HALF-YEARLY FINANCIAL REPORT

Transcription

1 Il Sole 24 ORE SpA Registered offices and administration: Via Monte Rosa Milan - Italy - Tel Share capital EUR 35,123, fully paid in - Milan Companies Register, Tax Code, and VAT no Milan REA no HALF-YEARLY FINANCIAL REPORT AS AT 30 JUNE 2008 Disclaimer: This document is a translation of the 2008 Half-Yearly Financial Report of Il Sole 24 ORE SpA originally issued in Italian. The translation has been prepared solely for the convenience of non-italian, English-speaking readers. Only the original Italian report ( Relazione Finanziaria Semestrale al 30 giugno 2008 ) is legally valid and it shall always prevail over the English translation.

2 Table of contents Corporate bodies... 2 Board of Directors... 2 Board of Statutory Auditors... 3 Internal control & audit committee... 3 Compensation committee... 3 Independent auditor... 3 Structure of Il Sole 24 ORE Group... 4 Summary data... 5 Management report for the period ended on 30 June First-half operating performance... 6 Significant events in the first half... 7 Main consolidated financial reporting highlights... 8 Group performance by business segment Information on ownership status Related-party transactions Risks and uncertainties Events after 30 June Foreseeable business progress Financial statements Explanatory notes General information Format, content, and accounting standards Structure of financial statements Consolidation policies Accounting policies Changes in accounting policies, errors, and changes in estimates Risk management Principal reasons for uncertainties in estimates Scope of consolidation Notes to financial statements Segment reporting Other information Attestation of condensed half-yearly financial statements pursuant to Article 81/3 of CONSOB Regulation no of 14 May 1999 as subsequently amended and supplemented This Report has been translated into English from the original version in Italian. In case of doubt the Italian version shall prevail. 1

3 Corporate bodies Board of Directors Chairman GIANCARLO CERUTTI Chief Executive Officer CLAUDIO CALABI Directors LUIGI ABETE MAURIZIO BERETTA DIANA BRACCO NICOLA DE BARTOLOMEO ANTONIO FAVRIN PAOLO LAMBERTI GAETANO MACCAFERRI FRANCESCO PROFUMO (1) MARCO SALOMONI (1) LUCA TACCONI MARINO VAGO (2) MARCO WEIGMANN (3) PAOLO ZEGNA (4) Secretary to the Board GIANROBERTO VILLA (1) Independent director. (2) Co-opted on 14 March 2008 to replace Matteo Colaninno (who had resigned) and confirmed by shareholders at the Annual General Meeting on 21 April (3) Elected at the Annual General Meeting on 21 April (4) He resigned on 29 July

4 Board of Statutory Auditors President Standing statutory auditors PIERGIORGIO RE DEMETRIO MINUTO ALBERTO USUELLI Substitute statutory auditors MARIA SILVANI LUIGI VIARENGO Internal control & audit committee President MARINO VAGO (1) Members FRANCESCO PROFUMO MARCO SALOMONI Compensation committee President Members DIANA BRACCO FRANCESCO PROFUMO MARCO SALOMONI Independent auditor KPMG SpA, appointed for independent auditing of the separate and consolidated financial statements pursuant to Article 159 of Italian Legislative Decree no. 58 of 24 February (1) Co-opted on 14 March 2008 to replace Matteo Colaninno (who had resigned) and confirmed by shareholders at the Annual General Meeting on 21 April

5 Structure of Il Sole 24 ORE Group Il Sole 24 ORE S.p.A. Consolidation area Nuova Radio S.p.A. 100% 100% Il Sole 24 ORE Business Media S.r.l. Faenza Editrice 100% Iberica SL 24 ORE Television S.p.A. 100% 100% STR S.p.A. Il Sole 24 ORE UK Ltd. 100% 100% Data Ufficio S.p.A. 24 ORE Motta 57% 55% Alinari 24 ORE S.p.A. Cultura S.r.l. Editorial (2) 15% 30% Diamante S.p.A. (1 Ecoprensa S.A. Blogosfere S.r.l. (1) 30% 50% Italia News S.r.l. (1) (1) Associate company (2) Minority interest 4

6 Summary data Consolidated Income Statement highlights of Il Sole 24 ORE Group Amounts in '000 1H H 2007 Revenue 309, ,183 Gross operating profit (GOP) 38,969 56,000 Operating profit 21,533 42,690 Profit before tax 26,794 44,159 Profit for the period 21,337 23,310 Profit attributable to shareholders of the parent company 21,590 23,562 Gross operating profit per share * Operating profit per share * Profit attributable to equity holders of the parent company per share * *1H 2007 figures are based on the number of shares before the stock split approved by the extraordinary shareholders' meeting of Consolidated Balance Sheet highlights of Il Sole 24 ORE Group Amounts in '000 Balance at Balance at Total assets 736, ,125 Net financial position 221, ,163 Equity attributable to the shareholders of the parent company 363, ,411 Equity attributable to the shareholders of the parent company per share Number of employees at period end 2,004 1,988 5

7 Management report for the period ended on 30 June 2008 First-half operating performance The first half of 2008 (1H08) featured tangible deterioration of the domestic and international economic situation, which had an adverse effect on consumer spending propensity. In the publishing industry, the dynamics of advertising investments and of newspaper and magazine circulation showed significant slowdown. In this scenario, the Il Sole 24 ORE Group achieved consolidated revenue in 1H08 of million (mn), progressing by 0.7% vs mn in the same period in 2007 (1H07). Based on comparable consolidation, revenue was down by -6.1%, primarily because of the poorer performance of add-on products. Gross operating profit (GOP) amounted to 39 mn, decreasing by -30.4% vs. 56 mn in 1H07. In order to read this result correctly, it has to be pointed out that the YoY comparison is affected by some one-off differences. More specifically, while 1H07 benefited from non-recurring income of 4.7 mn relating to IFRS-compliant calculation of post-employment employee benefit provision, 1H08 was dampened by (a) the change in the method of sale of some software products (with an impact of some 5.4 mn in terms of lower sales and 3.8 mn in terms of lower GOP which will any case be substantially made up in the second part of the FY) and (b) recognition at fair value of free stock grants to employees and of the stock option plan for top management, which caused a 1.4-mn increase in personnel expense. Net of the above one-offs, the change in results at GOP level was almost entirely caused by the negative trend of add-on products partly expected offset in part by good advertising sales performance and by moderation of some types of cost. Add-on products GOP was 12.4 mn lower than in 1H07, which was also the best 6-month period in outright terms since the start of the Group s presence in the sector. Still as regards comparison with 1H07, the higher contribution generated by acquisitions completed in the second and third quarters of 2007 totalled 20.6 mn in terms of revenue. Their incremental impact on GOP was instead 2 mn. It should in fact be remembered that the seasonality of some of the companies acquired (sector-specific publishing and software) means that the most significant part of performance is achieved in the second half of the year. Operating profit amounted to 21.5 mn, as compared with 42.7 mn in 1H07. Besides the items already described for GOP, the 1H08 figure was also affected by higher depreciation & amortisation ( 3.7 mn) relating to acquisitions made in Profit attributable to equity holders of the parent amounted to 21.6 mn vs mn in 1H07. It decreased less than operating profit thanks to higher net finance income stemming from higher average cash resources and to a lower tax burden, which also benefited from optimisation efforts made during the period. As at 30 June 2008, the Group s net financial position was positive by mn (vs. a positive position of mn as at 31 December 2007). In 1H08 group advertising revenue grew by 10.4% in total, thanks to 6.8% growth of advertising sales achieved by the System division considerably better than the trend of the market of reference which was joined by the effects of acquisitions made in 2007 (Il Sole 24ORE Business Media). The Publishing area s circulation revenue was down by -24.9% vs. 1H07, mainly because of the decrease, as mentioned above, in sales of add-on products, down by 19.2 mn vs. 1H07 figures (-48.9%). The Professionals area achieved revenue growth of +15.6% vs. 1H07. This was attributable to changes in the scope of consolidation. Like-for-like comparison showed a decrease of -5.9%. We note growth in training revenue and firmness of the Tax & Legal area set against a reduction in sales of software products (-36.7%). The latter s delay vs. 1H07, which also affected margins, was entirely due to the different contractual approach adopted. For these products, we have in fact switched from single sales to subscriptions, meaning that, on an accrual accounting basis, their performance is spread over the entire contract duration. By the end of the year this delay will have therefore been recovered. 6

8 On the cost front there was a reduction of the impact of direct costs on revenue, permitting achievement of a 2.9% improvement in direct margin. The growth of personnel expense (+28.5%) was prevalently related to significant changes in the scope of consolidation (ex-gpp Group, Data Ufficio SpA, and STR SpA). This was joined by cost components not present in 1H07 (costs for stock granting, stock options, and other nonrecurring charges). Based on like-for-like consolidation, there was a decrease in operating costs (specifically, costs for advertising, marketing, promotions, and professional services) on which actions forming part of the coststreamlining programme adopted had an impact. Significant events in the first half 1H08 featured: completion of the Group s listing process, via exercise of the over-allotment option; strengthening of the Group s presence in new media (Internet, mobile telephony); new-product launches, specifically in the Professional area and in the e-publishing and software areas; implementation of new publishing initiatives; continuation of action to rein in and rationalise operating costs. We specifically highlight that: On 4 January 2008, exercise by the Coordinators of the global public offering (Mediobanca and UBS) of the over-allotment option for 1,355,904 special class shares marked completion of the listing process of Il Sole 24ORE SpA. This option, which was exercised at the IPO price ( 5.75 per share), generated further cash-in of 7.8 mn in addition to the mn coming from the capital increase, bringing the total IPO proceeds up to mn, gross of fees and transaction costs. Evolutionary work continued on the ilsole24ore.com site, with a view to (a) increasing its attractiveness and developing verticalisations by customer target and topic (new Money24 section, revamping of Viaggi24 (travel), and a new film section) and (b) increasing its usability on the mobile market (release of versions optimised for conventional mobile telephone and iphone users). There was also an increase in the number of online products for professionals and businesses, with the launch of Avvocati24, a directory of legal firms, and with evolution of the B2B24.it portal, which was completed with new sections. 1H08 featured release of the new-generation databank Sistema elettronico Frizzera, of new management software products for small companies (Via Libera Azienda), sole proprietorships (Via Libera Small Office24), and for professionals in the construction market (Studio 24 Edilizia), as well as some upgrades of tax software products for professionals, tax assistance bureaux, and public administrations. From the publishing standpoint, the period featured the start of some initiatives supplementing news and information for households and consumers, with the launch of publications such as Il Sole 24ORE in Famiglia with contents of immediate usefulness for Italian households, and Test24, a guide to the assessment and comparison of specific product categories. Creation was also approved of a new magazine dedicated mainly to the male public, which will be launched in September, and revamping of the Ventiquattro magazine, relaunched with new graphics and contents in June. In May, the Group signed an agreement with other publishing partners to buy an interest in the company Italia News Srl, with the aim of creating the first Italian online syndication of journalistic information. This new initiative s advertising sales have been entrusted to the System advertising sales agency. 7

9 As of 1 January 2008 he merger by incorporation of the companies Il Sole 24 ORE Editoria Specializzata Srl and Motta Architettura Srl with the company Il Sole 24 ORE Business Media Srl became operational. The merger was part of the process of rationalising the Group s legal entity structure. Main consolidated highlights Below we review the main income statement, balance sheet, and financial figures achieved by the Group in 1H08. We point out that the Group s business is subject to seasonality, consisting of a slowdown in revenue both for circulation and, above all, for advertising in the summer period. Given this, first-half performance cannot be considered representative of the Group s full-year operating performance. Income statement Amounts in '000 1H H 2007 Balance at Revenue from sales and services 309, , ,093 Other operating income 5,896 4,155 10,298 Personnel expense (88,625) (68,943) (152,175) Change in inventories (6,158) 2,042 4,442 Purchase of raw and consumable (15,796) (23,900) (48,313) materials Costs for services (138,294) (134,833) (267,397) Other operating costs (24,210) (25,726) (45,120) Provisions (3,306) (3,978) (9,466) Gross operating profit 38,968 56,000 64,362 Depreciation, amortisation and impairment (17,437) (13,661) (33,378) Gains (losses) on disposal of non-current assets Operating profit 21,533 42,690 31,307 Financial income (expenses) 5,262 1,571 2,680 Income (expenses) from investments (1) (102) 12,827 Profit before tax 26,794 44,159 46,814 Income taxes (5,457) (20,849) (19,240) Profit for the period 21,337 23,310 27,574 Profit attributable to shareholders of the parent company 21,590 23,562 27,694 Revenue from the sale of daily newspapers, books, and magazines amounted to mn vs mn in 1H07, down by 21.9 mn, i.e %. A key contributor to this trend consisted of the sales of add-on products, which amounted to 20.1 mn, down by 19.2 mn. The newspaper s circulation revenue slipped 8

10 from 43.4 mn to 41.8 mn (-3.7%), whilst magazine revenue totalled 35.2 mn (-5.7% YoY) and book revenue 10.3 mn (+11.6% YoY. With a 44.5% share of total revenue, advertising increased by 13.0 mn (+10.4%) to a total amount of mn. The advertising sales of the System advertising sales agency increased by 7.4 mn (to mn). The Professionals area s advertising sales totalled 20.7 mn vs mn in 1H07. The increase of 5.4 mn was mostly due to the publications of the recently acquired company Il Sole 24ORE Business Media Srl and mainly related to the fact that, in 2007, this company was consolidated as of April. Other revenue, which came to 64.2 mn vs mn in 1H07 (+21.0%), once again because of the effect of the change in consolidation scope, includes the revenue from the sale of software products, e-publishing, and conferences & training which featured growth trends. Conversely, revenue from services for the distribution of real-time financial newsflows was down (-6.9%). Revenue from other products and services grew by 6.1 mn by virtue of the new acquisitions. Other operating income amounted to 5.9 mn vs. 42. mn in 1H07. This item includes cost charge-backs, rental income, incidental income, grants, and other residual items. Personnel expense amounted to 88.6 mn vs mn in 1H07. During 1H07 costs totalling 1.4 mn were booked for stock granting and stock option plans. Moreover, in 1H07 personnel expense benefited from the legislative changes leading to different IFRS-compliant accounting treatment of post-employment benefits, which reduced costs by 4.7 mn. The expense trend for dependent employees was the result of a 25.5% increase ascribable to the increase in average headcount ( average heads stemming from the new acquisitions) and to a 3.0% increase in average per-head cost. Average headcount totalled 1,974.6 employees, up by vs. 1H07, of which heads due to the new acquisitions. Direct and operating costs totalled mn with a 0.6% YoY increase and with an impact on revenue that remained virtually constant. Net of effects linked to the change in consolidation scope, they were down by -3.8% thanks to efficiency improvements implemented, which made it possible to offset, in part, the downturn in revenue. Provisions and allowances amounted to 3.3 mn vs. 4.0 mn in 1H07. Depreciation & amortisation and impairment amounted to 17.4 mn vs mn in 1H07. The increase of 3.8 mn was due to allocation to property, plant & equipment and to intangible assets of the acquisition purchase prices of 24 ORE Business Media Srl, Data Ufficio SpA, and STR SpA. Net finance income rose from 1.6 mn as up to June 2007 to 5.3 mn in 1H08. The 3.7-mn increase over 1H07 was ascribable to the current-account interest accrued by virtue of the greater liquidity available follow the stock market listing in December Income taxes amounted to 5.5 mn as opposed to 20.8 mn in 1H08. Besides reduction of the statutory rates for corporate income tax (IRES) and regional business tax (IRAP), the reason for the lower tax rate was application of the rules established by the 2008 National Budget Law, which has permitted alignment of taxreporting amounts with financially reported amounts via application of a substitute tax. 9

