.3 0.1 1,1 1,4 4,0 8.2 1,1 15.4 (16.7) 16.0

Total revenues 142,2 21,7 24.2 104,3 32.9 25.8 14.2 230,0 15.4 (190.9) 419,8 Revenues from other segments (83,4) (9,9) (0.3) (43.2) (31.6) (6.3) (1.0) (15.3) 190.9 - Net revenues 58,9 11,8 23.9 61.2 1.2 25.8 7.9 229.0 0.1 - 419.8

Operating profit 14,1 (3,0) 2.6 16.0 10.0 6.3 (0.6) (3.2) (0.3) 0.1 42.1

Financial income (expense) (5.8) Taxes and minority interests (15.1)

Group net profit 21.2

1st HALF 2011 National Add-on Local Other Elisions and in millions of euro newspapers Periodicals products newspapers Radio Digital Television Advertising activities adjustments TOTAL

Circulation revenues 59.2 12.5 38.8 60.2 0.2 - - - - (0.8) 170.0 Advertising revenues 93.4 12.6 0.5 49.3 33.6 18.3 6.0 255.9 - (195.2) 274.4 Other revenues 1.4 0.3 0.0 1.3 1.2 3.0 5.9 1.1 15.5 (16.7) 13.0

Total revenues 154.0 25.3 39.3 110.8 35.0 21.3 11.9 256.9 15.5 (212.6) 457.4 Revenues from other segments (93.8) (12.5) (0.5) (49.5) (33,9) (6.2) (1.1) (15.4) 212,6 - Net revenues 60.3 12.8 38.9 61.3 1.1 21.3 5.7 255.9 0.1 - 457.4

Operating profit 20.2 (3.1) 12.8 16.5 15.4 5.8 (3.3) (0.9) (0.6) 0.1 63.0

Financial income (expense) (7.3) Taxes and minority interests (24.3)

Group net profit 31.5

1st HALF 2012 National newspapers Local Radio and Other Elisions andin millions of euro and periodicals newspapers Internet Television Advertising activities adjustments TOTAL

Net capital expenditure 0.4 0.9 0.7 8.2 0.0 0.1 - 10.3 Assets 989.8 349.2 124.0 220.6 211.2 41.8 (679.9) 1,256.8 Tax assets 40.5 Total Assets 1,297.3

Total 2011 National newspapers Local Radio and Other Elisions andin millions of euro and periodicals newspapers Internet Television Advertising activities adjustments TOTAL

Net capital expenditure (12.6) 6.7 6.1 9.4 0.1 11.8 - 21.3 Assets 1,030.2 394.7 121.9 206.2 220.5 45.6 (680.4) 1,331.7 Tax assets 1,026.8 371.6 126.8 214.8 226.9 47.8 (683) 39.5 Total Assets 1,371.2

47Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

6. Change in accounting principles, errors and adjustments to estimatesAccounting principles adopted are modified from one financial year to the next only in case thechange is required by an accounting principle or it contributes to provide more reliable andrelevant information on the effect of transactions carried out on the financial position,economic performance or cash flows of the entity involved.The effect of changes in accounting principles is recorded retrospectively under shareholders’equity for the first accounting year in which the change is introduced, and comparativeinformation is adapted accordingly. This approach is adopted only when it is impractical torestate the accounts for comparative purposes. The application of a new or modifiedaccounting principle is accounted for as required by the same principle. In case the principledoes not provide for the transition, the change is accounted for under the retrospective methodor, when this is impractical, through the use of projections.In case of relevant errors, the method described in the paragraph above with reference toaccounting principles applies. In case of immaterial errors, the recording is carried out in theincome statement in the period in which it is detected.Changes in estimates that have an impact exclusively on the income statement are accountedfor through the use of projections in the same in the year in which the review takes place incase changes affect only such year, or in the year in which the review takes place and insubsequent years in case the change has an impact also in subsequent accounting periods.

7. Subsequent eventsEvents occurred after the date of the financial statements are events occurred between such dateand the date at which the publication of the same is authorized. The date of approval for thepublication of the financial statements is the date when the Board of Directors approves them.This date is indicated in Note 1.Subsequent events relate to facts that provide evidence of situations existing at the date of thefinancial statements (subsequent events that imply adjustments) or facts providing evidence ofsituations after the statement of financial position date (subsequent events that do not requireadjustments). The effect related to the first is recorded in the financial statements and theappropriate note is adjusted accordingly, while in the second case only suitable information isprovided in the Notes, where relevant.

8. New IFRS and IFRIC interpretationsAccounting standards, amendments and interpretations applied as from January 1, 2012On October 7, 2010 the IASB issued a number of amendments to IFRS 7 – FinancialInstruments: Disclosures, to be applied for the Group as from January 1, 2012. Theamendments were issued with the intent of improving the understanding of transfers (derecog-nition) of financial assets, including the understanding of possible effects of any residual riskfor the company transferring such assets. The amendments also require greater information ifa disproportionate amount of such transactions are executed close to the end of an accountingperiod. The adoption of this amendment has not had any effect with regard to the valuation ofthe financial statement items.

Accounting principles, amendments and interpretations not yet applicable for which the Group has notopted for early applicationThe Group did not opt for the early adoption of the following principles, interpretations andupdates of principles already published and approved by the European Union, whose adoption

is mandatory for financial statements which commence after January 1, 2012 and for whichthe Group is evaluating the effects of future adoption of the same.

Document Document title Effective date of the IASB documentAmendments to IAS 1 Presentation of items of Other Comprehensive Income July 1, 2012Amendments to IAS 12 Deferred tax: Recovery of Underlying Assets January 1, 2012Amendments to IAS 19 Employee Benefits January 1, 2013

The Group is currently evaluating the possible impact of the adoption of the principles andinterpretations listed below, for which at the date of the present half-yearly consolidatedfinancial report, competent EU Authorities have not yet concluded the approval process.

Document Document title Effective date of the IASB documentStandards and InterpretationsIFRS 9 Financial Instruments January 1, 2015IFRS 10 Consolidated Financial Statements January 1, 2013IFRS 11 Joint Arrangements January 1, 2013IFRS 12 Disclosures of Interests in Other Entities January 1, 2013IFRS 13 Fair Value Measurement January 1, 2013IAS 27 Separate Financial Statements January 1, 2013IAS 28 Investments in Associates and Joint Ventures January 1, 2013IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine January 1, 2013AmendmentsAmendments to IFRS 1 Government loans January 1, 2013Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities January 1, 2013Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities January 1, 2014Improvements to IFRSs (2009-2011) January 1, 2013

9. Main causes of uncertainty over estimatesEstimates are made primarily in the context of the recording of write-downs in the value ofassets, to estimate returns of publications, provisions for bad accounts, employee benefits,taxes and other provisions. Estimates and assumptions are reviewed periodically and the effectsof each resulting change are reflected immediately in the income statement. In particular, thecurrent uncertain outlook for the short and medium term, which is resulting in a negative per-formance of advertising sales for the print segment, has made estimates of future performanceand cash flow projections difficult. These projections are used in the determination of the valuein use of Cash Generating Units to assess the retrievability of the book value of intangible assetswith an indefinite useful life and that of equity investments. Therefore, the generation of resultsdiffering from those estimated in the near future cannot be excluded. Circumstances and eventsthat may affect future performance will be monitored closely by management, that will assesson an ongoing basis possible losses in the value of assets and, where necessary, adjust the bookvalue of the same accordingly.Estimates of returns of publications and the related add-on products are carried out monthlyand constantly updated through the use of statistical methods applied to up-to-date informationon sales.

48 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Estimates of legal risks take into account the nature of the litigation pending (civil andcriminal). Estimates for homogeneous risk are weighted against the performance in theprevious three years. Historical data shows a stable trend.

10. Scope of Consolidation There were no changes in the consolidation compared to the first six months of 2011.With regard to the subsidiaries, in October 2011 (but with backdated effect to January 1,2011), the transaction for the incorporation of the former Editoriale FVG SpA within FinegilEditoriale SpA was finalised; the absorbed company is the publisher of the newspapers IlPiccolo in Trieste and Messaggero Veneto in Udine and Pordenone. During the same month,Finegil Editoriale acquired the business segment relating to the newspaper Corriere delle Alpi,sold in the province of Belluno, from S.E.T.A. SpA.

11. Financial InstrumentsOn April 8, 2010, the Parent Company entered into an interest rate swap contract (for anotional value of € 50 million) converting the fixed interest rate payable on part of the bondissue into a floating rate of interest.Such transaction was classified as a fair value hedge and as such, all gains and losses resultingfrom the recording of the market value of the derivative instrument and all gains and lossesfrom the adjustment to the fair value of the hedged bond issue relating to the hedged risk, arerecorded in the income statement. At June 30, 2012, the generated profit of € 339 thousand,which joined that generated in previous years totalling € 1,230 thousand, determined by thefair value valuation of the derivative, was exactly counterbalanced by the equivalent lossreported on the bond issue. The conversion of the fixed rate into floating resulted in a profitof € 175 thousand which, together with that achieved in in previous years of € 789 thousand,made it possible to generate total income of € 964 thousand. To verify the effectiveness of thehedge, tests have been performed prospectively and retrospectively.Prospective tests are carried out to ensure that at the beginning of a hedge, and for the wholeterm of the same, a hedge proves to be highly efficient, or that, in other words, changes in thefair value of the item hedged offset almost in full the change in the fair value of the hedgedinstrument. Retrospective tests are carried out to ensure that the hedge covers between 80 to125% of said changes in the value of the underlying asset, thus being considered an effectivehedge. The methods applied by the Parent Company to verify the effectiveness of the hedge are,for the retrospective test, the Dollar Offset Method, and for the prospective test, the RelativeRisk Reduction Method (RRR). Tests on the efficacy of the hedge always proved positive, asfrom the date the swap was entered into to the year end date.

49Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

12. Notes to the Statement of Financial Position Items

Assets

Intangible assets (1)The breakdown of the category is shown below. Dec. 31, 2011 June 30, 2012Publications and trademarks 400,245 400,245Frequencies 222,011 222,011Goodwill 37,572 37,572Industrial patents and intellectual property rights - 1,285Concessions and licenses 1,822 1,414Assets in process and advance payments 27 3TOTAL INTANGIBLE ASSETS 661,677 662,530

of which:Intangible assets with an indefinite useful life 659,828 659,828Intangible assets with a defined useful life 1,849 2,702

Research and Development costs were not capitalized and no revaluation of intangible assetswas carried out.

The breakdown of intangible assets and changes in the period are shown in the tables thatfollow.

50 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Intangible assets with an indefinite useful life

Publications and trademarks

June 30, 2012

Opening balance Original cost 400,245Accumulated write-downs -Opening balance 400,245

ADJUSTMENTS TO ORIGINAL COST Increases -Decreases -Reclassifications -Closing balance Original cost 400,245Accumulated write-downs -Ending balance 400,245

Frequencies

June 30, 2012

Opening balance Original cost 222,011Accumulated write-downs -Opening balance 222,011

ADJUSTMENTS TO ORIGINAL COST Increases -Decreases -Closing balance Original cost 222,011Accumulated write-downs -Final balance 222,011

51Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Goodwill

June 30, 2012Opening balance Original cost 37,572Accumulated write-downs -Opening balance 37,572ADJUSTMENTS TO ORIGINAL COST Increases -Decreases -Closing balance Original cost 37,572Accumulated write-downs -Final balance 37,572

A detailed list of intangible assets with an indefinite useful life and the respective book valuefor the current year and the previous one are shown in the table below.

Cash Generating Unit Book value at Book value ator groups of CGU Dec. 31, 2011 June 30, 20121. La Repubblica 229,952 229,9522. La Nuova Sardegna 6,113 6,1133. Finegil Editoriale publications (Northwest Division, Padua, Livorno, Centre-South) 50,764 50,7644. Messaggero Veneto and Piccolo 104,527 104,5275. Alto Adige/Trentino 4,345 4,3456. Free Press 3,372 3,3727. Radio frequencies (Radio Deejay,

Radio Capital and m2o) 83,728 83,7288. TV frequencies (Rete A) 138,283 138,2839. Deejay trademark 1,171 1,17110. Rete A goodwill 34,840 34,840Goodwill of other activities 2,733 2,733TOTAL 659,828 659,828

The impairment test carried out at December 31, 2011 on publications, radio and TV frequen-cies, trademarks and goodwill, considered assets having an indefinite useful life, did not resultin the emergence of losses in value to be recorded in the financial statements. At the date ofthe financial statements no indicator of possible losses in value of said assets was identified.The expected retrievable value of assets was estimated based on fair value less costs to sell andvalue in use. The table that follows shows the main information used to carry out the impairment test foreach cash generating unit or group of units whose value is significant.

52 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Cash Generating Unitor groups of CGU Criterion used Sector Impairment loss1. La Repubblica Value in use National newspapers -2. La Nuova Sardegna Value in use Local newspapers -3. Finegil Editoriale publications (Northwest Division, Padua, Livorno, Centre-South) Value in use Local newspapers -4. Messaggero Veneto and Piccolo Value in use Local newspapers -5. Alto Adige/Trentino Value in use Local newspapers -6. Free Press Value in use Local newspapers -7. Radio: Deejay frequencies and trademark Fair Value/Value in use Radio -8. Television: frequencies and goodwill Fair value Television -

Determination of value in use of Cash Generating UnitThe value in use of Cash Generating Unit was determined by discounting back – at an appropriaterate – future cash flows, both positive and negative, generated by the unit in its productive phaseand upon disposal. In other terms, the value in use was estimated by applying the DiscountedCash Flow model using the unlevered (or asset side) version that applies a formula that includesthe discounting back of cash flows analytically expected during the period of the anticipatoryplans (2012-2016) and the expected terminal value of the cash generating unit. In order to correctly estimate the value in use of a Cash Generating Unit, it has been necessary toestimate the cash flows generated by it over time; expectations regarding possible fluctuations inthe amount and timing of cash flows; the discounting back rate to be applied; other possible riskfactors inherent in the long-term nature of the investment made in the unit.With regard to the characteristics of cash flows to be discounted, international accountingprinciples explicitly require that in the estimation of the discounted value, positive and negativecash flows generated by financial management and cash flows relating to taxes must not be takeninto account. Cash flows to be discounted are therefore only operating cash flows, unlevered anddifferential (as they relate to the specific unit), gross of taxes.In the specific case the discounting rate adopted was the average cost of capital employed by theEspresso Group (WACC), equal to 11.49%.

The determination of fair value less costs to sell of Cash Generating UnitIAS 36 establishes that the fair value less costs to sell of an asset or a group of assets (forexample a Cash Generating Unit) is best expressed through a price “set” in a binding sale offerbetween independent parties, net of direct costs incurred in the disposal of the asset. In casesuch evidence does not exist, the fair value net costs to sell can be determined making reference,in order of importance, to the following values: the current price negotiated in an activemarket; the price recorded in previous similar transactions; the price estimated on the basis ofother information gathered by the company.In the specific case, the fair value less costs to sell was determined following a differentapproach according to the publishing activity for which, in absence of an active trading market,direct multiples were used (Enterprise value/Sales, Enterprise Value/EBITDA, EnterpriseValue/EBIT), and assets in the radio and television segment, for which a price/users type ofmultiple was adopted (Enterprise Value/population reached by the signal), observing transfer

53Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

prices of similar frequencies in relation to the population potentially reached by the relatedsignal.To determine the possible “price” of a cash generating unit in the publishing sector, entity sidemultiples, either of the trailing (historical/punctual multiples) or leading (expected/averagemultiples) indicator type, were used. The estimated fair value less costs to sell of operating units in the radio and television segmentwas calculated based on prices recorded on the sale of similar frequencies, verified through anassessment of the potential audience reached by the signal. The use of this approach allowsestimating the fair value of radio and television frequencies by correlating the market price ofthe frequency and the number of inhabitants reached by the signal.

Main assumptions on which the 2012-2016 anticipatory plans and sensitivity analysis are basedResults and operating cash flows generated by individual CGU of the Group were calculated basedon the 2012-2016 anticipatory plans drafted by management on the basis of reasonableassumptions consistent with historical data. These represent the best estimate of the economic con-ditions prevailing in the period considered. The first year of the anticipatory plans corresponds tothe budget prepared for 2012, approved by the Board of Directors on January 25, 2012.As already mentioned in note 9 above, current uncertainties regarding the short and medium termoutlook induced the management to review expected growth rates of revenues and margins.With regard to advertising revenues in particular, the analysis of the evolution over the last tenyears shows a sharp correction between advertising investments and GDP. During the second halfof 2011, as the crisis flared up, the economic indicators disclosed rapid deterioration and, as a con-sequence, advertising investment dropped considerably. On the basis of this performance andobserving the parallelism with that which occurred in the last few months of 2008, a decrease washypothesised for 2012 in the advertising market similar to that which was recorded during the lastcrisis in 2009, equating to -12%. With regard to the various media, a trend in line with theperformance over the last three years was envisaged, which for the newspaper sector means a dropof 15%, along with a decrease in line with the global market for radio and TV and essentiallystability for internet. In this general context, a trend in advertising revenues on the media of theGroup similar to that hypothesised for the specific market segments was adopted, involving a slightincrease in shares for newspapers and internet thanks to product re-launch/maintenance action.For the remaining years of the plan, a gradual recovery was forecast in funding from advertisingin daily newspapers, with an average growth of 2.8% for the period, a trend similar to thatrecorded by the market for press media after the 2001-2002 crisis.As for circulation revenues, the business plan 2012-2016 assumed a trend for sales of the varioustitles in line with the trend seen over the last three years, bearing in mind the specific marketconditions in which each newspaper operates, especially at local level, and a gradual decrease inrevenues associated with optionals distributed with the daily newspapers.It should also be noted that, in the determination of the terminal value of cash generating units, azero growth rate was prudentially used.With regard to the cash generating units that had a value of the masthead and/or the frequencyand/or goodwill considered relevant for the purposes of the Group consolidated financialstatements, and for which impairment tests carried out showed a positive difference equal to thehigher of the fair value less costs to sell and the value in use with respect to the book value thatwas lower than 50% of the book value, a sensitivity analysis of results was carried out to determinewhich combination of variables would equalize the retrievable value of the CGUs in question withtheir book values.

54 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

In particular for the publishing CGU, this analysis for the “Messaggero Veneto” and “Il Piccolo”CGU gave the following results:

• for the “Messaggero Veneto” CGU, value in use would have been equal to the carrying amountof € 65.65 million assuming an annual average growth in advertising of 0.5 % and an averagedecline of 2.8% in the number of copies sold. As an alternative, taking as valid the assumptionsregarding circulation and advertising revenues contained in the 2012-2016 anticipatory plan,value in use would have been equal to the book value if the discount rate of expected cash flows(pre-tax WACC) were 12.94% instead of the 11.49% currently used;

• in the case of the Il Piccolo CGU, value in use would have been equal to the book value of€41.08 million assuming a 1% average annual rise in advertising and a 2.7% average declineper year in the number of copies sold. As an alternative, taking as valid the assumptionsregarding circulation and advertising revenues contained in the 2012-2016 anticipatory plan,value in use would have been equal to the book value if the discount rate of expected cash flows(pre-tax WACC) were 13.10% instead of the 11.49% currently used.

In conclusion, in the case of CGU in the radio and television segment, the parameter used todetermine the fair value less costs to sell ranged from 1.5 to 3 times the number of inhabitantsreachable by the FM broadcasting stations of the Radio Deejay, Radio Capital and m2o, while forCash Generating Units in the television segment, the parameter applied was included between 3.4and 3.8 times. In the latter case, the fair value of the Rete A CGU would have been equal to itsbook value using a price multiplier of 1.80 times the number of inhabitants reached by the digitalsignal. Due to the scarcity of recent transactions involving television frequencies in Italy, the valuein use of television frequencies used to confirm the retrievable value recorded in the financialstatements was also calculated, assuming a growth in revenues from the lease of digital bandwidthlinked to the evolution of the coverage of the 2 multiplexes of Rete A in line with the national planfor the switch-off of analogue broadcasting. Specifically, the business plan assumes an increase inchannels rented to third parties from 6 in 2012 to 11 in 2016, with rental prices developingaccording to the step-up scale of values already defined in existing contracts.