11 Balance sheet Summary balance sheet Amounts in '000 Balance at Balance at Non-current assets 252, ,717 Current assets 483, ,408 Total assets 736, ,125 Equity attributable to the shareholders of 363, ,411 the parent company Total minority interests 1,111 1,365 Total equity attributable to the 364, ,776 shareholders of the parent company Non-current liabilities 100, ,016 Current liabilities 271, ,333 Total liabilities 371, ,349 Total equity and liabilities 736, ,125 Non-current assets amounted to mn vs mn as at 31 December 2007, with a reduction of 8.9 mn. The decrease in 1H08 was primarily due to the decrease of property, plant and equipment assets which, in total, decreased by 9.1 mn due to depreciation totalling 17.4 mn, partly offset by investments totalling 8.3 mn. We specifically highlight investments in radio frequencies and plant ( 1.7 mn), investments in software projects ( 1.7 mn) mostly relating to CRM, and investments in production and printing plant ( 1.2 mn) and in hardware. Current assets amounted to mn vs mn at the beginning of the year, with an increase of 22.5 mn. The increase was largely due to the growth of trade receivables (by 45.1 mn), mainly relating to the Group s business seasonality. Cash & cash equivalents decreased by 21.4 mn. Equity amounted to mn vs mn as at 1 January Minority interest amounted to 1.1 mn. Non-current liabilities amounted to mn vs mn at the beginning of the financial year (FY), with a decrease of 15.7 mn. Changes during 1H08 was primarily attributable to lower deferred tax liabilities ( mn). Of this decrease, 10.2 mn was due to elimination between tax reporting amounts and financial reporting amounts for some categories of non-current assets, as envisaged by the 2008 Italian National Budget Law. Substitute tax was calculated on these differences and totalled 4.9 mn. Application of the regulation thus led to a net tax benefit of 5.3 mn. Current liabilities amounted to mn, increasing vs mn at the beginning of the FY ( mn). There was an increase in trade payables ( +2.0 mn) and in deferred income, which is higher in the first part of the FY due to concentration of signature of subscriptions mainly in that period. 10

12 Statement of cash flow Amounts in '000 Balance at Balance at Profit attributable to the shareholders of the parent 21,590 23,562 company Adjustments (602) 8,490 Changes in net working capital (32,186) (11,368) Total net cash generated (absorbed) by operating activities (11,198) 20,685 Investments (8,362) (31,326) Disinvestments and other changes Total net cash absorbed by investing activities (8,134) (30,699) Free cash flow (19,331) (10,014) Net cash generated (absorbed) by financing activities (1,098) (17,503) Net increase (decrease) in cash and cash equivalents (20,430) (27,517) Cash and cash equivalents: Opening 238,573 81,338 Closing 218,143 53,821 Total cash flow was negative by 20.4 mn vs. negative cash flow of 27.5 mn in 1H07. Cash flow from operating activities was negative by 11.2 mn, decreasing by 31.9 mn vs. 1H07. Application of the facilitations envisaged by the 2008 National Budget Law for elimination of tax differences had a net negative effect of 8.9 mn, which was joined by the adverse trend of net working capital (up by 32.2 mn), specifically because of the trend in trade receivables. Cash flow from investing activities, negative by 8.1 mn, mainly referred to operating investments ( 8.3 mn). Cash flow from financing activities was negative by 1.1 mn mainly following outlays for dividend distribution ( 13.9 mn) and loan repayments (1.6 mn), net of interest income ( 5.3 mn), cash-in from the IPO s over-allotment option ( 7.8 mn), and other financial changes ( 1.3 mn). The net financial position decreased from net cash of mn as at 31 December 2007 to mn as at 30 June 2008, mainly because of less cash, related to the cash flows already discussed in the cash flow statement. The following table summarises NFP breakdown: 11

13 Amounts in '000 Balance at Balance at Cash and cash equivalents 221, ,067 Bank overdrafts and loans due within one year (3,555) (4,494) Short-term net financial position 218, ,573 Non-current financial liabilities (14,836) (16,407) Non-current financial assets and fair value changes in 18,422 17,998 financial hedging instruments Medium/long-term net long-term financial position 3,586 1,591 Net financial position 221, ,164 Group performance by business segment Publishing Area Generalist publishing Publishing is the division heading the daily newspaper Il Sole 24ORE, its add-on products, 24minuti (the free newspaper launched at the end of FY2006), the theme magazines English24, Viaggi24, and House24, the monthly magazine Ventiquattro and some primary processes (printing and distribution) also managed for other Group areas. Publishing Area revenue by product Amounts in '000 1H H 2007 % change Newspaper 116, , % Add-on products 20,122 39, % Other 8,173 6, % Total 145, , % The area s total revenue was down by -10% vs. 1H07. Set against a slight increase in the paid newspaper s revenue and significant growth of those of the free newspaper (+63.1%), there was a major decrease in addon products contribution. The paid newspaper s revenue progressed by 1.1% vs. 1H07. Advertising revenue growth, also thanks to launch of the new Lombardy and Rome local supplements in the latter months of

14 The most recent circulation data (ADS 12-month moving average, May 2007-April 2008) showed a -2.7% YoY decrease in the number of copies of the main paid national daily newspapers. Performance in the same period of Il Sole 24ORE was slightly better than this, with a decrease of -2.1%. In 1H08 we created and distributed free of charge with the paid newspaper a number of publications to round off and supplement information provided to businesses, professionals, households, and consumers. We particularly highlight: I nostri soldi - guida ai pagamenti (= Our money a guide to payments), Dossier ecoincentivi 2008 (= 2008 eco-incentives dossier), Speciale elezioni 2008 (= 2008 general election special), Le novità per la casa (= Novelties for the home), Test 24 [critiques and testing of certain product categories], Speciale sulla manovra finanziaria (= National budget special), a free book on the entire print run, i.e. La Costituzione (= The constitution) by Valerio Onida, plus Guida Università (=University guide), Guida ai voli Low Cost (= Guide to low-cost flights). The following events were held to complement the information provided to professionals: Telefisco La Finanziaria 2008 e le altre novità per imprese e professionisti (the 2008 edition of the Telefisco conference, which focused on the 2008 National Budget Law and other novelties for businesses and professionals) with over 70,000 participants and 130 venues linked by videoconference, and Forum Lavoro 2008, the 2008 edition of the employment forum, which focused on the new compliance obligations for businesses, with more than 40 locations linked by videoconference. To help readers complete tax returns, we launched sale, bundled with the paid newspaper, of Guida al 730 [the 730 tax-return form] with the password for online completion of the tax return form, and Guida Unico 2008 (for the single, comprehensive personal tax return) with a CD-Rom to calculate IRPEF (personal income tax) and ICI (municipal property tax). In May and June, we distributed free of charge to 300,000 Italian households Il Sole 24 ORE in famiglia, a tabloid offering articles of immediate usefulness for Italian families. The publication rounds off the Il Sole 24ORE product portfolio, aiming at a target complementary to the core professional target. It is also a further advertising sales opportunity, aids the newspaper s brand awareness, and pursues the objective of providing householders with information and advice useful for managing the problems of everyday life. In 1H08 the market of add-on products bundled with newspapers confirmed the downward trend that had already emerged in 2H07, featuring a significant reduction of the average number of copies sold per series and substantial firmness of average price. This downturn involved all types of products, across the board. The current trend is for publishers to market joint works, on a paid basis right from the first number and with limited advertising investments. Il Sole 24ORE s add-on products also featured shrinkage of sales and margins in 1H08. Revenue in particular showed a -48.9% decrease vs. 1H07. In outright terms, the factor impacting this performance was the particularly negative performance of a specific title (Atlante Geografico Economico = Economic Geographical Atlas). In comparative terms, it was the factor that 1H07 had been the best 6-month period ever during the Group s presence in the sector (+21.8% vs. 1H06). In this environment, action was taken to reduce the number of launches, concentrating the publishing focus on the market niches in which the strength of the Il Sole 24ORE brand is a winner. In 1H08 the free newspaper 24Minuti featured revenue growth of over 53% vs. 1H07. This was a result achieved thanks to reinforcement of brand awareness and of the relationship with young people and local areas; an enhanced offering (additional editions dedicated to specific events); and to the possibility of having a specific, dedicated advertising sales network within the System advertising sales agency. Free-press readers in Italy total some 5 million and the latest Audipress data show a total increase over the previous year (+7%). Advertising revenue is growing but so is competition, with the entry of new competitors. Among the magazines, one year after its launch, House24 confirms its position as an extremely high-end product, unique in its kind on the Italian market. In 1H08 the publication s presence in high-profile channels from airports to exclusive clubs was strengthened. A point to note was the relaunch, in June, of Ventiquattro, the magazine of Il Sole 24ORE, with revamped graphics and a new, more modern and sophisticated layout. Contents have been enhanced with the Ventiquattro Stile section, dedicated to fashion and design. In the travel-magazine segment featuring an increase in competitive pressure and a not very dynamic advertising trend I Viaggi del Sole consolidated its leadership position in the segment in 1H08. Going against the current, compared with its direct competitors, it achieved revenue growth of +8%. Lastly, in April the English24 magazine was relaunched, with revamped graphics and enhanced contents. 13

15 Area results Amounts in '000 1H H 2007 % change Circulation/other revenue 63,343 84, % Revenue from advertising 81,900 77, % Revenue 145, , % Gross operating profit (GOP) 22,706 32, % GOP Margin % 15,6% 20,1% -22.3% Operating profit 19,376 29, % System Area Advertising sales System is the division acting as the advertising sales agency for the Group s main media except for sectorspecific publishing, which has its own network (Business Media) - and for some third-party media. System Area revenue Amounts in '000 1H H 2007 % change Captive revenue 112, , % Non-captive revenue 4,628 5, % Total 116, , % Compared with the same period in 2007, Nielsen data for January-May 2008 showed a -1.9% decrease in press advertising investments, with a significant reduction in the case of paid daily newspapers (-2.7%) and greater firmness in the case of magazines (-0.7%). There was a very positive trend in Web investments (+24.6%) and a good trend for radio (+8.3%). In this scenario, significantly influenced by the very negative set of the economy and financial markets, the System area achieved performance tangibly better than that of its core market, reporting total advertising sales up by 6.8% over 1H07, with improvement involving all media managed. Excluding the revenue generated in 2007 by San Paolo Edizioni magazines, no longer under concession, YoY top-line growth rose to 8%. Advertising sales for the Il Sole 24ORE newspaper increased by 1.2%, notwithstanding the major decrease vs. 1H07 of financial advertising, mainly due to the smaller number of IPOs. The top 5 business sectors in terms of advertising pages were: Finance & Insurance, Automotive, Professional Services, Apparel, and the Building Industry. These top 5 sectors accounted for 48% of total advertising investment and, together, grew by 14% vs. 1H07. A key highlight was the outstanding performance of the Apparel sector, with +98% growth vs. 1H07. Advertising sales for the free newspaper 24minuti grew by 63% vs. 1H07, also benefiting from the contribution of the dedicated sales network. 14

16 Overall performance of magazines was also good, with revenue growing by +7.8% in a market that was instead down. Among them, the Ventiquattro magazine confirmed its positive trend and its strength in the Apparel and House sectors, which accounted for 41% of its total advertising sales. Radio 24 s advertising sales grew by over 5% YoY. The sales network specifically dedicated to radio advertising sales has been fully operational since January Advertising sales for the Group s websites (ilsole24ore.com, radio24.it, and b2b24.it grew by over 40%. Independent publishers sites managed by Web System (System s digital division) grew by 19.5% in total, with a like-for-like increase that rises to 62.3%. Lastly, another highlight to note was the start in June of the ItaliaNews syndication which has consolidated a number of online news sites under a single brand. This new initiative has appointed System as its advertising sales agent, confirming the level of excellence achieved by System, particularly as regards online media. Area results Amounts in '000 1H H 2007 % change Circulation/other revenue nmf Revenue from advertising 116, , % Revenue 116, , % Gross operating profit (GOP) (1,331) 1,469 nmf GOP Margin % -1.1% 1.3% nmf Operating profit (1,333) 1,467 nmf Professionals Area Professional and specialist publishing The Professionals division targets professionals (mainly chartered accountants, lawyers, and employment consultants), the PA, and SMEs with broad-spectrum publishing solutions comprising magazines, books, databanks, online services, training courses, and management software. The Professionals division also comprises, among other things, the product system branded Frizzera, the Pirola brand, and software under the Via Libera and Impresa24 brands. The Professionals division also manages B2B integrated communication activities targeting SMEs in specific sectors, including agrifood, retail distribution, building, ICT, and welfare, directly managing dedicated advertising sales networks. Professionals Area revenue by business Amounts in '000 1H H 2007 % change Tax, Legal and PA 52,324 53, % Business Media 30,149 24, % Software solutions 22,528 14, % 15