Other intangible assetsThe table below illustrates the useful life and related amortization rates for the various classesof intangible assets with a defined useful life. Useful life Amortization rateIndustrial patents and intellectual property rights 2-3 years 33.33-50.00%Concessions and licenses 3-5 years 20.00%-33.33%Other intangible assets 3-6 years 16.67%-33.33%

55Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

The breakdown of changes in intangible assets is shown below.

Industrial patents and intellectual property rights

June 30, 2012Opening balance Original cost 2,069Accumulated amortization and write-downs (2,069)Opening balance -ADJUSTMENTS TO ORIGINAL COST IIncreases 1,593Decreases -ADJUSTMENTS TO PROVISIONS Increases (308)Decreases -Closing balance Original cost 3,662Accumulated amortization and write-downs (2,377)Final balance 1,285

The increase of € 1,593 thousand refers to the capitalisation of the TV rights relating to acontract entered into with Walt Disney Company Italia Srl which started to produce its effectsas from February 1, 2012.

Concessions and licenses

June 30, 2012Opening balance Original cost 43,178Accumulated amortization and write-downs (41,356)Opening balance 1,822ADJUSTMENTS TO ORIGINAL COST Increases 112Decreases (2)Reclassifications 24ADJUSTMENTS TO PROVISIONS Increases (542)Decreases -Closing balance Original cost 43,312Accumulated amortization and write-downs (41,898)Finaò balance 1,414

56 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Assets in process and advance payments

June 30, 2012Opening balance Original cost 27Opening balance 27ADJUSTMENTS TO ORIGINAL COST Increases -Decreases -Reclassifications (24)Closing balance Original cost 3Final balance 3

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

Dec. 31, 2011 June 30, 2012Land 6,978 6,978Industrial and civil buildings 37,097 36,199Leasehold improvements 7,696 6,884Plant and machinery 102,519 97,379Technical equipment 185 148Furniture, fixtures and vehicles 5,560 4,734Assets under construction and advance payments 2,602 1,119Other assets 191 152TOTAL PROPERTY, PLANT AND EQUIPMENT 162,828 153,593

At June 30, 2012 property, plant and equipment amounted to € 153,593 thousand, down €9,235 thousand with respect to the end of 2011: investments for the period, totalling € 8,993thousand, mainly referring to the conclusion of the TV network digitalisation process, weremore than offset by depreciation for € 17,854 thousand and sales of assets for a total of € 374thousand.

In view of the homogeneity of assets recorded in the statement of financial position, barringspecific relevant cases, the expected useful life of assets by category and the related depreciationrates is as follows.

57Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

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

A breakdown of property, plant and equipment owned and assets held under a leasing contractis included in the tables that follow.

Land June 30, 2012Opening balance Original cost 6,978Opening balance 6,978ADJUSTMENTS TO ORIGINAL COST Increases -Decreases -Closing balance Original cost 6,978Final balance 6,978of which: Leasing principal 129

58 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Industrial and civil buildings

June 30, 2012Opening balance Original cost 62,721Accumulated depreciation and write-downs (25,624)Opening balance 37,097ADJUSTMENTS TO ORIGINAL COST Increases 27Decreases -ADJUSTMENTS TO PROVISIONS Increases (925)Decreases -Closing balance Original cost 62,748Accumulated depreciation and write-downs (26,549)Final balance 36,199of which: Leasing principal 796Accumulated depreciation on leased assets (283)

The leased building in Rimini is held by the subsidiary A.Manzoni&C. SpA, and is used foroffices. The contract was stipulated on December 11, 2000 with leasing company UBI LeasingSpA based in Brescia, and has a term of 144 months. The value of the building, assessedthrough an independent survey, on which leasing payments were calculated, is € 644thousand (including the value of the land), and is in line with market value. The book value,equal to € 796 thousand, includes accessory costs of the leasing contract amounting to € 97thousand and € 184 thousand of leasehold improvement costs. Interest is calculated at a fixedrate of interest set in the contract. The cumulative value of leasing payments is equal to € 876thousand and includes the principal amount, interest and the value of the buy-back option,worth € 6 thousand.

59Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Leasehold improvements June 30, 2012Opening balance Original cost 36,953Accumulated depreciation and write-downs (29,257)Opening balance 7,696ADJUSTMENTS TO ORIGINAL COST Increases 418Decreases (279)Reclassifications 244ADJUSTMENTS TO PROVISIONS Increases (1,471)Decreases 278Reclassifications (2)Closing balance Original cost 37,336Accumulated depreciation and write-downs (30,452)Final balance 6,884

Plant and machinery June 30, 2012Opening balance Original cost 351,847Accumulated depreciation and write-downs (249,328)Opening balance 102,519ADJUSTMENTS TO ORIGINAL COST Increases 7,627Decreases (3,470)Reclassifications 1,806ADJUSTMENTS TO PROVISIONS Increases (14,205)Decreases 3,102Closing balance Original cost 357,810Accumulated depreciation and write-downs (260,431)Final balance 97,379of which: Guarantees and commitments 162,442

Liens on plant and equipment relate to secured guarantees in favour of banks that in 2005granted the subsidized loan on rotary presses, printing equipment and similar equipment.

60 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Technical equipment June 30, 2012Opening balance Original cost 2,639Accumulated depreciation and write-downs (2,454)Opening balance 185ADJUSTMENTS TO ORIGINAL COST Increases 3Decreases (54)ADJUSTMENTS TO PROVISIONS Increases (57)Decreases 52Reclassifications 19Closing balance Original cost 2,588Accumulated depreciation and write-downs (2,440)Final balance 148of which: Guarantees and commitments 183

Furniture, fixtures and vehicles June 30, 2012Opening balance Original cost 83,246Accumulated depreciation and write-downs (77,686)Opening balance 5,560ADJUSTMENTS TO ORIGINAL COST Increases 338Decreases (73)Reclassifications 534ADJUSTMENTS TO PROVISIONS Increases (1,157)Decreases 64Reclassifications (532)Closing balance Original cost 84,045Accumulated depreciation and write-downs (79,311)Final balance 4,734

of which: Guarantees and commitments 90

61Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Assets under construction and advance payments June 30, 2012Opening balance Original cost 2,602Opening balance 2,602ADJUSTMENTS TO ORIGINAL COST Increases 567Decreases -Reclassifications (2,050)Closing balance Original cost 1,119

Final balance 1,119

Other assets

June 30, 2012Opening balance Original cost 5,387Accumulated depreciation and write-downs (5,196)Opening balance 191ADJUSTMENTS TO ORIGINAL COST Increases 13Decreases (4)Reclassifications (533)ADJUSTMENTS TO PROVISIONS Increases (39)Decreases 8Reclassifications 516Closing balance Original cost 4,863Accumulated depreciation and write-downs (4,711)Final balance 152of which: Leasing principal 87Accumulated depreciation on leased assets (78)

Assets held under a financial lease relate primarily to subsidiary A. Manzoni&C. SpA thatleases computers. These contracts were stipulated with leasing company Econocom InternationalItalia SpA respectively on May 1, 2009 and November 1, 2010, all for a term of 48 months.The cumulative value of the assets leased amounts to €87 thousand. Interest is set at a fixedrate and lease payments amount to €94 thousand, inclusive of principal and interest.

62 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

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

% held

Dec. 31, 2011 June 30, 2012Le Scienze SpA 50% 50%Editoriale Corriere Romagna Srl 49% 49%Editoriale Libertà SpA 35% 35%Altrimedia SpA 35% 35%

The tables that follow show changes in investments valued at equity:

Dec. 31, 2011 Increase Decrease Dividends Net profit June 30, 2012Le Scienze SpA 304 - - (233) 107 178Editoriale Corriere Romagna Srl 2,986 - - - 1 2,987Editoriale Libertà SpA 24,822 - - (525) 322 24,619Altrimedia SpA 745 - - (70) 41 716

Total investments valued at equity 28,857 - - (828) 471 28,500

The impairment test carried out at December 31, 2011, on Editoriale La Libertà and EditorialeCorriere di Romagna resulted in values in line with those at which the two investments arecarried. At June 30, 2012, no indicators of a loss in value of the investments were detected. Theretrievable value of both investments was assessed under IAS 36 as the higher between the fairvalue net of costs to sell and the value in use, obtained using the same method, and accordingto assumptions in line with those described in note 12.1. Specifically, the retrievable value wasequal to the value in use for both. In particular, the sensitivity analysis on the investment inEditoriale Libertà shows that the value in use would have been equal to the book value,assuming 1.8% average annual growth in advertising sales and a rise in copies sold of just over1% or, alternatively, hypothesising a 1% average annual drop in advertising revenues and a3.5% increase in the number of copies sold. If, by contrast, one takes the assumptionsregarding circulation and advertising revenues contained in the 2012-2016 anticipatory plan asvalid, value in use would have been equal to the book value if the discount rate of expectedcash flows (pre-tax WACC) were 11.98% instead of the 11.49% currently used.

Financial highlights of the mentioned affiliated companies are reported below.

63Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Assets Liabilities Dec. 31, 2011 June 30, 2012 Dec. 31, 2011 June 30, 2012Le Scienze SpA 3,475 2,828 2,867 2,472Editoriale Corriere Romagna Srl 3,821 3,881 611 668Editoriale Libertà SpA 26,956 25,610 6,559 5,792Altrimedia SpA 4,167 4,051 2,542 2,510

Revenues Profit/(loss) 1st Half 2011 1st Half 2012 1st Half 2011 1st Half 2012Le Scienze SpA 1,930 1,690 242 214Editoriale Corriere Romagna Srl 83 85 (8) 3Editoriale Libertà SpA 7,792 7,497 984 921Altrimedia SpA 4,610 4,390 90 116

The financial year of the above companies coincides with that of Gruppo Editoriale L’Espresso SpA.

Other investments (4)

Book value at December 31, 2011 2,518Acquisitions and increases -Sale write-down of investments -Book value at June 30, 2012 2,518

The table that follows shows other investments, changes in the percentage of ownership and thebook value of the investment.

% held Book value Dec. 31, 2011 June 30, 2012 Dec. 31, 2011 June 30, 2012Telelibertà SpA 19% 4.32% 190 190ANSA Soc. Coop.a r.l. 18.48% 18.48% 2,209 2,209Trento Press Service Srl 14.40% 14.40% 37 37Audiradio Srl (in liquidation) 7.50% 7.50% - -Club Dab Italia Soc. Consortile p.A. 27.50% 27.50% 33 33Premium Publisher Network Consortium 20.51% 20.51% 14 14Other investments - - 35 35TOTAL OTHER INVESTMENTS 2,518 2,518

The financial year of the above companies coincides with that of Gruppo Editoriale L’Espresso SpA.