17 Training 5,118 3, % Total 110,119 95, % The Professionals area achieved overall revenue growth (+15.6%) vs. 1H07. This was mainly attributable to changes in consolidation scope occurring in the Business Media business unit (acquisition of the GPP group at the end of March 2007) and in the Software Solutions unit (acquisition of STR and of Data Ufficio in the second half of 2007). Revenue based on like-for-like scope totalled 71.4 mn, down by -5.9% vs. 1H07. This was due to the different selling approach adopted for some software products, as described later on, and to the shrinkage of sales of some magazines in the Tax & Legal sector. This latter sector featured revenue performance slightly lower than in 1H07, due to a decrease in revenue from conferences and magazines, set against significant e-publishing growth which also caused the subscriber portfolio to increase. There was a slight increase in the performance of books, which also benefited from the launch of a larger number of titles than in 1H07. Magazines confirmed their position as the segment s main product range (accounting for 52% of revenue), thanks to maintenance of a very loyal subscriber portfolio. 1H08 also featured the launch of online products that supplement the product range for professionals, based on a service rationale. This is true of the new-generation databank Sistema Elettronico Frizzera and of Avvocati24, an on-line directory launched in April that enables legal firms to communicate their professional activity effectively and directly to potential customers. Following the acquisitions made in 2007, for the Software Solutions area 1H08 marked the start of consolidation and rationalisation of its commercial proposition, product range, and organisation. As regards selling approaches, we particularly highlight the campaign to switch the customer base from one-shot sales to automatically renewable subscriptions. Although initiatives of this sort had a negative impact on revenue and margins in 1H08 vs. 1H07, they are improving the rate of customer loyalty. This makes it possible to dedicate the sales force to the search and engagement of new customers, by proposing new products that will go on sale in 2008, thanks also to use of solutions available at the acquired companies. This delay will in any case be made up by the end of the FY. New Sole brand products were released in March, developed on the basis of existing solutions at Group companies, i.e. Studio24 Edilizia, for construction professionals, stemming from an STR product; ViaLibera Azienda, an operating product for small businesses, and Via Libera Small Office, an operating product for sole proprietorshipsm derived from a Diamante product; Via Libera Mod. 730 OnLine, a tax product for professionals, derived from a Data Ufficio product. Studio24 Commercialisti, an integrated solution for mid-range chartered accountants derived from the repositioning and technological innovation of Sistema Via Libera is currently under development. Revenue for the Software Solutions area reached 22.6 mn in 1H08, growing by more than 55% over 1H07. This result reflected the effects of the new acquisitions and of the different selling approach for some products, as described above. Net of such effects, growth would have been in the region of 3%. Change in the scope of consolidation was also behind the major growth in revenue of the Business Media segment vs. 1H07, when acquisition of the former GPP Group was completed at the end of March. Net of this effect, revenue was in fact down, particularly advertising revenue, similarly to trends in the relevant core market. The causes of this shrinkage include, above all, the effect of the unfavourable economic phase and consequent reduction of corporate advertising investments, the decrease in average prices in the market as a whole, and accentuation of migration from the print to online medium, causing a lower level of advertising income. The situation described above had particularly evident effects on products for the trade segment, whereas products relating solely to B2B markets were stable or decreased marginally. Work continued on reorganisation following the merger of three separate companies in Business Media and revamping of the product portfolio. More specifically, 1H08 featured the launch of a new magazine Energia24 targeting companies that have high energy consumption and completion of repositioning of the GDOWeek magazine via an integrated print/online system. In a core market that, although continuing to grow at an annual rate of 5-6% features heightening of competitive pressures, revenue growth of the Training area was major and totally organic (1H08 = +41.7% 16

18 vs. 1H07). This result was achieved mainly thanks to better performance of the Annual & Other Events line, above all in the finance, energy, technology, and tourism sectors. These high-end products were used to develop the range of sponsored events. The Master Part Time line also did well. Targeting both junior staff and managers at executive level in the corporate market, it offers a catalogue of 22 specialisations based on a weekend format (Friday afternoon and Saturday). The short-courses line also enjoyed a positive trend. Area results Amounts in '000 1H H 2007 % change Circulation/other revenue 88,975 80, % Revenue from advertising 21,144 15, % Revenue 110,119 95, % Gross operating profit (GOP) 21,379 22, % GOP Margin % 19.4% 23.9% -18.7% Operating profit 16,538 21, % Multimedia Area The Multimedia division handles the collection, production, and distribution, in digital format, of specific news and information content for the world of financial institutions, investors, and companies using various transmission technologies, i.e. satellite, terrestrial, and wireless networks. The division also manages the Group s on-line activities, making Il Sole 24 ORE s contents and products available in digital format on the portal and on the e-commerce channel Shopping24. Multimedia also distributes the Radiocor agency s news feeds and provides the contents of the Group s main publications to the on-line databanks. It is also a content provider for the PA, mobile telephone players and independent publishers. Multimedia Are revenue by business Amounts in '000 1H H 2007 % change Real-time financial information 10,400 11, % Online 5,998 5, % Radiocor 3,210 3, % Total 19,608 20, % 17

19 The area s revenue amounted to 19.6 mn. The -3.1% decrease vs. 1H07 was the net balance of different levels of performance by the various business sectors. As regards the real-time financial news business, the decline in sales continued, in line with the trend in previous years, mainly caused by prices that have now been going down for quite some time. In the first part of 2008, the online business benefited from the excellent trend in advertising, which featured 31.8% YoY growth, higher than that of the market (+24.5% in the January-May period according to Nielsen data). Another positive factor was 30% growth in e-commerce, in line with 2008 forecasts for the market as a whole (Source: Osservatorio del Politecnico di Milano the Observatory of Milan s Polytechnic University). The Il Sole 24 ORE website increased the number of unique visitors by 51% hitting the all-time record of 3,309,650 unique visitors in May Page views also grew in 1H08, increasing by 46%. In the Financial News sector, the site maintains outright market leadership, with penetration double that of the second foremost competitor. Further improvements were made to the website in the first months of 2008, with a view to increasing its appeal and to developing verticalisations by customer target or topic. The new version of Money24 and Viaggi24 was released, together with the films section and the version of the site optimised for the mobile telephone market. Sales of the Radiocor press agency featured sales growth over the previous year, largely thanks to the growth of new products (primarily newsletters). Area results Amounts in '000 1H H 2007 % change Circulation/other revenue 16,417 17, % Revenue from advertising 3,191 2, % Revenue 19,608 20, % Gross operating profit (GOP) 859 1, % GOP Margin % 4.4% 5.9% -26.4% Operating profit % 18

20 Radio Area The Radio division manages the national radio station Radio24, a news & talk radio with an editorial format alternating news and entertainment programmes based exclusively on speech. Every week, over 30 different programmes cover all the key areas of public interest, ranging from national and international news to business & finance; from topics concerning the family and home to sport, culture and leisure; and from wellbeing to work. In 1H08, the total radio audience in Italy (source: Audioradio) remained substantially stable compared with the previous year, with 38.7 million daily listeners. In 1H08 Radio 24 s audience hit an all-time record with a precise figure of 2.2 million daily listeners and growth of over 17% YoY (Audioradio data for 1st half of January-13 June Listened Yesterday Daily Average Monday-Sunday). This was the highest growth achieved among national broadcasters, enabling Radio 24 to position itself stably among the 10 Italian radio stations with the highest listenership Consistently with its news & talk identity, i.e. a speech-based format, in January 2008 Radio 24 introduced some novelties in its programming. A special highlight in this respect is the whole hour dedicated to news every day from 1 to 2 p.m. and a new omnibus/feature programme included in Sunday programming. In addition, five new frequencies were purchased in 1H08 with the aim of improving radio signal quality and the coverage of some important stretches of road in the regions of Friuli, Tuscany, and Latium (a.k.a. Lazio). Area results Amounts in '000 1H H 2007 % change Circulation/other revenue % Revenue from advertising 6,806 6, % Revenue 7,061 6, % Gross operating profit (GOP) % GOP Margin % 2.1% 3.7% -44.4% Operating profit (5,518) (5,246) -5.2% 19

21 Corporate and Centralised Services Area The Corporate area comprises the Group management and co-ordination functions and support services, such as information systems and facility management that, together with administration, procurement and human resource management services, are charged to the business divisions according to activity-based costing. This division also includes certain projects and/or start-ups that, by virtue of their limited size, or pending integration in the business divisions, are directly managed by the Corporate division. This area also includes the Group s activities in the Culture sector, via 24ORE Motta Cultura and Alinari 24ORE. The latter company represents a change in consolidation scope, as it was acquired in the second half of In 1H08 cultural events were organised that were very well received by the public, such as the Canova exhibition organised at Milan s Palazzo Reale by 24ORE Motta Cultura, the exhibition on Europe, which after Rome also went on tour to Berlin, Ljubljana, and Paris, and I mari dell uomo (= The seas of man), an exhibition of photographs by Folco Quilici. Lastly, another highlight was the production and sale of catalogues for the Sebastiano Del Piombo and Arte delle Donne (= Women s art) exhibitions, and of a book on the 1906 Expo. Area results Amounts in '000 1H H 2007 % change Circulation/other revenue 4, % Revenue from advertising % Revenue 4, % Gross operating profit (GOP) (4,790) (2,220) % GOP Margin % % % 61.0% Operating profit (8,171) (5,209) -56.9% 20

22 Information on ownership status As at the date of the Board of Directors meeting, the share capital of Il Sole 24 Ore SpA, fully subscribed and paid in, amounted to 35,123,787.40, divided into 90,000,000 ordinary shares (67.500% of share capital) and 43,333,213 special shares (32.500% of share capital) of which 6,554,125 treasury shares (4.915% of share capital) without indication of par value. All ordinary shares are owned by the Confederazione Generale dell Industria Italia Confindustria (the Confederation of Italian Industry), which, pursuant to Article 92 of Italian Legislative Decree no. 58 of 24 February 1998 (the Italian Consolidated Finance Act), therefore exercises control of Il Sole 24ORE SpA. Following the election of its new president on 21 May 2008, Confindustria, via a resolution of its managing council, arranged for fiduciary registration of all Il Sole 24ORE shares owned in the name of Mrs. Emma Marcegaglia [the new president], as well of all and any further shares that may be purchased by Confindustria in future. As at 30 June 2008, based on the entries in the Shareholder Register and taking into account notifications received pursuant to Article 120 of the Italian Consolidated Finance Act [significant shareholding reports], the following parties directly or indirectly owned Company shares to an extent exceeding 2% of share capital: Declarant Direct shareholder No. of shares Ordinary shares Confindustria Confederazione Generale dell Industria Italiana Special-category shares % of capital with voting rights Confindustria Confederazione Generale dell Industria Italiana 90,000, Il Sole 24ORE SpA Il Sole 24ORE SpA 6,554, Ragione di Gilberto Benetton & C. S.A.p.A. Edizione Holding SpA 2,666, Examination is still underway of the position of Gamco Investors Inc., which, on 17 March 2008 via the notification required by Article 120 of Italian Legislative Decree 58/1998, notified completion of purchase of a total equity interest of 5.18% by six different investment funds. Both Gamco Investors Inc. and the funds are based in the USA. Gamco Investors Inc. maintains that the funds owning the shares are separate legal entities. The Company has asked the declarant for more detailed information in order to check compliance with the share ownership limit established by the Company Bylaws. As at 30 June 2008, the investment funds headed by Gamco Investors Inc. owned, in total, 4.64% of share capital. On the same date, Il Sole 24ORE SpA shareholders numbered 23,619. Foreign investors owned 6.2% of share capital. As regards the rights, privileges, and restrictions associated with existing share categories, there have been no changes with respect to what is indicated in the Corporate Governance Report, which can be consulted at the Website in the Governance section. The Shareholders Meeting has not delegated any powers to the Board of Directors either to increase share capital under Article 2443 of the Italian Civil Code or to issue participatory financial instruments. There are no Shareholder Meeting authorisations to buy back own shares pursuant to Article 2357 et seq. of the Italian Civil Code. 21

23 Related-party transactions Related-party transactions are limited to those with subsidiaries and associates concerning commercial, administrative and financial services. These transactions form part of the Group's normal business operations and of the core business of each of the companies involved, and are regulated at market conditions. Related-party transactions are reported in section 12.2 of the Explanatory Notes to this set of condensed half-yearly consolidated financial statements. Risks and uncertainties Risks connected with strategies in the traditional and multimedia publishing sectors The publishing industry is involved in a process of transition from conventional forms of publishing to electronic/online publishing, associated with the introduction of new technologies and distribution channels. It is difficult to predict the impacts of this in terms of the market s competitive dynamics. The Group is continuing to expand its business also to relatively new sectors and environments (such as online publishing). It has in fact made investments targeting development of this sector within all business segments, and further investments are envisaged. Any failure of these new initiatives, and also any delays in the transition process, might lead to adverse effects on the Group s income statement, balance sheet and financial position. Risks connected with recent acquisitions and with the Group s integration process The Group s present configuration stems from an integration process that is still underway. Some of the companies forming the group were in fact acquired during the previous financial year and the Group s strategic intentions contemplate future externally driven growth. Acquisition deals, by nature, feature significant elements of risk. These include, but are not limited to, loss of customers and key staff by acquiree companies, legal risks, or possible integration difficulties due to different corporate cultures. Furthermore, this process features the risks typical of a corporate group s integration operations, i.e. difficulties relating to co-ordination of management, integration of budgeting and reporting procedures and of the commercial proposition, as well as the use of resources to achieve operating efficiency improvements. Although the Group has already initiated the process of integrating the existing organisational facilities, technologies and services with those of the newly acquired companies, completion of the process might be achieved with different timing and costs to those originally planned. Such a circumstance might jeopardise full exploitation of the production, distribution, and commercial synergies expected, with consequent adverse effects on the Group s business activity and results. Risks connected with management of externally driven growth The Group s strategic guidelines contemplate future growth that is externally driven. The Group in fact intends to pursue a strategy designed to expand its business also via acquisitions or partnership agreements, also in foreign markets. Implementation of this strategy also depends on the possibility of concluding acquisitions or partnership agreements at satisfactory conditions and on the Group s ability to assimilate, in its organisation, the new initiatives as part of the Group s normal business. Difficulties potentially associated with acquisition deals or partnership agreements, such as delays in closing deals or unexpected costs and liabilities might have a negative impact on the Group s business activity and on its results. Risks connected with the advertising revenue trend The Group generates a considerable part of its revenue via sale of advertising space in its own media (the paid daily newspaper Il Sole 24 ORE, magazines, sector-specific magazines, the free newspaper, radio, and websites) and those of independent publishers. 22

24 In 1H08 advertising revenue totalled mn and accounted for 44.5% of Group revenue (vs. 40.6% of total revenue in 1H07). Given this, the Group might have to make investments to maintain and/or increase the competitiveness of its publishing products to attract and/or maintain strong interest on the part of advertisers, with consequent effects on the Group s income statement, balance sheet and financial position. The Italian advertising market has historically featured a cyclical nature, growing when Italy enjoys macroeconomic expansion and decreasing in recessionary periods. Consequently, the Group s advertising revenue is heavily dependent on the economic conditions existing in Italy and in the global environment. Prospects of downsizing of the add-on product sector Add-on products bundled with a newspaper contribute to improvement of the latter s circulation performance, to brand awareness and, to a significant extent, to publishing groups profit margins. Revenue from the marketing of these publishing products can vary significantly, together with gross operating margins, according to the type of add-on product combined with the newspaper. After years of strong growth, the Italian add-on product market has suffered in particular during the last 9 months a major decrease and future forecasts suggest that a further decrease of revenue from this sector is likely. Of the Il Sole 24ORE Group s total revenue, that relating to add-on products accounted for 12.8% in 1H07 and 6.5% in 1H07. The Group is taking a series of actions to mitigate the effects of current trends, working on the type and characteristics of future add-on products. These initiatives, however, might not be sufficient to combat or limit the effects of the market trend, with consequent negative impacts on the Group s business and financial situation. Risks connected with the trade receivables trend Based on the type of customers targeted by the products and services of the Group s various areas, it is not believed that there is a high risk in terms of trade receivables. It is nevertheless deemed advisable to activate operating procedures that limit sales to customers considered not to be solvent and to post specific provision for bad and doubtful debts to cover any losses caused by non-collectability of receivables. At the same time, however, the major growth in billings for advertising sales that occurred in 2007 and has continued in 1H08, and the difficult contingent economic situation, might lead to increased credit risk exposure, in connection with customers extension of payment times and the potential increase in insolvencies. 23

25 Events after 30 June 2008 In observance of contractual agreements, at the beginning of July the Group paid the second instalment for the purchase of 100% of the company Data Ufficio SpA, with an outlay of 4.5 mn. The total investment to date therefore amounts to 8.5 mn. On 29 July 2008, acquisition was completed, with an investment of 2.3 mn, of 60% of Newton Management Innovation SpA, a company active in managerial and commercial training for companies and professionals. The main services offered are in-house training, communication and distance learning, events organisation, and design and implementation of targeted Web-based solutions concerning organisational operation. With this deal the Il Sole 24ORE Group strengthens its presence in the sector of services for businesses and professionals, also in the training segment. In FY2007 the company achieved revenue of 3.7 mn. In addition, further deals were approved to acquire radio frequencies and installations, to be completed in forthcoming months, for a total of 2.3 mn. These acquisitions will, in particular, permit significant improvement of territorial coverage in Sicily, increasing the percentage of the national population covered by approximately 2.5 points (from 83.8% to 86.3%). Foreseeable business progress The negative overall economic picture should not show signs of improvement in the next few months. The scenario remains particularly difficult for the publishing industry, for which the second half of the year should confirm the slack circulation performance of paid newspapers and the steady, major downsizing of the addon product segment. The advertising sales environment is also expected to deteriorate, with performance of the Il Sole 24ORE Group that, although confirming growth vs and in any case at higher levels than that expected for the market as a whole will be unable to maintain the significant levels of growth achieved in the first six months of the year. The Professionals area - which will also benefit from recouping of software products sales and margins and from the contribution of acquisitions made during should feature revenue and margin growth vs Based on like-for-like consolidation, the area s result is expected to achieve levels in line with those achieved in The items mentioned above lead us to believe that, at present, if there is no increased deterioration of the economic environment, full-year earnings expected for FY2008 also thanks to tax optimisation action taken should achieve levels higher than those of 2007 net of the positive non-recurring effects primarily relating to the capital gain made on London Stock Exchange Group Shares and to new regulations concerning postemployment employee benefit provision. Milan, 31 July 2008 /s/ GIANCARLO CERUTTI Chairman of the Board of Directors 24

26 Financial statements Consolidated Balance Sheet Amounts in '000 Note (*) Balance at Balance at ASSETS Non-current assets Property, plant and equipment (1) 92,701 94,628 Goodwill (2) 39,377 39,377 Intangible assets (3) 78,004 85,268 Investments in associates and joint ventures (4) 1,970 1,950 Available-for-sale financial assets (5) 5,583 5,580 Other non-current financial assets (6) 17,586 17,337 Other non-current assets (7) Deferred tax assets (8) 16,784 16,697 Total 252, ,717 Current assets Inventories (9) 15,193 21,350 Trade receivables (10) 224, ,559 Other receivables (11) 10,757 10,648 Other current assets (12) 11,606 6,784 Cash and cash equivalents (13) 221, ,067 Total 483, ,408 TOTAL ASSETS 736, ,125 As required by CONSOB (Italian securities & exchange commission) resolution no of 27 July 2006, the effects of related-party transactions on the balance sheet, income statement, and cash flow statement of the parent company Il Sole 24 ORE SpA are reported in Section 12.4 and detailed in Section

27 Consolidated Balance Sheet (continued) Amounts in '000 Note (*) Balance at Balance at EQUITY AND LIABILITIES A) Equity Total equity attributable to the shareholders of the parent company Share capital (14) 35,124 35,124 Equity reserves (15) 180, ,316 Fair value and revaluation reserves (16) 20,561 20,561 Hedging and translation reserves (17) Other reserves (18) 33,003 29,182 Retained earnings (19) 72,516 53,049 Profit for the period attributable to the (20) 21,590 27,694 shareholders of the parent company Total equity attributable to the shareholders of the parent company 363, ,411 Capital and reserves attributable to minority interests ,485 Profit (loss) attributable to minority interests (20) (254) (120) Total equity attributable to minority interests 1,111 1,365 Total 364, ,776 B) Non-current liabilities Non-current financial liabilities (21) 14,836 16,407 Employee benefit obligations (22) 40,169 40,558 Deferred tax liabilities (8) 20,014 32,198 Provisions for risks and charges (23) 23,209 24,781 Other non-current liabilities (24) 2,084 2,072 Total 100, ,016 C) Current liabilities Bank overdrafts and loans - due within one (25) 3,555 4,494 year Trade payables (26) 189, ,634 Other current liabilities (27) 20,423 5,812 Other payables (28) 57,939 61,393 Total 271, ,333 Total liabilities (B + C) 371, ,349 TOTAL EQUITY AND LIABILITIES 736, ,125 (*) Section 10 of the explanatory notes (Notes to the Financial Statements) As required by CONSOB (Italian securities & exchange commission) resolution no of 27 July 2006, the effects of related-party transactions on the balance sheet, income statement, and cash flow statement of the parent company Il Sole 24 ORE SpA are reported in Section 12.4 and detailed in Section

28 Consolidated Income Statement Amounts in '000 Note (*) 1H H 2007 Revenue from newspapers, books and (29) 107, ,280 magazines Revenue from advertising (30) 137, ,813 Other revenue (31) 64,247 53,090 Total revenue 309, ,183 Other operating income (32) 5,896 4,155 Personnel expense (33) (88,625) (68,943) Change in inventories (9) (6,158) 2,042 Purchase of raw materials and consumable (34) (15,796) (23,900) materials Costs for services (35) (138,294) (134,833) Use of third party assets (36) (18,689) (19,722) Other operating costs (37) (5,521) (6,004) Provisions (23) (1,084) (1,318) Provisions for bad debts (10) (2,222) (2,660) Gross operating profit 38,968 56,000 Amortisation of intangible assets (3) (10,748) (7,206) Depreciation of property, plant and equipment (1) (6,690) (6,455) Gains (losses) on sale of non-current assets (38) Operating profit 21,533 42,690 Financial income (expenses) Financial income (39) 5,792 1,931 Financial expenses (39) (530) (360) Total financial income (expenses) 5,262 1,571 Other income (expenses) from investment (40) (1) 305 assets and liabilities Gains (losses) on valuation of equity (41) - (407) investments Profit before tax 26,794 44,159 Income taxes (42) (5,457) (20,849) Profit for the period 21,337 23,310 Profit attributable to minority interests Profit attributable to shareholders of the 21,590 23,562 parent company Basic EPS ( ) ordinary shares Basic EPS ( ) ordinary shares Basic EPS ( ) special shares Diluted EPS ( ) special shares (*) Section 10 of the explanatory notes (Notes to the Financial Statements) As required by CONSOB (Italian securities & exchange commission) resolution no of 27 July 2006, the effects of related-party transactions on the balance sheet, income statement, and cash flow statement of the parent company Il Sole 24 ORE SpA are reported in Section 12.4 and detailed in Section Pursuant to the same resolution, we also advise that, in 1H08, no income components stemming from non-recurring events or transactions, or from transactions or events that do not recur frequently, have been reported. 27

29 Statement of Changes in Equity '000 Share capital Equity reserve s Fair value and revaluatio n reserves Hedgin g and translati on reserve s Other reserves Retained earnings Profit for the period Equity - Shareholde rs of the parent Equity - Minority interests Total equity Note (*) (14) (15) (16) (17) (18) (19) (20) 23,400-20, ,978 58,488 16, , ,066 Balance at 31 December 2006 Income/expenses recognized directly in equity Adjustment to postemployment benefits Fair value changes in hedging instruments Fair value availablefor-sale financial assets Income/expenses recognized directly in equity ,186-1,186-1, , , ,186-11,573-11,573 Profit for the period ,562 23,562 (252) 23,310 Total income/expenses allocated in the year Allocation of 2006 profit Distribution of dividends/reserves Balance at 30 June , ,186 23,562 35,135 (252) 34, ,650 (16,650) (18,666) - (18,666) - (18,666) 23,400-30, ,978 57,658 23, , ,283 '000 Share capital Equity reserve s Fair value and revaluatio n reserves Hedgin g and translati on reserve s Other reserves Retained earnings Profit for the period Equity - Shareholde rs of the parent Equity - Minority interests Total equity Balance at 31 December , , , ,182 53,049 27, ,411 1, ,776 Income/expenses recognized directly in equity Adjustment to postemployment benefits Fair value changes in hedging instruments Fair value of Stock Granting Fair value stock option Income/expenses recognized directly in equity , ,829-1,829 Profit for the period ,590 21,590 (254) 21,336 Total income/expenses ,708-21,590 23,419 (254) 23,165 28

30 allocated in the year Changes in 2007 net profit Distribution of dividends/reserves IPO Gross proceeds of greenshoe Transfers between reserves Balance at 30 June ,694 (27,694) (13,911) - (13,911) - (13,911) ,796-7,796-7, ,113 (2,113) , , , ,003 72,516 21, ,716 1, ,827 29

31 Consolidated Cash Flow Statement Amounts in '000 Note (*) 1H H 2007 A) CASH FLOWS FROM ORDINARY ACTIVITIES Profit attributable to the shareholders of the parent (20) 21,590 23,562 company Adjustments for: Dividends received - (305) Depreciation of property, plant and equipment (1) 6,690 6,455 Amortisation of intangible assets (3) 10,748 7,206 (Gain) loss on sale of property, plant and equipment (38) 11 (8) (Gain) loss on sale of intangible assets (38) - (205) (Gain) loss on sale of business areas (38) (13) (138) Increase (decrease) in provisions for risks and (23) (1,572) (137) charges Increase (decrease) in employee benefit obligations (22) (389) (7,240) Increase (decrease) in deferred tax assets/liabilities (8) (12,271) 4,433 Annual instalment of substitute tax 1,457 - Net financial (income) expenses (5,262) (1,571) Cash flows from ordinary activities prior to 20,988 32,052 change in net working capital (Increase) decrease in inventories (9) 6,158 (2,430) (Increase) decrease in trade receivables (10) (45,100) (31,315) Increase (decrease) in trade payables (26) 1,988 7,883 Income taxes paid (3,481) (5,817) (Increase) decrease in other assets/liabilities 8,250 20,311 Changes in net working capital (32,186) (11,368) TOTAL CASH FLOW FROM (USED IN) ORDINARY ACTIVITIES (A) (11,198) 20,685 30

32 Consolidated Cash Flow Statement (continued) Amounts in '000 Note (*) 1H H 2007 B) CASH FLOWS USED IN INVESTING ACTIVITIES Dividends received Proceeds on sale of property, plant and equipment Proceeds on sale of intangible assets Proceeds on sale of business areas Investments in property, plant and equipment (1) (4,855) (3,556) Investments in intangible assets (3) (3,484) (2,458) Other changes in property, plant and equipment (1) 4 (9) Other changes in intangible assets (3) - (8) Other increases in goodwill (2) - (139) Purchase of investments in associates (4) (20) - Purchase of investments in subsidiaries - (23,617) Other decreases (increases) in other non-current assets and (7) 133 (1) liabilities (24) Purchases of available-for-sale financial assets (5) (3) (1,695) TOTAL CASH FLOW USED IN INVESTING ACTIVITIES (B) (8,134) (30,699) FREE CASH FLOW (A + B) (19,331) (10,014) C) CASH FLOWS USED IN FINANCING ACTIVITIES Dividends paid (13,911) (18,666) Registering (repayment) of long-term bank loans (21) (1,571) (951) Net change in other non-current financial assets (250) - Net change in financial assets held for trading - (624) Net financial interests received 5,262 1,571 Change in equity attributable to minority interests (254) (252) Other changes in reserves 9,625 1,420 TOTAL CASH FLOW USED IN FINANCING ACTIVITIES (C) (1,098) (17,503) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) (20,430) (27,517) OPENING CASH AND CASH EQUIVALENTS 238,573 81,338 31

33 CLOSING CASH AND CASH EQUIVALENTS 218,143 53,821 INCREASE (DECREASE) OF THE PERIOD (20,430) (27,517) As required by CONSOB (Italian securities & exchange commission) resolution no of 27 July 2006, the effects of related-party transactions on the balance sheet, income statement, and cash flow statement of the parent company Il Sole 24 ORE SpA are reported in Section 12.4 and detailed in Section Milan, 31 July 2008 /s/ GIANCARLO CERUTTI Chairman of the Board of Directors 32