64 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Non-current receivables (5)

Dec. 31, 2011 June 30, 2012Long-term security deposits 1,071 1,121Other non-current receivables 2 2TOTAL NON-CURRENT RECEIVABLES 1,073 1,123

Deferred tax assets and Deferred tax liabilities (6) The table that follows shows changes in deferred/prepaid taxes.

Deferred tax assets

Taxable amount Dec. 31, 2011 June 30, 2012On personnel provisions 11,988 8,187On risk provisions 34,852 37,829 On write-down of current assets 36,076 34,388 On write-down of non-current assets 7,498 7,222 On write-down of financial instruments 4,847 2,626 On previous years’ tax losses 7,043 88 TOTAL 102,304 90,440

Prepaid tax assets Dec. 31, 2011 June 30, 2012On personnel provisions 3,297 2,251 On risk provisions 10,191 11,172 On write-down of current assets 9,978 9,536 On write-down of non-current assets 2,209 2,134 On write-down of financial instruments 1,333 751 On previous years’ tax losses 1,937 24 TOTAL 28,945 25,868

Deferred tax liabilities

Taxable amount Dec. 31, 2011 June 30, 2012On lower valuation of personnel provisions 8,135 7,880On lower valuation of risk provisions 92 92 On higher valuation of current assets 83 64 On higher valuation of non-current assets 375,100 384,254 TOTAL 383,410 392,290

65Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Deferred tax liabilities Dec. 31, 2011 June 30, 2012On lower valuation of personnel provisions 2,237 2,167On lower valuation of risk provisions 29 29 On higher valuation of current assets 23 18On higher valuation of non-current assets 115,871 118,900

TOTAL 118,160 121,114

Dec. 31, 2011 June 30, 2012Deferred taxes credited/charged (23) (396)TOTAL DIRECT RECOGNITION UNDER EQUITY (23) (396)

Inventories (7)

Dec. 31, 2011 June 30, 2012

Gross Write- Net Gross Write- Net inventories downs inventories inventories downs inventories

Paper (raw materials) 19,383 (711) 18,672 18,284 (562) 17,722Printing materials (raw materials) 2,502 (253) 2,249 2,123 (254) 1,869Publications(finished products) 392 - 392 369 - 369Add-on products (finished products) 220 (33) 187 291 (7) 284Returns (finished products) 4,516 (4,062) 454 3,350 (3,011) 339Other goods 390 (338) 52 115 (63) 52TOTAL INVENTORIES 27,403 (5,397) 22,006 24,532 (3,897) 20,635

At June 30, 2012, the decline in inventories recorded in the income statement amounted to €1,370 thousand (as compared with an increase of € 4,961 thousand at December 31, 2011),of which € 41 thousand relating to the decrease in product inventories included under “Changein products inventories” (at December 31, 2011 this change was positive by € 101 thousand),and € 1,329 thousand relating to the decline in paper and raw material inventories includedunder “Purchases” (as compared with a positive € 4,860 thousand at December 31, 2011).

Trade receivables (8)

Dec. 31, 2011 June 30, 2012Newsstands and distributors 16,805 17,401Advertising and exchanges 214,043 198,900Other trade receivables 16,744 19,305Receivables from Group companies 953 487TOTAL TRADE RECEIVABLES 248,545 236,093

At June 30, 2012, the provision for doubtful accounts amounted to € 20,968 thousand (€ 17,710thousand at December 31, 2011.

66 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Receivables from other Group companies refer to trade receivables due from companiesconsolidated under the equity method (Le Scienze, Editoriale Libertà and Altrimedia). Fordetails, see the table in note 14.4.

Marketable securities and other financial assets (9)

Dec. 31, 2011 June 30, 2012Treasury bonds and similar 11,275 5,387Bonds 35,248 40,844Interest accrued 942 607Financial receivables on derivative instruments 1,270 2,958TOTAL MARKETABLE SECURITIES AND OTHER FINANCIAL ASSETS 48,735 49,796

During the first half of 2012, the process for the reorganisation of the portfolio continuedwhilst keeping the overall value of the investments held more or less unchanged. Overall, atJune 30, 2012 securities amounted to € 46,231 thousand of which € 5,387 thousand in gov-ernment or similar securities and € 40,844 thousand in bonds of private companies, bothItalian (€ 25,301 thousand, essentially represented by leading banks) and foreign (€ 15,543thousand, represented mainly by leading industrial concerns). Furthermore, during 2012 €5,260 thousand was paid for the purchase of new securities and € 6,762 thousand collectedfor securities which had reached their natural maturity date. These bonds, which bear fixed and floating interest rates, which average 4.56%, expirebetween June 3, 2013 and October 20, 2014 and are classified as “available-for-sale financialassets” and thus valued at fair value.The negative effect on the shareholders’ equity of the above valuation, net of related tax effects,amounts to € 617 thousand (of which € 1,044 thousand, with a positive effect accrued duringthe first half of 2012).

The item financial receivables on derivatives amounts to € 2,958 thousand and relates to the fairvalue valuation of the interest rate swap to hedge the interest of the Bond issue, for € 1,570thousand, in addition to the related net interest accrued (€ 1,388 thousand).

Tax receivables (10) Dec. 31, 2011 June 30, 2012Corporate income tax (Ires) and regional tax on business activities (Irap) receivable 729 7,388Ires receivable from parent company - 3,182Ires/Irap to be reimbursed 4,635 62VAT receivable 506 313Grants on publishing as per Italian Law No. 62/2001 receivable 731 638Paper subsidies - 2,713Other tax receivables 3,912 337TOTAL TAX RECEIVABLES 10,513 14,633

Tax receivables amounted to € 14,633 thousand, up € 4,120 thousand with respect to the €10,513 thousand as at December 31, 2011 mainly due to the effect of the IRES and IRAP creditaccrued in the period; at December 31, 2011, advances were in fact reported net of thetheoretical tax liability, while at June 30, 2012 the tax receivable emerging at the time of

67Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

payment of the first advance instalment and the tax payable were reported separately. Thiseffect was only partly balanced by the netting, for a total of € 8.6 million, between amountsdue from the tax authorities and the tax bill referring to the year 1993 and 1994, in relationto which the Company has an appeal outstanding, relating to the dispute on beneficial shareinterests already commented on; the amount netted was therefore recorded under “Otherreceivables” pending the conclusion of the legal proceedings.

Receivables for grants relate to tax credits on capital expenditure as per Italian Law 62/2001(Law on Publishing) which grants a 3% tax credit on eligible capital investments for thefollowing five years. Grants not pertaining to the period were discounted and will be used-upover time based on the depreciation schedule of the assets to which they relate.Italian Law No. 220 dated December 13, 2010 (Stability law for 2011) providing easy termsfor spending on the paper used during 2011 for the printing of publications, had granted a taxcredit of up to a maximum of 10% on total paper consumption purchased during the sameyear. The Group presented an application for a total amount of subsidised paper for € 42,721thousand, which could have represented a maximum tax credit of € 4,272 thousand. The max-imum amount available of the subsidies proposed by law amounted to € 30 million.During the first half of 2012, the applications presented by all the Group companies wereaccepted and acknowledged by the Prime Minister’s Office for a total of € 2,713 thousand, or6.35%.

Other receivables (11)

Dec. 31, 2011 June 30, 2012Withholding taxes on employee termination indemnities receivable 31 31Social security receivables 435 889Security deposits 126 134Advances to suppliers and agents 1,175 1,776Receivables from employees and associates 1,244 1,863Other receivables 11,061 21,638TOTAL OTHER RECEIVABLES 14,072 26,331

Other receivables consist mainly of prepaid rights for the publication of add-on products andradio/TV programs to be launched in the 2nd half of 2012.The increase was mainly due to the amount receivable following the appeal as indicated above.

Cash and cash equivalents (12)

Dec. 31, 2011 June 30, 2012Financial receivables from Group companies 157 158Current account deposits 140,570 74,834Cash on hand 263 127Chicks 26 58Accrued interest on bank and post office deposits 391 548TOTAL CASH AND CASH EQUIVALENTS 141,407 75,725

68 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Cash and cash equivalents amounted to € 75,725 thousand, down € 65,682 thousand on December31, 2011. The reduction is firstly due to the transaction for the partial repurchase of Group bondsmaturing in October 2014 for an equivalent value of € 28,775 thousand, at a price equating to99.85% of the nominal value. Secondly, the positive cash flow from operations, equal to € 5,253thousand, was absorbed by the payment of dividends for € 24,966 thousand, the purchase oftreasury stock for € 1,172 thousand and the other investment and financing activities, amounting toa total of € 16,022 thousand.

Current account balances are highly liquid short-term financial investments that are readilyconvertible into known cash amounts and not subject to relevant fluctuations in value. Suchinvestments are made according to the financial needs of the Group, have maturities of around threemonths and are remunerated at a pre-set fixed rate based on Euribor (averaging around 2.17%).

Liabilities and Shareholders’ Equity

Share capital (13)At June 30, 2012, the share capital amounted to € 61,534,498.20 and was made up of 410,229,988shares with par value of € 0.15 each. There were no increases with respect to December 31, 2011.

Dec. 31, 2011 June 30, 2012No. of shares resolved 438,212,188 438,055,288No. of shares issued 410,229,988 410,229,988 of which: No. of own shares 12,520,152 13,884,969

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

Reserves (14) The breakdown of reserves and changes occurred in the period are reported in the “Statementof changes in the Shareholders’ Equity”. As resolved by the Shareholders' Meeting, authorizing the Parent Company’s Board ofDirectors to acquire ordinary shares of Gruppo Editoriale L’Espresso SpA, in the 1st half of2012 a total of 1,364,817 shares were acquired for € 1,172 thousand. Considering theacquisitions in the previous years, treasury shares held by the Company at June 30, 2012amounted to 13,884,969, representing 3.39% of the share capital.

Benefits based on financial instrumentsTThe Group recognizes additional benefits to the Managing Director and other employees ofthe Parent Company and its subsidiaries holding top positions within the Group throughcompensation plans based on financial instruments.Plans adopted provided for the awarding of stock options in some cases, and in other cases theattribution of stock grants.

69Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

All stock option plans adopted by the Group between 2001 and 2010 assign beneficiaries theright to exercise, at a pre-determined price and for a set term, an option for the underwritingof new shares of the Company to be issued pursuant to specific resolutions.The Shareholders’ Meetings held on April 20, 2011 and April 23, 2012 resolved the assignmentof a stock grant plan for 2011 and a stock grant plan for 2012, as a tool for providingincentives for and increasing loyalty in the Group’s management.The stock grant plans provide for attributing each beneficiary of the Plan a specific number ofcontingent rights (Units) to receive ordinary shares already in the company’s portfolio (treasuryshares). The Units were assigned free of charge, are not transferable and are divided into twocategories: “Time-based Units”, whose vesting is subordinate only to the passing of time and“Performance Units”, whose vesting is subordinate to the passing of time and the achievementof the targets of appreciation in the value of the shares, as well as an additional performanceparameter linked to the Group’s financial results.The related rules regulate, among other terms and conditions, also the case in which theassignee of said options and rights ceases for whatever reason to be employed by the company.Attachment No. 2) summarises all the information relating to each stock option and stockgrant plan outstanding at June 30, 2012. In particular, as shown in Attachment 2), unexpiredstock options that have not to this day been exercised, amount to 22,058,500, representing5.38% of the share capital of the Company.A description of stock option plans launched between 2002 and 2010 is provided in the“Information disclosure pursuant to Consob Regulation No. 11971” section in the financialstatements at December 31, 2011. Below we report a description of the 2011 and 2012 stockgrant plans.

2011-2012 Stock Grant PlansThe Board Meetings held on April 20, 2011 and April 23, 2012, availing themselves of theauthority granted them by the shareholders’ meeting held on the same date, resolved theapproval of the 2011 stock grant plan and the 2012 stock grant plan, as per the proposal ofthe Remuneration Committee to be reserved for the Managing Director and the GeneralManager of the Company and the employees of the Parent Company and its subsidiaries.The exercise price is determined in relation to the provisions of Article 9, paragraph IV ofthe Testo Unico consolidated tax law that makes reference to the simple arithmetic mean ofofficial stock market prices of the company’s shares in the month that precedes theassignment of the options.On April 20, 2011, a total of 1,410,000 Units were assigned, divided up between Time-basedUnits (705,000) and Performance Units (705,000) at a price of € 1.81. The Time-based Unitswill accrue, with the corresponding right of the Beneficiaries to receive the related shares,free of charge, in quarterly tranches equal to 12.5% of the related total, starting from April21, 2013. The Performance Units will accrue at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets areachieved.To-date, in accordance with the regulations, 33,750 Time-based Units are void, therefore671,250 remain, and 33,750 Performance Units are void, therefore 671,250 remain.On April 23, 2012, a total of 1,897,500 Units were assigned, divided up between Time-basedUnits (948,750) and Performance Units (948,750) at a price of € 0.98. The Time-based Unitswill accrue, with the corresponding right of the Beneficiaries to receive the related shares,

70 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

free of charge, in quarterly tranches equal to 12.5% of the related total, starting from April24, 2014. The Performance Units will accrue at the same vesting date envisaged for the Time-based Units, but only on condition that the company and share performance targets areachieved.

*****

The options and Units assigned through the plans adopted by the Group were valued according tothe binomial tree method. This method is commonly used in the valuation of financial optionsaccording to the stochastic approach, and makes reference to discreet “binomial” models elaboratedfrom 1979 by Cox, Rubinstein and Ross with the intent of providing a general application of theBlack-Scholes model.Main assumptions used in determining the fair value of stock option plans (2003– 2006) aresummarized in the table below.

Feb. 26, 2003 July 23, 2003 Feb. 25, 2004 July 28, 2004 Feb. 23, 2005 July 27, 2005 2006 Plan Plan Plan Plan Plan Plan Plan 1st tranche 2nd trancheAverage strike price 2.86 3.54 4.95 4.80 4.75 4.65 4.33 3.96Expected volatility* 40.83% 27.23% 24.19% 25.86% 20.84% 18.41% 17.51% 16.56%Risk-free rate 4.08% 4.17% 4.31% 4.49% 3.79% 3.42% 4.35% 4.10%Fair value 0.4292 0.5533 1.1173 0.9070 0.6650 0.6960 0.8016 0.6938

* three-month implicit volatility (official estimate of the Italian Stock Exchange)

While the main assumptions used in determining the fair value of 2009-2010 stock optionplans and the 2011-2012 stock grant plans are summarized in the table below.

Extraordinary Plan for 2009 Ordinary Plan for 2009 Ordinary Plan for 20101st tranche 2nd tranche 3rd tranche 4th tranche1st tranche 2nd tranche1st 1nd tranche2nd tranche

Average strike price 3.84 3.60 2.22 1.37 1.00 1.86 2.25 1.58

Expected volatility* 38.98% 38.98% 38.98% 38.98% 38.98% 38.98% 33.23% 29.98%

Risk-free rate 2.90% 2.90% 2.90% 2.90% 2.90% 2.90% 3.19% 2.60%

Fair value 0.1596 0.1699 0.2404 0.3195 0.5431 0.8927 0.5361 0.3815

* three-month implicit volatility (official estimate of the Italian Stock Exchange).

Stock Grant 2011 Time based Units Performance Units

Opening value 1.81 1.81 Expected volatility** 40.81% 40.81%Risk-free rate 3.63% 3.63%Average fair value 1.8357 1.6627

* twelve-month implicit volatility

71Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Stock Grant 2012Time based Units Performance Units

Opening value 0.98 0.98 Expected volatility* 40.00% 40.00%Risk-free rate 1.62% 1.62%Average fair value 0.7546 0.671

* twelve-month implicit volatility

At June 30, 2012, the total cost of stock option plans recorded in the financial statementsamounted to € 958 thousand (€ 1,292 thousand during the first half of 2011).

Minority interests (15)

Dec. 31, 2011 June 30, 2012 Seta SpA 1,260 1,213Finegil Editoriale SpA 409 406Editoriale La Nuova Sardegna SpA 50 38TOTAL MINORITY INTERESTS 1,719 1,657

Financial debt (16)

Non-Current Financial Debt

Dec. 31, 2011 June 30, 2012 Coming Coming

due in 1-5 years due over 5 yearsBonds 257,498 228,221 228,221 -Bank loans 27,582 22,105 22,105 -Leasing payables 19 4 4 -TOTAL NON-CURRENT FINANCIAL DEBT 285,099 250,330 250,330 -

Current Financial Debt Dec. 31, 2011 June 30, 2012Bonds 4,243 10,037Bank overdrafts 7 1,256Bank loans 10,900 10,938Leasing and other financial payables 98 52TOTAL CURRENT FINANCIAL DEBT 15,248 22,283

At June 30, 2012, the value of the bond issue amounted to € 228,834 thousand, of which €613 thousand represents the short-term portion, and € 228,221 thousand the long-term one.At December 31, 2011, the total amount of the liability amounted to € 258,172 thousand.

72 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

The short-term portion of bonds payable includes, in addition to the current portion of thebond issue also the related interest accrued at June 30, 2012, equal to € 7,854 thousand, inaddition to the mentioned € 1,570 thousand valuation relating to swap agreements.The 10-year bond issue, placed in October 2004, originally had a face value of € 300 million(now reduced to € 227.4 million) and bears a 5.125% coupon. The effective tax rate is equalto 4.824%.During the first half of 2012, the Group made a purchase on the market of the bond issue fora nominal € 28,818 thousand against a payment made of € 28,775 thousand plus the paymentof the accrued interest for € 371 thousand. The transactions generated a capital gain of € 261thousand since the related book value came to € 29,036 thousand. In compliance with theterms and condition of the bond issue, the bonds repurchased are being cancelled.In application of IAS 39, the bond issue is valued at the amortised cost, calculated applying theeffective interest rate. According to this valuation method, the value of the bond issue includesboth directly attributable costs (equal originally to €1,995 thousand, declining at June 30,2012 to 416 thousand), and proceeds from the early termination, in March 2005, of an interestrate swap converting the fixed interest rate payable on the bonds into a floating rate of interest(such proceeds amounted originally to € 9,020 thousand, declining to € 1,881 thousand atJune 30, 2012, of which € 280 thousand due to the repurchase).In 2010, a swap derivative was entered into, to partially hedge the above loan (notional valueof € 50 million) which, accounted for under the hedge accounting method, resulted in the fairvalue valuation of the portion hedged, thus resulting in a loss of € 339 thousand, which isoffset by the profit recorded following the fair value valuation of hedging derivatives. The totalcumulative loss came to € 1,570 thousand.Prospective and retrospective tests were carried out to verify the effectiveness of the hedge atthe date at which the interest rate swap was entered into and at June 30, 2012. The testsconfirmed the effectiveness of the hedge.

Bank loans are made up as follows:

Dec. 31, 2011 June 30, 2012Non-current secured loans 27,582 22,105Total non-current loans 27,582 22,105Current secured loans 10,900 10,938Total current loans 10,900 10,938TOTAL BANK LOANS 38,482 33,043

Further information on loan terms is provided in Note 14.5 on “Risk management”.

Balance at Increases and Repayment Repurchases Balance at Dec. 31, 2011 changes in term of principal June 30, 2012

Short-term portion 98 15 (61) - 52Coming due between 1 and 5 years 19 (15) - - 4Coming due over 5 years - - - - -TOTAL 117 - (61) - 56

73Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Provisions for risks and charges (17)

The table below illustrates the total movements in provisions, as well as movements brokendown into the current and non-current portions.