34 Explanatory notes 1. General information The main deals involving the Group during 1H08 are detailed in the section Operating performance in the first half in the Management Report. The companies included in the scope of consolidation as at 30 June 2008 were: Il Sole 24 ORE SpA, the parent company, which acts both as the holding company for majority investments in Group companies, and as an operating company, by performing core business activities (general, financial and professional news and information, press agency, etc.). 24 ORE Television SpA, which used to handle the production of television content. Today the company is not operational. Nuova Radio SpA, the broadcaster of Radio 24, a news and talk radio station. Il Sole 24 ORE UK Ltd., which handles the sale of advertising space in the UK. 24ORE Motta Cultura Srl, specialised in products dedicated to art and photography. 24 ORE Business Media Srl, specialised in professional B2B publishing, in sectors such as hotels and catering, information technology, electronics, building, and architecture. Effective 1 January 2008 the companies Il Sole 24 ORE Editoria Specializzata Srl and Motta Architettura Srl were merged in it by incorporation. Faenza Editrice Iberica SL, active in the Spanish sector-specific publishing market with magazines for the ceramic sector. Data Ufficio SpA, specialised in software solutions and electronic communication services for the public administration and professionals and in office products and printed materials. STR SpA, specialised in software solutions for the building industry. Alinari 24ORE SpA, a company active in the photography & image sector. Changes in the scope of consolidation, for which reference should be made to Section 7 Scope of Consolidation compared with financial statements as at 31 December 2007 relate to: merger by incorporation of Motta Architettura Srl and Il Sole 24 ORE Editoria Specializzata Srl in 24 ORE Business Media Srl; deconsolidation of Faenza Editrice do Brasil SA by virtue of its disposal in November Il Sole 24 ORE SpA has its registered and administrative offices in Via Monte Rosa 91, Milan (Italy). Confindustria (Confederation of Italian Industry) owns control of the parent company. The share capital of the parent company totals 35,124 thousand, represented by 90,000,000 ordinary shares and 43,333,213 special class shares. Their breakdown is as follows: 90,000,000 ordinary shares owned by Confindustria, accounting for 67.5% of all shares; 36,779,088 special-class shares listed on the Milan Bourse screen-based equity market (MTA Mercato Telematico Azionario) of Borsa Italiana SpA in the Standard segment (Class 1), accounting for 27.58% of all shares; 6,554,125 special-class shares, accounting for 4.92% of all shares. There were 7,910,029 treasury shares as at 31 December 2007, which decreased by 1,355,904 shares at the beginning of FY2008 due to exercise of the over-allotment option. This operation did not impact share capital. The Company Bylaws contain rules based on which the Company s controlling ownership cannot be changed. More specifically, under Article 8 of the Bylaws, shareholders cannot own a number of specialcategory shares that exceed one fiftieth of share capital plus one share, with the exception of the Company, which may own them as treasury shares. 33

35 Il Sole 24 Ore SpA stock is currently listed on the Milan screen-based equity market (= MTA) of Borsa Italiana SpA in the Standard (Class 1) segment. The stock s identification codes are: Name ISIN Alphanumerical code Reuters code Bloomberg code Il Sole 24 ORE S.p.A. IT S24.MI S24_p.MI S24 IM 2. Format, content, and accounting standards This set of condensed half-yearly consolidated financial statements for the period ended on 30 June 2008 has been prepared on a going-concern basis and in compliance with the recognition and measurement rules established by international accounting standards (i.e. International Accounting Standards IASs and International Financial Reporting Standards IFRSs), supplemented by related Interpretations (i.e. of the Standing Interpretations Committee SIC and International Financial Reporting Interpretations Committee IFRIC) approved and issued by the International Accounting Standards Board IASB. Both the IASs/IFRSs and the relevant Interpretations have been endorsed by EC Regulation 1725/2003 as subsequently amended of the European Commission, which adopts international accounting standards as per EC Regulation 1606/2002 of the European Parliament and Council. The format and content of this set of condensed half-yearly consolidated financial statements comply with the disclosure envisaged by IAS 34 Interim Financial Reporting. Given this, the present set of condensed half-yearly consolidated financial statements does not include all the information required for the annual financial report and must be read together with consolidated financial statements for the FY ended on 31 December Its purpose is in fact to provide an update with respect to the last consolidated annual report, focusing on the new activities, events, and circumstances taking place in the period between 31 December 2007 and 30 June It is pointed out that the interim management statement for the first quarter of 2008 was not prepared applying IAS 34 and was drawn up pursuant to Article 154/3 of Italian Legislative Decree no. 58 of 24 February 1998, an article introduced by virtue of Article 1 of Italian Legislative Decree no. 95 of 6 November The accounting standards and measurement and recognition policies used to draw up the condensed halfyearly consolidated financial statements are the same accounting standards and methods used to prepared the last set of annual consolidated financial statements, saving what is indicated in Section 6. Changes in accounting policies, errors, and changes of estimates. The separate condensed half-yearly financial statements of the parent company and of the main companies included in the scope of consolidation have been prepared in compliance with IFRSs. Appropriate adjustments have been made to the financial statements of other companies consolidated on a line-by-line basis (24ORE Motta Cultura Srl and Alinari 24ORE SpA) that are prepared according to standards other than IFRSs. All condensed half-yearly financial statements have been approved by the respective Boards of Directors. We specify that the currency used to present this set of condensed half-yearly consolidated financial statements is the euro and that amounts are expressed in thousands of euro ( 000). 34

36 3. Structure of financial statements The Group has prepared the balance sheet by classifying current and non-current assets and liabilities separately. For each asset and liability item that includes amounts falling due both within and beyond 12 months from balance-sheet date, the amount that is expected to be recovered or paid beyond 12 months has been indicated. The balance sheet was drawn up at the end of the first half (1H08) and is compared with the balance sheet of the last annual consolidated financial statements. All details needed for more thorough and comprehensive disclosure are provided in the notes in the form of additional sub-classifications of the items shown in the balance sheet. Items are classified in the consolidated income statement according to their nature. The income statement has been drawn up for the relevant 6-month period of the current FY (1H08) and compared with the income statement of the corresponding 6-month period in the previous FY (1H07). Cash flow information is assured via preparation of the consolidated cash flow statement, which is an integral part of these condensed half-yearly consolidated financial statements. The indirect method has been used for presenting cash flows, according to which the period s profit has been adjusted for the effects of: Changes in inventories, receivables and payables generated by operations; Non-cash operations All other elements whose cash effects are cash flows involved in investing or financing activity. The cash flow statement was drawn up as at the end date of 1H08 and is compared with the data of the 1H07 cash flow statement. As required by the relevant regulations, a reconciliation has also been prepared of amounts in the cash flow statement with the equivalent items shown in the balance sheet. The table illustrating the net financial position has been conceived on the basis of the guidance given in the CESR (The Committee of European Securities Regulators) recommendation dated 10 February 2005 Recommendations for consistent implementation of the EU Commission s Regulation on Prospectuses. The table details the main NFP components and indicates payable/receivable positions vis-à-vis related parties. The statement of changes in equity shows: Profit for the period Income and costs allocated directly to equity The effects of changes in accounting standards and corrections of errors found, in compliance with IAS 8 The amounts of transactions with equity holders, with earnings distribution indicated separately Changes in earnings reserves The balance of and change in each equity class and each reserve, with reconciliation between the period s initial and closing book value. The statement of changes in equity has been prepared based on the 1H08 end date compared with data for 1H07. The amount of dividends recognised as distribution to equity holders during the period in question and the related per-share amount are shown separately. The Group has also prepared a reconciliation of the equity and profit for the period reported in condensed half-yearly consolidated financial statements with the equivalent figures in the parent company s accounts. 35

37 At the foot of the balance sheet, income statement and cash flow statement there are cross-references with a specific section where the same schedules are presented highlighting separately from the main item concerned - sub-items concerning related-party positions or transactions. This indication is omitted only when it is not significant for comprehension of the Group s financial and balance sheet status, business result, and cash flows. At the foot of the income statement, there is a cross-reference to a specific section where, for the same schedule, sub-items are shown if they are of a significant amount relating to income components stemming from non-recurring events or transactions, or from transactions or events that do not recur frequently, have been reported. These income items are shown separately in the cost or revenue items to which they refer. A specific table, which is an integral part of this set of condensed half-yearly consolidated financial statements, lists the Group s companies indicating their name, registered office, share capital, equity interests directly or indirectly owned by the parent company and each subsidiary, and consolidation method, as well as listing equity-accounted investments. Also shown are shareholdings exceeding 2% of share capital in listed companies and exceeding 10% of share capital in unlisted companies, or in private limited liability companies, including foreign companies. The notes are presented in a systematic manner. For each of the items shown in the balance sheet, income statement, cash flow statement and statement of changes in equity, there is a cross-reference to the detailed disclosure provided in the notes. 4. Consolidation policies The Group consists of the parent company Il Sole 24 ORE SpA and its subsidiaries. The parent company consolidates all of its investments in subsidiaries in the consolidated financial statements. Companies are considered subsidiaries if the parent company has the power to determine their financial and operating policies in order to obtain benefits for its own activity. Investments in subsidiaries are excluded from consolidation in those cases where control can no longer be exercised as the parent company has lost the power to determine their financial and operating policies. Such investments are shown at cost. In preparing these condensed half-yearly consolidated financial statements, the parent company has consolidated on a line-by-line basis its own financial statements and those of its subsidiaries, as though they were the financial statements of a single economic entity. The same accounting standards have been applied to similar transactions and events that took place in similar circumstances. The separate condensed half-yearly financial statements of the parent company and of its subsidiaries used to prepare the consolidated financial statements were all drawn up as at 31 June Subsidiaries are included in the consolidated financial statements (balance sheet and income statement) from the date when the parent company acquires control and are no longer consolidated from the date when the parent company loses control. Subsidiaries are valued at the date of acquisition of control according to the purchase method. In accordance with this method, all identifiable assets, liabilities and contingent liabilities of the business acquired that meet the requisites for recognition in accounts, are recognised at their respective fair value as at the acquisition date. In preparing the consolidated financial statements, the parent company aggregates its financial statements and those of the subsidiaries item by item, summing the various assets, liabilities, equities, revenue and costs. The carrying amount of the investments held by the parent company and by other Group companies in each subsidiary included in the scope of consolidation is eliminated against the related portion of equity. Any cost paid for the subsidiary over and above the interest acquired in the net fair value of its identifiable assets, liabilities and contingent liabilities qualifying for accounting recognition is recognised as goodwill. 36

38 Goodwill, as an asset that produces future economic benefits, but that cannot be individually identified or accounted for separately, is initially recognised at cost. Reference should be made to the section Goodwill and Business Combinations for a detailed explanation of the policy applied for the measurement of goodwill. If the interest acquired in the net fair value of the identifiable assets, liabilities and contingent liabilities qualifying for accounting recognition exceeds the cost of the subsidiary at the date of acquisition (generating "negative goodwill"), the excess is recognised in the income statement. Any temporary differences emerging from the difference between the net fair value of identifiable assets, liabilities and contingent liabilities qualifying for accounting recognition and their value recognisable for tax purposes give rise to deferred tax assets and/or liabilities if the required conditions exist. The portions of equity pertaining to third-party shareholders of consolidated companies are recognised separately as minority interests in the specific equity items relating to the capital and reserves pertaining to third parties, whereas the portion of the result attributable to third parties is shown in the consolidated income statement under Profit attributable to minority interests. All receivables and payables and costs and revenue deriving from transactions between companies included in the scope of consolidation are totally eliminated. Any unrealised profits or losses on transactions between consolidated companies and included in inventories or property, plant and equipment at the balance sheet date are also eliminated. Dividends distributed by consolidated companies are also eliminated from the income statement and added back to the prior years profits if and to the extent that they were paid out of such earnings. The financial statements of foreign subsidiaries expressed in currencies other than the euro are translated: At the spot exchange rate on the consolidated balance sheet date for monetary items; At the exchange rate prevailing on the transaction date for non-monetary items measured at historical cost; At the exchange rate prevailing on the date on which the fair value was determined for non-monetary items measured at fair value. Any exchange differences arising from recognition of non-monetary items at the balance sheet date are recognised in a separate equity caption known as the Hedging and translation reserve. 5. Accounting policies The Il Sole 24 ORE Group's condensed half-yearly consolidated financial statements have been prepared in compliance with IFRSs. This section provides a summary of the main accounting standards applied, indicating the key accounting policies used in preparing the condensed half-yearly consolidated financial statements and any other accounting standards used if they are considered significant for comprehension of the condensed half-yearly consolidated financial statements. 5.1 Non-current assets Property, plant, and equipment This caption includes the buildings, plant and machinery owned for use in production, to provide goods and services and for administrative purposes, and that are expected to be used for more than one financial year. It also includes any spare parts that can only be used in connection with a specific non-current asset, as well as spare parts and related equipment of a certain value that are expected to be used for more than one year. Only those items that are likely to generate future economic benefits and have a cost that can be reliably determined are recognised as non-current assets. 37

39 Non-current assets are initially recognised at cost. Cost includes the purchase or construction cost, ancillary charges and any costs directly attributable for bringing the asset to the place and condition necessary for it to function. Routine maintenance costs are charged to the income statement. Costs relating to items of property, plant and equipment that are used to replace parts removed from the same property, plant and equipment are accounted for as non-current assets, when it is likely that they will generate future economic benefits and their cost can be reliably determined. The carrying amount of the parts that have been removed is derecognised. After initial recognition, the cost method is adopted, under which non-current assets are shown in the balance sheet at cost, net of cumulative depreciation and any impairment losses. Each non-current asset item is depreciated on a straight-line basis over its estimated useful life on the assumption that its residual value is zero. Depreciation commences when the asset is available for use. Land has an unlimited useful life and is therefore not depreciated. Non-current assets that are not yet available for use are not depreciated. Depreciation terminates on the more recent of two dates: when the asset is classified as held for sale (see the paragraph called "Non-current assets classified as held for sale") and the date when the asset is derecognised, i.e. eliminated from the books. Depreciation is not interrupted just because the asset is not being used. A non-current asset is derecognised when it is disposed of or when no future economic benefit can be expected either from its use or from its disposal. The period and method of depreciation of each item of property, plant and equipment are reviewed at the end of each year. A check is carried out at each balance sheet date to see if there are any signs that assets are impaired. If there is any indication that this is the case, an estimate is made of the asset's recoverable amount. This impairment test is carried out by comparing the carrying amount of the asset with its recoverable amount. The recoverable amount is the higher out of the asset's fair value, net of any selling costs, and its value in use. Fair value is determined on the basis of the best information available at the time to reflect the amount that the company could obtain at the balance sheet date by disposing of the asset in an arm s length transaction between knowledgeable, willing parties. The value in use is calculated by estimating the net present value of the future cash flows expected to be generated by the asset being tested for impairment. Impairment losses are recognised immediately to the income statement. Impairment losses that have already been recognised are reviewed at the end of each period in order to evaluate whether they are still justified or should be reversed. If there is any indication that impairment no longer exists or should be reduced, an estimate is made of the asset's recoverable amount. The original value of an asset that suffered an impairment loss in previous years is only reinstated if there is a change in the valuations used to calculate the asset's recoverable amount. In this case, carrying value can be increased up to the recoverable value. This recoverable value cannot be higher than the carrying value that would have applied if no impairment loss had been recognised in previous years. Reversals of impairment losses are recognised in the income statement. Finance leases Assets purchased under finance lease arrangements are recognised as property, plant and equipment at the present value of the minimum payments due under the lease contract, even if ownership of the leased asset has not been acquired. This treatment is applied because the substantial and financial nature of the contracts - and not their legal nature must be taken into account. 38

40 Initial recognition of the leased asset as an item of property, plant and equipment is at the present value of the minimum payments due under the lease contract. The present value of the minimum payments due under the lease contract are also recognised initially as a payable in Finance lease payables due in more than one year under non-current liabilities. Government grants Government grants, including non-monetary grants measured at fair value, are not recognised until there is reasonable certainty that the conditions to obtain them will be respected and the grants will effectively be received. Government grants for capital investments, obtained in connection with non-current assets, are recognised as deferred income and then transferred to the income statement under other operating income on a systematic and rational basis that spreads them appropriately over the asset s useful life. Government grants offsetting costs or losses already incurred or to provide immediate financial support, without there being any related future costs, are recognised in the income statement as income for the year in which they become collectable. Goodwill and business combinations All business combinations for which IFRS 3 is applicable are accounted for applying the purchase method. In accordance with this method, all identifiable assets, liabilities and contingent liabilities of the business acquired that qualify for accounting recognition, are recognised at their respective fair value as at the acquisition date. Any excess cost paid for the business combination over and above the interest acquired in the net fair value of its identifiable assets, liabilities and contingent liabilities that qualify for accounting recognition is recognised as goodwill. Goodwill, as an asset that produces future economic benefits, but that cannot be separately identified or accounted for, is initially recognised at cost. Goodwill acquired in a business combination is allocated to each cash-generating unit (CGU) that is expected to benefit from the combination s synergies. CGUs to which goodwill has been allocated are checked annually for impairment. If there is any indication of impairment, their carrying value is compared with their recoverable value. Goodwill is not amortised, but subjected to annual impairment testing. Impairment testing is done more frequently if specific events or changed circumstances suggest that goodwill has suffered impairment. If goodwill is initially recognised during the first half of the FY, an impairment test is carried out before the end of the same FY. Recoverable value is the lower out of fair value net of any selling costs and value in use, calculated by estimating the net present value of the future cash flows expected to derive from the CGU being tested for impairment. If the CGU s recoverable value is lower than its carrying value, an impairment loss is recognised. An impairment loss recognised for goodwill cannot be reversed in future years. If the interest acquired in the net fair value of the identifiable assets, liabilities and contingent liabilities that qualify for accounting recognition exceeds the cost of the business combination at the date of acquisition, the excess is recognised in the income statement. Any temporary differences emerging between the net fair value of identifiable assets, liabilities and contingent liabilities that qualify for accounting recognition and their value recognisable for tax purposes give rise to deferred tax assets and/or liabilities. Intangible assets Intangible assets are non-monetary assets that have no physical substance, which have to be: identifiable, in other words separable or arising from contractual or other legal rights; under the company's control as a result of past events; 39

41 likely to generate future economic benefits for the company; and with a cost that can be measured reliably. Initial recognition is at cost. The cost of intangible assets not acquired through business combinations includes the purchase price and any other direct cost to prepare the asset for use. The purchase cost of intangible assets acquired through business combinations is their fair value at the date of acquisition. The process of formation of intangible assets generated internally distinguishes between the research and development phases. No intangible asset deriving from the research phase is recognised. Intangible assets deriving from the development phase are recognised if they satisfy the conditions specified above. Trademarks, publications and publishing rights generated internally are not recognised as intangible assets. Similarly, start-up and expansion costs, staff training and placement costs and internal reorganisation expenses are not recognised as intangible assets. The cost of intangible assets generated internally is represented by the sum of the cost incurred from the date on which the intangible asset first satisfies the conditions for accounting recognition. After initial recognition, the cost method is adopted. Intangible assets with a finite useful life are shown in the balance sheet at cost, net of cumulative amortisation and impairment losses. The cost of intangible assets with a finite useful life is amortised on a straight-line basis over their estimated useful life on the assumption that their residual value is zero. Amortisation commences when the asset is available for use. Intangible assets with a finite useful life that are not yet available for use are not amortised. The period and method of amortisation of intangible assets with a finite useful life are reviewed at the end of each FY. Amortisation terminates on the more recent of two dates: i.e. the date when the intangible asset is classified as held for sale (see the paragraph entitled "Non-current assets classified as held for sale") and the date when the asset is derecognised. An intangible asset is derecognised when it is disposed of or when no future economic benefit can be expected either from its use or from its disposal. Intangible assets with an indefinite useful life are not amortised. An intangible asset has an indefinite useful life when, based on certain key factors, there is no foreseeable limit to the period in which it is expected to generate net cash inflows. Among the key factors playing a significant role in determining the existence of indefinite useful life, we have considered: The asset s expected utilisation The productive life cycles typical of the asset, also based on information in the public domain concerning estimated useful lives of asset categories used in similar ways Technical, technological and any other type of obsolescence The stability of the economic sector in which the asset operates and changes in demand for the products and services originated by the asset Actions that will presumably be taken by competitors The level of maintenance costs necessary to obtain the future economic benefits expected from the asset The period of control over the asset and the legal limits to its utilisation The dependence of useful life on the useful life of other assets. 40

42 The useful life of intangible assets that are not amortised is reviewed at the end of each accounting period to ascertain whether the key factors mentioned above still support the assumption of an indefinite useful life. A check is carried out at each balance sheet date in order to see whether intangible assets have suffered impairment. Intangible assets with an indefinite useful life and those that are still not available for use are subjected to annual impairment testing, whether or not there are signs of a loss in value. This impairment test is carried out by comparing the carrying value of the intangible asset with its recoverable value. Recoverable value is based on the higher out of fair value net of any selling costs and value in use, calculated by estimating the net present value of the future cash flows expected to derive from the intangible asset that is being tested for impairment. If it is not possible to estimate the recoverable value of the individual asset, the recoverable value of the CGU (cash-generating unit) to which the asset belongs is calculated. This recoverable value is then compared with the CGU s carrying value. Impairment losses are recognised immediately in the income statement. Impairment losses that have already been recognised are reviewed at each end date in order to check whether they are still justified or should be reversed or reduced. If there is any such indication that this is the case, an estimate is made of the asset's recoverable value. The original value of an intangible asset that suffered an impairment loss in previous years is only reinstated if there is a change in the valuations used to calculate the asset's recoverable value. In this case, carrying value can be raised to no more than the recoverable value. This recoverable value cannot exceed the carrying amount that would have applied if no impairment loss had been recognised in previous years. Reversals of impairment on intangible assets are recognised in the income statement. Investments in associates and joint ventures Associates are those companies over which the parent company exercises significant influence, even if it does not own control. Investments in associates are accounted for under the equity method, excluding those classified as held for sale (see the paragraph entitled "Non-current assets classified as held for sale"). Under the equity method, an investment is initially recognised at cost. The carrying value is subsequently increased or decreased to reflect the investor's share of the associate s profits or losses made after the date of acquisition. The investor's share of the associate s net result for the period is recognised in the investor's income statement. Any dividends received from associates reduce the carrying value of the investment. Any part of the investor's share of the associate s profits and losses deriving from transactions between the two companies is eliminated. Associates have the same balance sheet date as the investor company. The financial statements of associates that use accounting standards other than IFRSs have been suitably adjusted to bring them into line with those of the investor company. In the event that the investor's share of an associate s losses exceeds the carrying value of its investment in that associate, the investor accounts for any further losses as a provision in liabilities, but only to the extent that the company has contracted legal or constructive liabilities on behalf of the associate. Following application of the equity method, an individual review is carried out at each balance sheet date to see if there is any objective evidence that investments in associates are impaired. If there is any sign of a possible impairment loss, the entire value of the investment is subjected to an impairment test, via comparison of its recoverable value with its carrying value. The recoverable value, i.e. the higher out of the value in use and the fair value of the investment, net of selling costs, is determined for the investment in each associate. 41

43 Fair value is calculated as the amount that could be obtained by selling the investment in the associate in an arm s length transaction between knowledgeable, willing parties, net of disposal costs. Value in use is calculated by estimating the investor's share of the net present value of the future cash flows expected to be generated by the associate, including the cash flows deriving from its operations and the proceeds of its final disposal. Impairment losses are recognised immediately in the income statement. Impairment losses that have already been recognised are reviewed at each end date to see if they are still justified or if they ought to be reduced. If there is any such indication, an estimate is made of the investment's recoverable value. The original value of an investment in an associate that suffered an impairment loss in previous years is only reinstated if there is a change in the valuations used to calculate its recoverable amount. In this case, the carrying value can be raised to not more than the recoverable value. This recoverable valuable cannot be higher than the carrying amount that would have applied if no impairment loss had been recognised in previous FYs. Reversals of impairment on investments in associates are recognised in the income statement. Financial assets available for sale Investments in other companies, over which the parent company has neither control nor considerable influence, are classified in this category. Initial measurement of these investments is at fair value on the trading date (identifiable as the purchase cost), net of transaction costs directly attributable to the purchase. After initial recognition: Investments consisting of equity instruments that do not have a market price listed on an active market and whose fair value cannot be measured reliably are valued at cost; Investments consisting of equity instruments that have a market price listed on an active market are valued at fair value; in other words, the value at which each investment could be exchanged in an arm's-length transaction between knowledgeable and independent parties. The gains and losses deriving from changes in fair value are recognised directly in equity, except for impairment losses and foreign exchange gains and losses. An individual review is carried out at each balance sheet date to see if there is any objective evidence that investments have suffered an impairment loss. If there is objective evidence that there has been an impairment loss: For investments valued at cost, the amount of the loss is measured as the difference between the investment s carrying value and the present value of the expected future cash flows discounted at a current market rate of return for a similar financial asset. Impairment losses are recognised immediately in the income statement and can never be reinstated. For investments measured at fair value, the amount of the loss is measured as the difference between the investment s purchase cost and its current fair value. Any impairment losses are recognised in the income statement, as are any losses that were charged against equity. The latter have to be reversed and cumulatively recognised in the income statement. Impairment losses can never be reversed. Dividends coming from investments in other companies are recognised when they are collected among Other income (losses) from investment assets and liabilities. Other non-current financial assets This category includes all medium-/long-term receivables and financial instruments that are held to maturity. Initial measurement of non-current financial assets is at fair value on the trading date (identifiable as the purchase cost), net of transaction costs directly attributable to the purchase. After initial recognition, both medium-/long-term receivables and financial instruments held to maturity are measured at amortised cost using the effective interest method. 42

44 The effective rate of interest is the rate that exactly discounts the future cash flows expected over the financial instrument s estimated life to its net carrying value. An individual review is carried out at each balance sheet date to see if there is any objective evidence that any non-current financial asset has suffered impairment loss. If there is objective evidence that there impairment loss has occurred, the amount of the loss is measured as the difference between the carrying value of the medium-/long-term receivable and the investment held to maturity and the present value of the expected future cash flows discounted at the original effective rate of interest of the financial asset concerned. The amount of the loss is recognised immediately to the income statement. If, in a subsequent period, the amount of the impairment loss decreases and this decrease is linked to an event that took place after recognising the loss, it is reversed and related reinstatement of value is recognised in the income statement. Other non-current assets This category includes: Guarantee deposits; Tax receivables still to be refunded. Initial recognition of the tax receivables still to be refunded and of the guarantee deposits is at fair value at the transaction date, net of any directly attributable transaction costs. After initial recognition, both the tax receivables still to be refunded and the guarantee deposits are measured at amortised cost, using the effective interest method, calculated as indicated in the paragraph on "Other non-current financial assets" of the section called "Non-current assets". An individual review is carried out at each balance sheet date to see if there is any objective evidence that other non-current assets have suffered a loss in value. If there is objective evidence that there has been an impairment loss, the amount is determined. The amount of the loss is measured as the difference between the carrying value and the present value of the expected future cash flows discounted at the original effective rate of interest of the non-current asset in question. The amount of the loss is recognised in the income statement. If in a subsequent period, the amount of the impairment loss decreases and this decrease is linked to an event that took place after recognising the loss, it is reversed and related reinstatement of value is recognised in the income statement. Deferred tax assets Prepaid-tax assets, or deferred tax assets, are portions of income tax that will be recovered in future years, relating to: deductible temporary differences; unutilised tax losses carried forward; unutilised tax receivables carried forward. Deductible temporary differences are differences between the carrying value of an asset or liability shown in the balance sheet and the value that is recognised for tax purposes. When calculating the taxable income of future years, these will translate into deductibles when the carrying value of the asset or liability is realised or extinguished. Deferred tax assets are recognised on all deductible temporary differences and on all unutilised tax losses and tax credits carried forward, if it is probable that sufficient taxable income will be generated in future years to permit their use (i.e. offset them). Deferred tax assets are measured at the tax rates that are expected to apply during the year when the tax asset will presumably be realised, based on the measures in force at balance sheet date 43