Legal Social Early Sundry risks Total of which: of which:proceedings security retirement and contract provisions current non-current

litigation incentives renewals portion portionOpening balance 14,125 3,440 19,030 42,344 78,939 38,970 39,969Uses/releases (1,879) - (4,500) (9,966) (16,345) (7,949) (8,396)Transfer current/non-current - - - - - 2,176 (2,176)Provisions 5,749 31 1,400 1,428 8,608 6,130 2,478Change due to discounting back 138 4 - 2 144 - 144Final balance 18,133 3,475 15,930 33,808 71,346 39,327 32,019

Non-current portion

Sundry risks and Legal proceedings Social security litigation Early retirement contract renewals Total provisions

Opening balance 6,380 1,773 - 31,816 39,969Uses/releases (145) - - (8,251) (8,396)Transfer current/non-current (2,022) - - (154) (2,176)Provisions 2,309 (4) - 173 2,478Change due to discounting back 138 4 - 2 144Final balance 6,660 1,773 - 23,586 32,019

Current portion

Sundry risks and Legal proceedings Social security litigation Early retirement contract renewals Total provisions

Opening balance 7,745 1,667 19,030 10,528 38,970Uses/releases (1,734) - (4,500) (1,715) (7,949)Transfer current/non-current 2,022 - - 154 2,176Provisions 3,440 35 1,400 1,255 6,130Final balance 11,473 1,702 15,930 10,222 39,327

Excluding the provision for social security and tax litigation (discounted at the legal rate ofinterest), the non-current components of provisions for risks and charges were discounted at a5% rate (unchanged with respect to December 31, 2011), gross of the related tax effect.

74 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Provisions for legal proceedings and labor litigation include risks deriving from libel suits, commonto all publishers, risks connected with trade and labour litigation, and those connected withsocial security audits.

The provision for early retirement incentives relates to the provision of costs expected to beincurred in the reorganization of some subsidiaries.

The provision for sundry risks consists of tax provisions made in previous years, and of accrualsfor risks on tax litigation and other risks.With reference to the provision for tax liabilities for previous years, on May 18, 2012 sentenceNo. 64/9/12 was filed by the Rome Regional Tax Commission, during summing, concerningthe 1991 IRPEG and ILOR assessments; these assessments gave rise to the following principalfindings:• the Tax Authorities disputes the tax benefits deriving from the corporate reorganisationtransactions of Gruppo Editoriale L’Espresso consequent to the division of the MondadoriGroup (in detail, the benefits emerging from the merger via incorporation of Editoriale LaRepubblica SpA in Cartiera di Ascoli SpA, which subsequently undertook the name;• benefits were also disputed relating to beneficial share interest transactions with foreignparties, specifically those relating to the tax credit on dividends and the related withholdingsmade, along with the accrued interest.With regard to this latter aspects, beneficial interest on shares, in the 2008 financial statementsthe Company had made provisions, evaluating that, in relation to the progress of case law, theadditional taxes assessed and the related interest would have to be qualified as a “probablerisk” (the provisions did not concern just the 1991 tax period but also the three subsequentones, in relation to which the Tax Authorities disputed the same benefit), in contrast to thefines which were qualified as “possible”.With regard to the first aspect, solely concerning 1991, the risk has always been qualified as“remote”, both in light of the technical assessments of the disputes and the outcome of thevarious levels of jurisdiction. You are hereby reminded in fact that:• the facts were first of all subject to the examination of the criminal courts due to allegedtax fraud and the proceedings concluded with an acquittal delivered by the preliminaryhearings judge, confirmed definitively by the Appeals Court on December 9, 1999, thus fullyacquitting all the directors and auditors.• before the tax courts, the first and second degree proceedings were both favourable forthe Company, respectively in 1998 and 2000; subsequently, in 2007 the Supreme Court of Cas-sation cancelled the second degree sentence, referring the case to the Regional Tax Commission,what is more passing judgement in just procedural aspects and not prejudicing the merits of thecase in any way.By means of the afore-mentioned sentence, the Regional Tax Commission upheld the positionof the Tax Authorities relating to the most significant dispute in economic terms, concerningthe corporate reorganisation transactions, while it rejected the dispute relating to the beneficialinterests.On the basis of the opinions up-dated at June 30, 2012, this sentence would give rise to amaximum risk in terms of amount of € 354.8 million (including additional taxes assessed for€ 121.4 million, interest for € 112.0 million and fines for € 121.4 million): this value derivesfrom the fact that the Tax Authorities did not limit themselves simply to refusing to recognise

75Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

the tax benefits (undue withholdings) of the additional values recorded at the time of theallocation of the “cancellation deficit” in the merger process, but unexpectedly demanded theimmediate and full taxation of this deficit in as far as in itself lacking any income-relatedvalues, on the same footing as a “realised” capital gain. On June 27, 2012, the Company took steps to file an appeal before the Supreme Court of Cas-sation against the second degree sentence while on June 28, 2012 an application for thesuspension of the effects of said sentence was filed care of the Rome RTC pursuant to and forthe purposes of Article 373 of the Italian Code of Civil Procedures; the appeal was upheld bythe Rome RTC by means of ordered deposited on July 19, 2012.By virtue of the awareness of the statutory-tax-related legitimacy of the transactions subject totax dispute, as well as on the basis of the technical opinions obtained from third partyprofessionals, the Company has confirmed the opinion of the degree of risk relating to thebeneficial share interest transactions (even if the same came out on the winning side on thepoint, for procedural reasons, before the RTC) and has classified the risk linked to thecorporate restructuring transactions in relation to which it emerges as the losing party asmerely “possible”.With regard to the aspects pertaining to the beneficial share interest transactions, the Companyhad taken steps to set aside until December 31, 2011, an amount of € 30.5 million (to coverthe risks linked to the amortisation of the cost incurred for the purchase of the beneficialinterest, the tax credit on dividends, the related withholdings made and the interest accrued),with reference to all four tax periods assessed.Further to a recent verdict of the European Court of Justice, by means of sentence filed on April24, 2012, the Supreme Court of Cassation declared the dismissal of the proceedings which sawthe Company and the Tax Authorities in dispute in relation to the beneficial interests for 1992;accordingly, nothing is due any more to the Tax Authorities in this connection. The previousprovision made in relation to 1992, amounting to € 8,059 thousand, was therefore released.By means of the addition provision for € 262 thousand so as to take into account the interestaccrued, the risk provision as of June 30, 2012 amounted to € 22,482 thousand, equal to theentire amount assessed less fines, since the related risk was only classified as “possible”. Forthe sole purpose of providing a complete picture, we acknowledge that the highest possiblepotential liability, gross of the related tax effect and including the mentioned fines, wouldamount to about € 34,005 thousand.

Provisions for Employee termination indemnity and other retirement benefits (18)Defined benefit plansProvisions for Employee termination indemnity accrued up until December 31, 2006 bycompanies with more than 50 employees and those accrued at June 30, 2012 by all other com-panies, in addition to the Indemnity for managers of newspapers, fall within the defined benefitplan category and are therefore determined according to actuarial methods. Both Plansrepresent the present value of the future legal obligation.

Benefits are calculated based on the following assumptions:

76 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

EMPLOYEE TERMINATION INDEMNITIES OTHER PROVISIONSYearly technical discounting back rate 4.30% 4.30%Yearly inflation rate 2.0% 2.0%Yearly rate of increase in remuneration 3.0% 3.0%

The amounts recorded in the statement of financial position were determined as follows.

Provisions for Employee Termination Indemnity June 30, 2012Opening balance 60,533Provision for employment in the period (service cost) 317Increase due to interest (interest cost) 1,301Benefits paid (3,553)Final balance 58,598

Other retirement benefits June 30, 2012Opening balance 7,567Provision for employment in the period (service cost) 343Increase due to interest (interest cost) 145Benefits paid (319)Final balance 7,736

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

Average number of employees Number of employees at year-end 1st Half 2011 1st Half 2012 Dec. 31, 2011 June 30, 2012Journalists 1,136 1,120 1,124 1,112Manual workers 328 289 298 284Office workers 1,182 1,110 1,135 1,102Managers 87 78 77 78Fixed-term employees 45 47 39 56TOTAL 2,778 2,644 2,673 2,632

77Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Trade payables (19)Dec. 31, 2011 June 30, 2012

Payables to suppliers of:– Paper 6,359 4,017– Printing services 11,700 8,711– Transport and distribution 4,504 3,668– Capital goods 8,281 5,355– Promotions 9,297 6,201– Products sold optionally with publications 11,163 11,670– Freelance work 6,577 5,648– Other editorial costs 5,230 6,321– Utilities and maintenance 6,927 5,898– Other suppliers 61,273 52,399Advances received 781 881Payables to Group companies 1,178 818

TOTAL TRADE PAYABLES 133,270 111,587

Payables to Group companies amounting to € 818 thousand, refer to trade payables due tocompanies consolidated under the equity method (Le Scienze and Altrimedia). For details, seethe table in note 14.4.

Terms of payment for trade payables normally range between 60 and 90 days.

Tax payables (20) Dec. 31, 2011 June 30, 2012IRAP payables 973 11,588IRES payable to parent company 18,516 -Payables for withholding tax and IRPEF 9,230 5,853VAT payable 2,784 5,612Other tax payables 129 151TOTAL TAX PAYABLES 31,632 23,204

As already mentioned previously, at June 30, 2012, IRES/IRAP payables were recordedseparately from the receivables emerging at the time of the first advance payment, in contrastto that which occurs at December 31, when the balances are stated net.

78 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Other payables (21) Dec. 31, 2011 June 30, 2012Social Security payables 21,162 12,872Payable to personnel for holidays 11,532 15,179Other payables to personnel 18,893 12,999Payables to Directors and Auditors 323 262Accrued liabilities 2,894 8,200Payables for subscriptions 9,171 9,580Payables for grants pursuant to Italian Law No. 62/2001 3,293 2,658Forfeiting of grants on subsidized loans 2,922 2,480Other payables 5,541 4,954TOTAL OTHER PAYABLES 75,731 69,184

13. Notes to the statement of comprehensive income

Revenues (22) 1st Half 2011 1st Half 2012Circulation 170,038 152,725Advertising 274,360 251,105Printing services provided to others 216 175Sale of rejects and returns 1,273 846Sale of internet and mobile services 2,433 3,548Rights and trademark royalties 247 410Sale of contents 341 210Sale of other services 8,398 10,701Sale of other products and services 51 60TOTAL REVENUES 457,357 419,780

Other operating income (23) 1st Half 2011 1st Half 2012Grants 1,761 3,736Capital gains on disposal of assets 2,885 24Extraordinary gains 1,275 1,532Rent 1 -Other income 627 9,740TOTAL OTHER OPERATING INCOME 6,549 15,032

The item “Grants” includes grants on paper consumption for 2011 already commented onunder the item “Tax receivables”, while the item “Other income” includes € 8,059 thousandof for the release of tax risk provisions also commented on the related balance sheet item.

79Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Purchases (24) 1st Half 2011 1st Half 2012Paper for newspapers, periodicals and add-on products 38,501 33,175Printing materials 6,089 6,314Purchase of add-on products 3,949 4,254Consumables 1,536 1,440Other goods 167 233Change in raw material and merchandise inventories (1,167) 1,329TOTAL PURCHASES 49,075 46,745

Services received (25)

1st Half 2011 1st Half 2012Printing and other work carried out by third parties 27,952 25,064Distribution 12,752 12,585Reproduction rights, SIAE and other copyright costs 11,287 8,095Promotions 9,686 13,206Publisher fees 20,436 19,494Agent and agency fees 19,989 17,236Editing costs 27,897 29,027Radio and TV productions 3,670 1,282Advisory 5,394 4,725Travelling expenses 5,345 5,309Postal, telephone and data transmission 3,139 2,759Maintenance and utilities 10,167 10,197Technical equipment operation 3,512 3,011Rent 11,191 10,936Security, cleaning and refuse disposal 2,319 1,911Other services 10,579 11,348TOTAL SERVICES RECEIVED 185,315 176,185

Other operating charges (26)

1st Half 2011 1st Half 2012Provision for risks and charges 2,190 6,979Taxes and duties 1,195 1,244Public relations and gifts 170 109Membership fees 1,085 1,471Settlements and reimbursements 278 88Extraordinary losses 1,391 1,263Write-downs and losses on receivables 1,881 4,783Capital losses on disposal of assets 579 33Other operating charges 279 191TOTAL OTHER OPERATING CHARGES 9,048 16,161

80 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Personnel costs (27)

1st Half 2011 1st Half 2012Wages and salaries 121,468 119,011Provisions for employee termination indemnity 6,654 6,423Provisions for retirement benefits 405 343Provision for paid leave costs 4,612 4,784Stock options – stock grants 1,292 957Early retirement incentives 2,842 1,405Other personnel costs 2,765 2,466TOTAL PERSONNEL COSTS 140,038 135,389

Depreciation, amortization and write-downs (28) 1st Half 2011 1st Half 2010Intangible asset amortisation 651 850Property, plant and equipment depreciation 17,787 17,854Write-down of intangible assets - -Write-down of property, plant and equipment 26 -TOTAL DEPRECIATION, AMORTIZATION AND WRITE-DOWNS 18,464 18,704

Financial income (expense) (29) 1st Half 2011 1st Half 2012Dividends 24 19Financial income on securities and derivatives 1,496 1,233Interest received on current accounts and short-term deposits 969 1,229Foreign-exchange gains 37 20Other financial income 119 83Financial income 2,621 2,565Interest on bank overdrafts (4) (2)Accessory banking expenses (231) (234)Interest on bonds issued (6,589) (5,585)Interest on loans and financing (1,103) (839)Foreign-exchange losses (40) (100)Leasing payments (12) (5)Financial changes on application of IAS (1,873) (1,590)Other financial changes (61) (69)Interest expense (9,913) (8,424)Gains/(losses) on security trading - 31TOTAL FINANCIAL INCOME/(EXPENSE) (7,268) (5,809)

The reduction in interest expense on bonds issued is due to the repurchase of part of the debtfor a total of € 28.8 million in January 2012. The transaction has been analytically describedin the item “Financial debt”. The other items remained more or less unchanged.

81Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

Income taxes (30)

1st Half 2011 1st Half 2012Current taxes 17,426 9,218Deferred and prepaid taxes 6,535 5,633Loss carry-forwards 319 261TOTAL TAXATION 24,280 15,112

Income taxes for the first half of 2012 amounted to € 15,112 thousand and included € 261thousand for tax-related provisions accrued on the beneficial share interest transaction. Thedecrease is due essentially to the reduction of the book profit and the presence of non-taxableincome.

Minority interests (31)These refer to the portion of profits attributable to Finegil Editoriale SpA and Seta SpA.

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

1st Half 2011 1st Half 2012Net profit 31,454 21,164Weighted average number of shares in circulation (‘000) 401,692 396,345Earnings per share, basic 0.078 0.053

1st Half 2011 1st Half 2012Net profit 31,454 21,164Weighted average number of shares in circulation (‘000) 401,692 396,345No. of options (’000) 29,432 28,326Earnings per share, diluted 0.073 0.050

82 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Dividends paid (33)In the 1st Half of 2012 €24,966 thousand in dividends were paid relating to 2011, approvedby the Shareholders’ Meeting of April 23, 2012, based on the price of €0.0629 for each ofthe 396,909,714 ordinary shares in circulation (taking account of treasury shares held by thecompany).

14. Other Information

14.1 Net financial positionThe net financial position of the Group is shown in the table below.

Dec. 31, 2011 June 30, 2012Financial receivables from Group companies 157 158Financial payables to Group companies - -Cash and deposits 141,250 75,567Bank overdrafts (7) (1,256)Cash and cash equivalents 141,400 74,469Marketable securities and other financial assets 48,735 49,796Bond issue (261,741) (238,258)Other bank debt (38,482) (33,043)Other financial debt (117) (56)Other financial assets (liabilities) (251,605) (221,561)NET FINANCIAL POSITION (110,205) (147,092)

14.2 Significant non-recurrent events and operationsIn compliance with Consob Communication dated July 28, 2006, we acknowledge thatin the 1st Half of 2012 the Group did not carry out significant non-recurrent operations,as defined in said Communication.

14.3 Transactions deriving from atypical or unusual operationsIn compliance with Consob Communication dated July 28, 2006, we acknowledge that in the1st Half of 2012 the Group did not carry out atypical and/or unusual operations, as defined insaid Communication.

14.4 Related-party TransactionsTransactions carried out by the Company, including transactions with related parties, arecarried out in the normal course of business and are settled at market rates.It is to be noted that the conclusion of operations with related parties is subject to a specificprocedure approved by the Board of Directors, which is described in the annual report onCorporate Governance included in a specific section of the Financial Statements at December31, 2011, available for consultation both on the Company’s site and with Borsa Italiana SpA.In particular, Gruppo Editoriale L'Espresso SpA receives from its parent company CIR SpA,services and advice on strategic, administrative, financial and tax matters. It is to be noted thatthe provision of such services on the part of the parent company is deemed as preferable to the

83Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

provision of the same on the part of third parties thanks, among other things, to the wideknowledge and experience CIR SpA has acquired over time on the company and the segmentin which Gruppo Editoriale L’Espresso SpA operates. Moreover, since the 2004 financial year,Gruppo Editoriale L'Espresso SpA and the majority of its subsidiaries participate in parentcompany’s CIR “tax consolidation” procedure. In April 2010, participation in the parentcompany’s tax consolidation procedure was extended for years 2010-2012 and the “taxconsolidation” procedure was amended to comply with regulatory changes.

In March 2012, Rete A and All Music renewed their participation for the three-year period2012-2014.Lastly, as regards compensation plans based on financial instruments reserved for directors andemployees of Group companies, refer to note 12.14 (Reserves). The data (expressed in thousands of euro) regarding the economic, equity and financialrelations of Gruppo Editoriale L’Espresso SpA with its related companies is set forth below.

Transactions of Gruppo Editoriale L’Espresso SpA with related companies

14.5 Risk managementFinancial riskThe management of financial risk is regulated by a set of rules that outline the objectives,strategies, guidelines and operating procedures.In the management of financial resources and treasury, the Group adopts a procedure thatimplies the application of prudence and limited risk criteria in the choice of financial andinvestment policies, prohibiting all speculative operations except for those motivated andapproved by the Board of Directors of the parent company.

84 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Tax Tax Financial Financial Receivables Payables GuaranteesCosts Revenues expenses income expenses* income Financial Tax Trade Financial Tax Trade granted

SUBSIDIARIESKsolutions SpA (in liquidation) - - - - - 2 158 - - - - 9 -

AFFILIATED COMPANIESLe Scienze SpA 84 617 - - - 233 - - 412 - - 577 -

Editoriale Libertà SpA - 38 - - - 525 - - 9 - - - -

Altrimedia SpA 556 209 - - - 70 - - 66 - - 241 -

PARENT COMPANIESCIR SpA 925 18 - 57 - - - 3,182 - - - 925 -

OTHER RELATED COMPANIESSorgenia SpA 4,380 417 - - - - - - 256 - - 1,220 -

Trento Press Service Srl - - - - 19 - - - - - - - -

*This item includes dividends received from subsidiaries

The Parent Company Gruppo Editoriale L’Espresso SpA manages and coordinates acentralized intragroup current account, in which all subsidiaries take part, aiming atobtaining economic advantages in relationships with financial counterparts and strongeroperating efficiency. Centralization allows in fact more efficient planning and control offinancial flows, ensures higher consistency in financing and investment choices, optimizesthe overall risk profile of the Group and, above all, strengthens its contractual power withthe banking system.The Group, whose rating issued by Standard&Poors is BB with a stable outlook, usesprevalently two channels to raise financial resources: the international bond market andlong-term bank loans extended against investments in publishing activities for whichsubsidies are provided by Italian law, reducing the interest rate on the loan by severalpercentage points.In this framework and in view of the good market liquidity and low interest rates, the parentcompany placed on the market in October 2004 a €300 million, 10-year bond, bearing a5.125% fixed rate of interest, the proceeds of which were used to repay a €200 million bondissue matured on August 1, 2005 and to provide liquidity for acquisitions and investments. The€300 million bond issue and related interest payments are unsecured and do not includecovenants or clauses providing for the early repayment of the same. In addition to the bond issue mentioned above, in November 2005 the parent company wasextended ten-year loans amounting to a total of €33.8 million, subsidized pursuant to the Lawon publishing, at an interest rate, net of the State subsidy, of about 2.35%.With the above operations, the Group ensured abundant long-term financial resources such asto prevent liquidity risks. Were it however to be in need of additional financial resources inaddition to those provided by the operating cash flow, the Group will be in a position to drawon a number of uncommitted credit lines which are currently unutilized. In compliance with financial risk management policies adopted, the parent company enteredinto an interest rate swap contract (for a notional value of €50 million) converting the fixedinterest rate payable on part of the bond issue into a floating rate of interest. Such transactionwas classified as a fair value hedge and as such, all gains and losses resulting from the recordingof the market value of the derivative instrument and all gains and losses from the adjustmentto the fair value of the hedged part of the bond issue are recorded in the income statement. The effectiveness of the hedge is evaluated periodically. The hedge is considered as efficientwhen the fluctuation in the fair value or the cash flow of the instrument is “almost entirely”offset by the fluctuation in the fair value or cash flow of the hedging instrument and results areincluded in an interval between 80% and 125%.Moreover, in compliance with the financial risk management policies, in order to diversify financialinvestments, the Group continued to invest part of its liquidity in government bonds (Italian, Germanand Austrian bonds) and, to a lesser extent, in bonds from banks and industrial companies.With the exception of the mentioned hedge, the Group is not exposed to financial riskconnected with fluctuations in interest rates or exchange rates.