45 Deferred tax assets are not discounted to their present value. The tax benefit of deferred tax assets is recognised in the income statement, unless the tax stems from a transaction or event that was recognised directly in equity or came from a business combination. The tax effects of deferred tax assets relating to items debited or credited directly to equity are also debited or credited directly to equity. 5.2 Current assets Inventories Inventories include saleable goods, such as items bought for resale and items produced internally, as well as goods that are used in their production as part of the company's normal operations, such as semi-finished goods, work in progress, raw and ancillary materials, and consumables. Inventories are valued at the lower out of historical cost and market value. The cost of inventories includes all purchase costs, transformation costs and any other costs incurred to bring stocks to their current position and condition. In particular, for goods purchased for resale and for direct and indirect materials bought and used in the production cycle, the historical cost applied is the purchase cost. For goods already produced or being processed internally, the historical cost used is manufacturing cost. When determining the purchase cost, account is taken of the price effectively paid, including directly applicable ancillary costs such as transport and customs duty, net of any trade discounts. The calculation of manufacturing cost takes into account the purchase cost, as mentioned previously, plus all production or transformation expenses, i.e. direct costs and a reasonable allocation of indirect costs for the manufacturing period in question. The transformation costs of semi-finished goods, work in progress and finished products are obtained by means of a cost accounting system that establishes the actual cost of each job order. Purchase cost and manufacturing cost do not include any distribution or selling expenses. Goods purchased for resale, items produced internally, semi-finished goods and work in progress are valued based on specific identification of actual cost. Raw and ancillary materials and consumables are measured at their weighted average cost for the period, taking the value of opening inventory into account. If it is no longer possible to measure inventories at historical cost as explained above, due to a decrease in selling prices, deterioration of goods, or the presence of obsolete or slow-moving goods, net realisable value is used. This value is based on market trends for goods, finished products, semi-finished goods produced internally, and work in progress. In the case of raw and ancillary materials, consumables and bought-in semifinished goods, replacement cost is used. Net realisable value represents the selling price in the course of normal business, net of any completion costs and direct selling costs that can be reasonably expected. Replacement cost represents the cost at which a certain item of inventory can be repurchased or reproduced, under normal business conditions. Each item of inventory is reviewed to check the existence of one or more of the events described above as causes of the reduction in the original utility or functionality, and for estimating, depending on inventory type, realizable value or replacement cost. The adjustment to replacement cost for raw materials is carried out directly, whereas the adjustment to net realisable value for finished products is done by setting up suitable provision for inventory obsolescence and slow-moving items, which is then deducted directly from the nominal value shown under assets. Given the nature of our inventories, it is highly unlikely that, in subsequent years, events will occur such as to change the circumstances that originally caused write-downs. 44

46 Trade receivables Trade receivables include amounts due from customers and advances to suppliers. Trade receivables are initially recognised at their fair value on the transaction date, i.e. for the amount expected to be received less any directly attributable transaction costs. After initial recognition, trade receivables are shown at their estimated realisable value. The initial recognition value of trade receivables is adjusted to the estimated realisable value via direct deduction of provision for bad and doubtful debts. The adjustment to estimated realisable value is achieved by reducing the face value of receivables, taking into account losses due to non-collection, returns and billing adjustments, discounts and allowances not accrued and any other reasons why a lower amount is likely to be received. Billing adjustments also include estimates of books and newspapers likely to be returned in the future. More specifically, appropriate provision for bad and doubtful debts is made based on foreseeable losses due to non-collection of the receivables shown in the balance sheet and deducted directly from their face value. The provision is determined by analysing the individual receivables and any other present or future factors likely to affect them. When collection of trade receivables is deferred for more than 12 months and the transaction effectively constitutes a form of financing, the fair value of the proceeds is determined by discounting all future inflows at a notional interest rate. Other receivables Other receivables include the following: Italian and EU VAT credits for which a refund has been claimed, as well as the tax credits for the publishing industry and the advance tax paid on post-employment benefits (Italian acronym = TFR); Payments on account and advances to employees that will not have to be reimbursed in the future as they will offset amounts to be paid, and loans to employees; Receivables from others, on transactions that do not generate revenue. This account group also includes advances to suppliers for the purchase of property, plant and equipment and intangible assets. Other receivables are initially recognised at their fair value on the transaction date, i.e. for the amount expected to be received less any directly attributable transaction costs. Current tax assets In this item current tax assets are shown if and only if - the amount already paid for the current year and for previous years exceeds the amount due, unless a refund has already been requested for the amounts relating to previous years. Other current financial assets This item includes short-term financial receivables. Other current financial receivables are initially recognised at their fair value on the transaction date, i.e. at the amount expected to be received less any directly attributable transaction costs. Other current assets Other current assets include: Accrued income and prepaid expenses; The fair value of financial instruments held for hedging purposes. Accrued income and prepaid expenses represent portions of costs or revenue that relate to two or more periods. They measure revenue and charges that have to be accounted for earlier or later than the event that gives rise to their original recognition. The fundamental condition for them to be recognised is that the amount of these portions of costs and revenue that are common to several periods varies on a time basis. 45

47 The amount to be spread over two or more periods is split on a time basis by counting the months, in order to allocate the correct portion to the current period in the case of accruals, or to postpone a portion to subsequent periods in the case of prepayments. More specifically, accrued income measures the portions of revenue due to be received in a future period, but partially applicable to the period to which the financial statements refer. Prepaid expenses reflect portions of costs recognised entirely during the current period, or in previous periods, and represent the part that is being deferred to one or more future periods. Cash and cash equivalents These include bank and post office deposits, as well as cash in hand and cash equivalents. Bank and post office deposits, cash in hand and cash equivalents in national functional currency are shown at face value. Cash and deposit accounts include all movements that took place up to balance sheet date. Accrued interest and related charges due at balance sheet date are included, even if actual receipt takes place subsequently. Collections received after balance sheet date are not included in this item, even if backdated. Cash payments made or requested after balance sheet date are not taken into consideration. 5.3 Equity Equity is the difference between total assets and total liabilities, valued according to the measurement methods explained above, considering the accounting requirement to balance assets and liabilities. Consolidated equity, including the consolidated result of the period in question, is split between the portion relevant to the Group (i.e. pertaining to equity holders of the parent company) and the portion relevant to minority interests. Equity includes the following items: Share capital, i.e. the par value of the amount paid by shareholders on the date of establishment or for subsequent capital increases plus the value of reserves converted into share capital over time, net of the par value of any amounts due from shareholders for capital subscribed and not yet called up and for capital called up but not yet paid in, and of the par value of any of the company's shares that have been bought back (i.e. treasury shares). Equity reserves, which include: Equity instruments assigned for transactions involving share-based payments settled using equity instruments, i.e. the corresponding entry for the cost recognised in the income statement for equity instruments assigned to employees. The shares, stock options and other equity instruments assigned to employees as part of their pay package are measured at the fair value of the equity instruments assigned, calculated as at the grant date. In the interval between the grant date - i.e. the date on which the right arises to receive the shares, stock options, and equity instruments once given conditions have been met and vesting date - i.e. the date when the conditions envisaged on the grant date have effectively materialised no change is made to the fair value calculated on the grant date. Vesting conditions other than market conditions are not considered in the estimate of fair value made on the grant date. These non-market conditions are instead considered when adjusting the number of equity instruments calculated on grant date, so that the amount recognised is based on a number of equity instruments that definitively qualify for vesting. Capital injections, i.e. reserves made up of new contributions made by shareholders. The share premium reserve, i.e. the difference between the issue price of the shares and their par value. Costs relating to capital operations, i.e. all costs associated with the purchase or issue of new shares, including the costs originated by the procedure for listing on a regulated market borne by the parent company in the period in question. Revaluation reserves, which include the reserves for revaluations envisaged by specific laws. 46

48 Hedging and translation reserves, which include: The translation reserve, which contains the exchange differences generated on conversion of the monetary and non-monetary elements of foreign subsidiaries included in consolidation, which prepare their individual financial statements in a currency other than the functional currency; The cash flow hedging reserve, relating to the part of the profit or loss on cash flow hedging instruments that is considered an effective hedge. The hedging reserves, which were set up following changes in the fair value of cash flow hedging instruments, are not available for distribution, in accordance with Article 6, paragraphs 1 and 4 of Italian Legislative Decree 38/2005. Other reserves, which include: The legal reserve, which is an obligatory reserve under Article 2430 of the Italian Civil Code, which requires that at least 5% of the profit for the year has to be set aside in the legal reserve until it reaches one fifth of the share capital. Up to this limit, the reserve is not available for distribution; The capital grants reserve, related to assets, for grants that are meant to reconstitute equity, set up as a result of past application of Italian accounting standards (Italian GAAPs). These grants were paid until FY1987, in accordance with Article 8 of Italian Law 416/81, and are taxable on distribution; The negative goodwill reserve, set up as a result of past application of Italian GAAPs. This is an adjustment to equity relating to the merger by incorporation of companies in prior years. Retained earnings, i.e. prior years' profits or losses that have not been distributed or allocated to other reserves. This item also includes: The post-employment benefit adjustment reserve, to account for actuarial gains and losses on postemployment benefits. This item reflects changes in the current value of this liability as a result of the programme evolving differently from the way initially envisaged in actuarial valuations. The policy adopted is to recognise all actuarial gains and losses on all post-employment benefits in the period when they arise, outside of the income statement. The IFRS opening reserve, made up of the adjustments deriving from the transition to IFRSs, which took place during the first year of adoption of IFRSs. The impact of IFRS transition, deriving from the change in the accounting standards applied, was reflected in equity as at the transition date (1 January 2005) and recognised in this specific reserve net of the tax effect. The profit for the period, i.e. profits or losses for the period, as shown in the corresponding item of the consolidated income statement. Equity attributed to minority interests, i.e.: The portion of the profit/loss for the period of consolidated subsidiaries, separately identified, pertaining to minority interests; The portion of the share capital and reserves of consolidated subsidiaries pertaining to minority interests, made up of the value of minority interests at the date of acquisition of the investment and the minority interests' share of any changes in equity since that date. 5.4 Non-current liabilities Non-current financial liabilities This caption essentially includes the amounts due to banks for medium-/long-term bank loans. The amounts due to banks reflect the effective amount owing in terms of principal, interest and related charges accruing and payable as at balance sheet date, even if they were charged after that date. The initial measurement of non-current financial liabilities is at fair value as at the trading date, net of directly attributable transaction costs. After initial recognition, non-current financial liabilities are measured at amortised cost using the effective interest method. 47

49 Employee benefits This balance-sheet caption comprises post-employee benefit provision (Italian acronym = TFR) accrued for all contractual categories of employees as up to 31 December Following the amendments made to Italian post-employment benefit regulations by Law no. 206 of 27 December 2006 (the 2006 National Budget Law) and by subsequent implementation Decrees and Regulations ( Pension Reform ) enacted during 2007, the Group adopted the following accounting treatment: Post-employment benefit accrued as up to 31 December 2006 is considered to be a defined-benefit plan, as per IAS 19 and consistently with the recognition and classification applied in previous FYs The benefits assured to employees, in the form of severance indemnities ( TFR ) when the employment relationship ceases, are recognised in the period when the right accrued. The related liability is calculated on the basis of actuarial assumptions and of the actual debt accruing and not paid as at the end date of the period in question, applying the criteria envisaged by for defined-benefit plans, based on when the Group retains actuarial and investment risk. The process of discounting to present value based on demographical and financial assumptions is performed professional actuaries, applying the accrued benefit approach by means of the projected unit credit method. This approach leads to valuations of the average present value of postemployment benefit obligations accrued based on the employee s past service up to the time of the valuation, which considers demographical variables such as employee turnover and mortality. Given the innovations introduced by the reform, the component relating to future expected pay increases has been excluded from present-value calculation as from 1 January Actuarial gains and losses are recognised in equity. The Group has adopted the SORIE (Statement of Recognised Income and Expenses) method. This means that actuarial gains and losses are not recognised in the income statement, but recognised in equity as part of retained earnings, as indicated in the Equity section of these notes. For post-employment benefits accruing as from 1 January 2007, reference should be made to the Other Payables heading in the Current Liabilities section. Deferred tax liabilities Deferred tax liabilities are income taxes due in future years relating to taxable temporary differences. Taxable temporary differences are differences between the carrying value of an asset or liability shown in the balance sheet and the value that is recognised for tax purposes. When calculating the taxable income of future years, they will translate into taxable amounts when the carrying amount of the asset or liability is realised or extinguished. Deferred tax liabilities are recognised for all taxable temporary differences except in those cases where the liability derives from: initial recognition of goodwill, or initial recognition of an asset or liability in an operation that is not a business combination and that does not have any effect either on the book result or the tax result at the date of the operation. Deferred tax liabilities are also recognised for the taxable temporary differences deriving from investments in associates, except in the case where the following two conditions exist simultaneously: (a) the parent company is able to control when taxable temporary differences are eliminated, and (b) it is probable that the temporary differences will be eliminated in the foreseeable future. Deferred tax liabilities are valued at the tax rates that are expected to apply during the year when the tax liability will presumably be extinguished, based on the tax rates in force as at balance sheet date. Deferred tax liabilities are not discounted to present value. The tax charge relating to deferred tax liabilities is recognised in the income statement, unless the tax derived from a transaction or event that was recognised directly in equity or came from a business combination. The tax effects of deferred tax liabilities relating to items debited or credited directly to equity are also debited or credited directly to equity. 48

50 The provision for deferred tax liabilities is only offset against the receivable for deferred tax assets if the two items refer to the same tax and to the same period. Provisions for risks and charges This item includes the various provisions made for risks and charges. These provisions are set up to cover liabilities whose amount or timing is uncertain, which arise from legal or constructive obligations, and which exist at balance sheet date as the result of a past event. These obligations, which derive from contractual provisions, legal regulations, long-standing models of corporate practice or public assumptions of responsibility, mean that the company has no real alternative than to comply. Obligations are recognised in accounts when they effectively exist, based on a past event, and when compliance will probably mean using economic or financial resources for an amount that can be reliably estimated. Provisions are measured at the value that represents the best estimate of the amount required to extinguish the obligation or to transfer it to third parties at the balance sheet date. If discounting for the cost of money has a significant effect because of the expected timing of the obligation, the amount of the provision is equal to the present value of the outflow expected to be needed to extinguish the liability. The financial component of discounted provisions is recognised in the income statement under financial expense. The current portions of provisions for risks and charges are reclassified to Current portions of provisions for risks and charges in the section comprising current liabilities. Contingent liabilities Contingent liabilities are obligations deriving from past events: whose existence will be confirmed by future events, or the extinction of which is unlikely to involve an outlay of economic or financial resources, or the amount of which cannot be estimated with sufficient accuracy. Contingent liabilities are not recognised in accounts but, if they exist, they have to be disclosed in the notes, giving an idea of their nature and, if possible, an estimate of their financial effects, as well as an indication of the uncertainty regarding their quantification and probable timing of their materialisation. Finance lease payables due after one year This category includes the amounts due for items of property, plant and equipment and intangible assets acquired under finance leases. Initial recognition of these payables, as well as their subsequent measurement after initial recognition, applies the same accounting treatment as explained in the note on leased property, plant and equipment assets in the section on non-current assets. The current portions of finance lease obligations are reclassified to Finance leases due within one year in the current liabilities section. Other non-current liabilities This category includes guarantee deposits received that will have to be reimbursed. Guarantee deposits are initially recognised at their fair value on the transaction date, net of any directly attributable transaction costs. 49