Price riskAs it is active in the publishing segment, the Group acquires large quantities of paper. Toachieve a more efficient management of paper purchases and to strengthen its bargainingposition with counterparts, thus promoting competition among suppliers, the management ofpaper purchases for the Group was unified.

85Notes to the Consolidated Financial Statements | Gruppo Editoriale L’Espresso |

In the past, the Group stipulated a number of paper swap contracts on a portion of its paperneeds. As, however, it assessed their ineffectiveness in the medium term, the Group has decidedto discontinue the use of such instruments.

Credit riskThe credit risk exposure of the Group relates to trade and financial receivables. Due to the sector in which it operates, the Group is not subject to significant credit risk ontrade receivables. Though there are no significant concentrations of such risks, the Grouphowever adopts operating procedures that bar the sale of products or services to customers thatdo not possess an adequate risk profile or provide collateral guarantees. With regard tofinancial receivables, investments in short-term financial instruments and trading in derivativesare carried out only with banks that possess a high credit standing.

14.6 CommitmentsIn addition to liens on printing plant and rotary presses granted to banks in the context of loansextended in 2005 (see Note 2), at June 30, 2012, commitments of the Group amounted to €3,790 thousand and consisted of:- contracts for the purchase of plant and other printing equipment (€ 944 thousand) relatingprimarily to the Repubblica Division, the North-east and Livorno divisions of Finegil Editorialeand L’Editoriale Nuova Sardegna;- guarantees granted amounting to € 2,846 thousand, mainly relate to guarantees granted bythe parent company and the subsidiaries Elemedia and A. Manzoni&C. on the lease of therespective offices, as well as the payment obligation of the parent company granted to theItalian Inland revenue, to guarantee the excess credit achieved over the last three years.

14.7 Essential reclassified data of the subsidiaries

Shareholders’ Financial Net Revenues Gross Operating Netequity position invested operating profit profit

capital profitIn millions of euroFinegil Editoriale SpA 166,865 (193) 167,058 93,563 19,152 13,521 14,904Editoriale La Nuova Sardegna SpA 16,943 8,572 8,371 14,793 3,645 2,545 1,443S.E.T.A. SpA 4,159 5,438 (1,279) 6,862 24 (144) (162)Elemedia SpA 68,357 (11,304) 79,661 46,201 11,732 10,084 6,307Rete A SpA 11,397 (47,686) 59,083 12,631 6,365 3,091 1,835All Music SpA 7,212 4,841 2,371 6,285 (1,049) (1,496) (1,110)A. Manzoni & C. SpA 10,287 (40,823) 51,110 251,378 (2,166) (2,236) (2,233)Rotocolor SpA 23,732 3,244 20,488 11,288 3,436 406 165Somedia SpA 835 1,914 (1,079) 949 272 261 168

86 | Gruppo Editoriale L’Espresso | Notes to the Consolidated Financial Statements

Attachments

Summary Statement of Group Companies

ATTACHMENT 1Company name and Registered Share % Held by and business activities Office Capital (€ thousand)PARENT COMPANY- Gruppo Editoriale L’Espresso SpA Rome 61,534 CIR SpApublishing

SUBSIDIARIES CONSOLIDATED LINE-BY-LINE- A. Manzoni & C. SpA Milan 15,000 100 Gruppo Editoriale L’Espresso SpAadvertising concessionaire

- All Music SpA Milan 6,500 100 Rete A SpAcontent provider

- Editoriale La Nuova Sardegna SpA Sassari 776 100 Finegil Editoriale SpApublishing

- Elemedia SpA Rome 25,000 100 Gruppo Editoriale L’Espresso SpAradio, internet and satellite television

- Finegil Editoriale SpA Rome 128.799 99,78 Gruppo Editoriale L’Espresso SpApublishing

- Rete A SpA Milan 13.198 100 Gruppo Editoriale L’Espresso SpATV broadcaster

- Rotocolor SpA Rome 23,000 100 Gruppo Editoriale L’Espresso SpAprinting

- S.E.T.A. SpA Bolzano 775 71 Finegil Editoriale SpApublishing

- Somedia SpA Milan 500 100 Gruppo Editoriale L’Espresso SpAservices

AFFILIATED COMPANIES CONSOLIDATED ON EQUITY- Altrimedia SpA Piacenza 517 35 Finegil Editoriale SpAadvertising concessionaire

- Editoriale Corriere Romagna Srl Forlì 2,856 49 Finegil Editoriale SpApublishing

- Editoriale Libertà SpA Piacenza 1,000 35 Finegil Editoriale SpApublishing

- Le Scienze SpA Rome 103 50 Gruppo Editoriale L'Espresso SpApublishing

Note: amounts in thousands of euro unless otherwise specified

Attachments | Gruppo Editoriale L’Espresso | 89

| Gruppo Editoriale L’Espresso | Attachments90

Company name and Registered Share % Percentage held business Office Capital by the Company

SUBSIDIARIES AND AFFILIATED COMPANIES VALUED UNDER THE COST METHOD- Benedettine Srl (in liquidation) Piacenza 255 35 Finegil Editoriale SpAreal estate

- Cellularmania.com Srl (in liquidation) Rome 10 100 Elemedia SpAinternet service

- Club DAB Italia - Società Consortile p.A. Milan 120 27.50 Elemedia SpAradio broadcasting services

- Enotrya Srl (in liquidation) Rome 78 70 Elemedia SpAe-commerce

- Ksolutions SpA (in liquidation) Massa 1,000 100 Elemedia Spainternet service

- Premium Publisher Network Consortium Milan 53 20.51 Gruppo Editoriale L'Espresso SpAinternet service

OTHER COMPANIES VALUED UNDER THE COST METHOD- Agenzia ANSA Soc. Coop. a r.l. Rome 11,921 3.81 Gruppo Editoriale L’Espresso SpA press agency 8.97 Finegil Editoriale SpA 3.17 Editoriale La Nuova Sardegna SpA 2.53 S.E.T.A. SpA

- Agenzia Informativa Adriatica d.o.o. Capodistria 13 19 Editoriale FVG SpAinformation production and transmission (Slovenia)

- Audiradio Srl Milan 258 7.50 A. Manzoni & C. SpAmarket research

- Consorzio Antenna Colbuccaro Ascoli Piceno 180 8.89 Rete A SpARadio broadcasting services

- Consorzio Emittenti Radio Televisive - CERT Bologna 178 6.67 Rete A SpARadio broadcasting services

- Consorzio Colle Maddalena Turin 62 4.17 Rete A SpARadio broadcasting services

- Consuledit Società Consortile a r.l. Milan 20 6.64 Gruppo Editoriale L'Espresso SpAmarket research 4.86 Finegil Editoriale SpA 0.62 Editoriale La Nuova Sardegna SpA 0.49 S.E.T.A. SpA- Immobiliare Editori Giornali Srl Rome 830 0.17 S.E.T.A. SpAreal estate 0.12 Editoriale La Nuova Sardegna SpA

- Presto Technologies Inc. (non-operational) Cambridge 7,664 ('000) $ USA 7.83 Elemedia SpAinternet service (USA - MA)

- Telelibertà SpA Piacenza 500 19 Finegil Editoriale SpAtelevision broadcasting services

- Trento Press Service Srl Gardolo di Trento 260 14.4 S.E.T.A. SpAnewspaper distribution (TN)

N.B. Figures in thousands of euro, unless stated otherwise

Attachments | Gruppo Editoriale L’Espresso | 91

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92 | Gruppo Editoriale L’Espresso | Relazione finanziaria semestrale al 30 giugno 2010

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Certification of the Consolidated Financial Statements pursuant to Article 154 bis of Legislative Decree no. 58 dated February 24, 1998

| Gruppo Editoriale L’Espresso | 95

Certification of the Half-Yearly Condensed Consolidated Financial Statements pur-

suant to Article 154 bis of Italian Legislative Decree No. 58

dated February 24, 1998

1) The undersigned Monica Mondardini, Managing Director, and Gabriele Acquistapace,

Executive appointed to draw up the company accounting documents of Gruppo Editoriale

L'Espresso S.p.A., certify, having also considered the provisions of Article 154 bis, para-

graphs 3 and 4, of Italian Legislative Decree No. 58 of February 24, 1998:

- the adequacy in relation to the characteristics of the Company, and

- the effective application of the administrative and accounting procedures used in the

preparation of the Half-Yearly Condensed Consolidated Financial Statements at June 30,

2012.

2) It is also certified that:

2.1) the Half-Yearly Condensed Consolidated Financial Statements at June 30, 2012:

a) are prepared in accordance with applicable accounting standards recognised in the Euro-

pean Union pursuant to Regulation (EU) No. 1606/2002 of the European Parliament and

Council dated July 19, 2002 and specifically with IAS 34 - Interim Financial Reporting as

well as the provisions issued by way of implementation of Article 9 of Italian Legislative

Decree No. 38 dated February 28, 2005;

b) agree with the results of the accounting records and entries;

c) are suitable to give a true and fair representation of the equity, economic and financial

position of the issuer and all the companies in the scope of consolidation;

2.2) the half-yearly report on operations contains a reliable analysis of the main events

which occurred in the first six months of 2012 and their relevance on the Half-Yearly Con-

densed Consolidated Financial Statements, together with a description of the exposure of

the Group to major risks and uncertainties for the second half of the year. The half-yearly

report on operations also contains information on the main transactions and relationships

with related parties.

Monica Mondardini Gabriele Acquistapace

Rome, July 25, 2012

Auditors’ Review Report of the Half – Yearly Condensed Consolidated Financial Statements

Auditors’ Review Report | Gruppo Editoriale L’Espresso | 99

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