51 5.5 Current liabilities Bank overdrafts and loans This item includes the current portions of amounts due to banks for medium-/long-tern loans, classified in non-current financial liabilities in the section comprising non-current liabilities, payment of which is expected to take place within 12 months of balance sheet date, in accordance with IAS 1. Other current financial liabilities This category includes: short-term financial payables; accrued liabilities for financial expenses. Short-term financial payables are initially recognised at their fair value on the transaction date, i.e. for the amount expected to be paid less any directly attributable transaction costs. After initial recognition, these financial payables are measured at their original value as there is no set discount rate. Accrued liabilities for financial expenses are recognised in the same way as the other accruals in Other current liabilities in the current liabilities section. Current tax liabilities This category includes the current direct taxes for the period and for previous years, to the extent that they have not already been paid. The amount in the balance sheet is shown net of advance payments of tax, withholding taxes and tax credits, unless a rebate has been claimed. Current income taxes are measured for the amount expected to be paid to the tax authorities, applying current tax rates and tax regulations in force or substantially enacted as at the balance sheet date. Current taxes are recognised as a charge in the income statement, except for the taxes that derive from transactions or events recognised directly in equity, in which case the taxes are also recognised in equity. Trade payables Trade payables include the amounts due to suppliers, the liabilities to be paid for goods and services received and invoiced, the advances received from customers for goods or services still to be provided, and deferred income relating to products sold on a subscription basis. The amounts due to suppliers and the advances from customers are recognised at fair value at the transaction date, i.e. at the amount formally agreed with the counterparty, net of any trade discounts and adjusted for returns or other billing adjustments. The deferred income relating to products sold on a subscription basis are recognised in the same way as explained for deferred income in Other current liabilities in the current liabilities section. When the payment of trade payables is deferred and the transaction effectively constitutes a form of financing, after initial recognition, they are measured at amortised cost using a notional interest rate. Current portions of provisions for risks and charges This item includes the current portions of Provisions for risks and charges in the section comprising noncurrent liabilities, payment of which is expected to take place within 12 months of the balance sheet date, in Other current liabilities Other current liabilities include accrued liabilities and deferred income other than that relating to revenue for products sold on a subscription basis, which are classified under Trade payables in the current liabilities section. 50

52 As already explained for accrued income and prepaid expenses, accrued liabilities and deferred income once again represent portions of costs or revenue that relate to two or more periods. More specifically, accrued liabilities measure the portions of costs due to be paid in full in a future period, but partially applicable to the period to which the financial statements refer. Deferred income reflects portions of revenue recognised entirely during the period in question, or in previous periods, and represents the part that is being deferred to one or more future periods. Deferred income includes the deferral of asset-related grants obtained for investments in property, plant and equipment and intangible assets, treated in the way explained in the paragraph concerning grants related to assets under Property, plant and equipment in the section Non-current assets. Other payables Other payables include: The amounts due to social security institutions for social security charges and pension contributions; Tax liabilities other than for direct taxes classified under current tax liabilities in the current liabilities section, such as the taxes payable on the basis of tax returns, for tax assessments or disputes that have been settled, for tax withheld as a withholding agent and for tax claims of any kind in the hands of collection agencies. The amount in the balance sheet is shown net of advance payments of tax, withholding taxes and tax credits, unless a rebate has been requested for them; Amounts due to employees for wages and salaries, expense reports to be reimbursed, accrued vacation and additional months' pay; Dividends payable to shareholders; Other payables that cannot be classified under any other current liability caption. Other payables are initially recognised at their fair value on the transaction date, i.e. at the amount agreed with the counterparty, less any directly attributable transaction costs. Because of their nature and duration, other payables do not have a set discount rate. As established by IAS 39, after initial recognition these payables are shown at their original value, as discounting would have an insignificant effect. Finance lease payables due within one year This item includes the current portions of Finance lease payables, shown in the section comprising noncurrent liabilities, payment of which is expected to take place within 12 months of the balance sheet date, in compliance with IAS Effects of fluctuations in foreign exchange rates At each balance sheet date, all monetary elements in foreign currency, i.e. all assets and liabilities that will be collected or paid in a fixed or determinable quantity of foreign currency, are translated at the end-ofperiod spot exchange rate. Exchange differences deriving from the translation of monetary elements at a different rate from the one used at the time of initial recognition during the period or in previous financial statements are taken to profit or loss in the year when they arise, except for exchange differences deriving from a monetary element that forms part of an investment in a foreign associate. Exchange differences deriving from a monetary element that forms part of an investment in a foreign associate are in fact recognised in an equity reserve and held there until the investment is sold. The total amount of the exchange differences recognised in a special equity reserve is taken to profit or loss at the time that the gain or loss on sale of the investment is recognised. At each balance sheet date, all non-monetary elements measured at historical cost in a foreign currency are translated at the exchange rate in force on transaction date. All non-monetary elements measured at fair value in a foreign currency are translated at the exchange rate in force on the date when fair value was determined. 51

53 When the carrying value of a non-monetary element expressed in foreign currency is determined in accordance with applicable accounting standards - by comparing two or more amounts, the exchange rate applied to the amounts used for comparison with the original carrying value is the rate prevailing at the time the comparison is made. This means that if, in application of relevant accounting standards, the carrying value to be recognised is one of the amounts being used in the comparison, any exchange differences that arise go through profit or loss, in the same way as for monetary elements. If a designated fair value hedging relationship has been designated between a hedging instrument and an element being hedged in foreign currency, the accounting treatment applied is the same as for hedges, as explained under other current assets in the current assets section. 5.7 Revenue Revenue from the sale of goods is recognised in the income statement when: A significant portion of the risks and benefits of ownership of the goods have been transferred to the buyer; The revenue amount can be measured reliably; There is no longer any effective control over the goods sold; It is probable that there will be economic benefits from the transaction; Related transaction costs can be reliably determined. Revenue from the provision of services is recognised in the income statement with reference to the stage of completion of the transaction at the balance sheet date when: The revenue amount can be reliably measured; It is probable that there will be economic benefits from the transaction; The stage of completion of the transaction can be reliably measured; The costs incurred and to be incurred can be reliably calculated. More specifically: Revenue from the sale of goods is considered earned when ownership is transferred, which is generally considered as coinciding with shipment, both for daily newspapers and magazines sold individually, and for book publications that are sold on a firm-sale basis (i.e. no returns). Revenue is recognised net of a reasonable estimate of returns; Revenue from the sale of newspapers and magazines on a subscription basis is recognised over the period of the subscription; Revenue from the sale of advertising space is recognised on the basis of the date of publication of the publicity insert or advertisement; Revenue from the sale of services with a contractual duration, such as online, master-course, and database subscription services, is recognised over the period of the contract. Revenue and costs relating to the same transaction or to another event are recognised simultaneously, applying the matching principle. When revenue components are significant, their nature and amount are shown separately. The notes to the condensed half-yearly consolidated financial statements includes comments concerning operations that are subject to cyclicality or seasonality 5.8 Costs Costs are recognised in the income statement when a decrease in future economic benefits has taken place involving a decrease in assets or an increase in liabilities that can be reliably measured. In particular, a cost is recognised immediately when and to the extent that: An expense does not result in any future economic benefit; 52

54 Future economic benefits do not qualify, or cease to qualify, for recognition as assets in the balance sheet; A liability is incurred without an asset being recognised. When cost components are significant, their nature and amount are shown separately. 5.9 Earnings per share Basic earnings per share (EPS), shown at the foot of the income statement, is calculated by dividing the profit or loss attributable to the ordinary and special equity holders of the parent company by the weighted average number of shares outstanding during the period. Diluted EPS is calculated by adjusting in order to take into account all dilutive potential shares both (a) the earnings attributable to ordinary and special equity holders of the parent company and (b) the weighted average number of shares outstanding during the financial year. The dilutive effects of potential ordinary and special shares are those that reduce EPS as a consequence of: conversion of convertible instruments into ordinary and special shares; exercise or options or warrants on ordinary shares; issuance of new ordinary shares upon materialisation of certain conditions Guarantees The carrying value of financial assets given as guarantee for liabilities or for contingent liabilities and clauses and conditions relating to such assets use are indicated separately in the notes to financial statements Hedging transactions For each type of hedge, the notes to financial statements separately describe: the transaction; the financial instruments designated as hedging instruments, also indicating their fair value as at balance sheet date; the nature of the risks hedged. The notes also provide detailed information on cash-flow and fair-value hedges Fair value of financial instruments In the notes to financial statements the fair value is separately indicated for each class of financial assets and liabilities, so as to permit comparison with carrying value, except in the following cases: when carrying value is a reasonable approximation of fair value; for investments in equity instruments that do not have a listed market price in an active market; for contracts containing a discretionary participation feature (DPF), if the fair value of the DPF cannot be reliably calculated. Financial asset and liability classes have been grouped in a manner pertinent to the nature of supplementary information disclosed. Sufficient information has been provided to permit reconciliation with items as classified in the balance sheet. 6. Changes in accounting policies, errors, and changes in estimates The accounting policies adopted in these condensed half-yearly consolidated financial statements have been changed with respect to those used in the previous consolidated annual financial statements only if this will be reflected in the next set of consolidated annual financial statements, is required by an official accounting standard, or helps to provide more pertinent and reliable information on the effects of transactions on the entity s assets and liabilities, business results, and cash flows. 53

55 Changes in accounting policy are accounted for retrospectively, recording the effect in opening equity of the earliest period being presented. Other comparative figures for each prior year are also adjusted as if the new policy had been applied right from the start. The prospective approach is used only when it is impracticable to reconstruct comparative information. The application of a new accounting standard or one that has been modified is accounted for as required by the standard concerned. If the standard does not regulate transition, the change is accounted for according to the retrospective method, or, if the latter is impracticable, according to the prospective method. In the case of material errors, the same treatment is applied as for changes in accounting standards, as explained above. In the case of non-material errors, these are recognised in the income statement in the period when the error is detected. Changes in accounting estimates made in previous interim periods or financial years are recognised prospectively in the income statement in the interim period when the change occurs if it affects only that period, or at year-end and in future FYs if the change also affects the latter. 7. Risk management In order to provide disclosures that improve the reader's understanding of the impact of financial instruments on the Group's financial position, economic results of operations and cash flows, supplementary information is provided to facilitate evaluation of the size of the related risks, in the section dedicated to supplementary information. The risks related to the financial instruments used by the Group are: Market risk, i.e. the risk of a financial instrument s fair value or cash flows fluctuating following changes in market prices. This risk can be further broken down into: foreign exchange risk, i.e. the risk that the value of a financial instrument might fluctuate as a result of changes in exchange rates; interest rate risk on fair value, i.e. the risk that the value or future cash flow of a financial instrument might fluctuate as a result of changes in market interest rates; price risk, i.e. the risk that the value of a financial instrument or its future cash flows might fluctuate as a result of changes in market prices; Credit risk, i.e. the risk that one of the parties to a financial instrument does not fulfil an obligation and causes a financial loss to the other; Liquidity risk, i.e. the risk of having problems in accessing funds to meet the commitments deriving from financial instruments. Financial risk Financial risk management is performed following a principle of prudence and of minimisation of the risks connected with financial assets and liabilities. The investment of surplus cash or the raising of necessary financial resources is carried out with the priority objective of neutralising the risk of (a) loss of capital, avoiding speculation, and (b) interest rate fluctuations, avoiding exposure of the period s operating result to any unexpected increases in financial expenses. The Group constantly monitors the financial risks to which it is exposed, in order to assess any negative impact and initiate appropriate mitigation action. The Board of Directors has the overall responsibility for creating and supervising the Group s risk management system, as well as for the development and control of risk management policies. The Group s risk management policies are intended to identify and analyse the risks to which the Group is exposed, defining appropriate limits and the monitoring systems for such risks. Policies and related systems are periodically reviewed in consideration of changes in market conditions and in Group activities. Financial management of subsidiaries takes place through specific intercompany current accounts on which any cash surpluses are deposited or on which the parent company provides the financial resources needed for the subsidiaries to conduct their business operations. The aim is also to optimise the income-statement impact of the financial income and expenses accruing on these current accounts. 54

56 Centralised management of the Group's finances also makes it possible to control and co-ordinate the operations of each subsidiary efficiently, also via more effective financial planning and control. This also provides useful input to ensure the best possible handling of the Group's relationships with its main banks and credit institutions and to help monitor the Group's financial risk and treasury movements systematically. Market risk Market risk is the risk of fluctuations of a financial instrument s fair market value or future cash flows following changes in market prices, due in turn to changes in interest rates, exchange rates, or in the market prices of equities. The objective of market-risk management is to manage the Group s exposure to this risk and keep it within appropriate limits, whilst also optimising the return of the investments to which such risk relates. The Group uses derivative instruments during the normal course of its financial activity and also takes on financial liabilities to manage market risk. It performs these activities in accordance with the guidelines established by the Board of Directors. The Group performs hedging transactions to manage the volatility of results relating to financial instruments. Foreign exchange risk The Group is marginally exposed to foreign exchange risk on purchases denominated in currencies other than the functional currency of the various Group entities. These transactions mainly refer to the following exchange rates: EUR/USD, EUR/GBP, and EUR/CHF. The Group in any case has the policy of hedging foreign exchange risk for specific purchases of investment assets denominated in currencies other than the functional currency in order to preserve the margin of return projected for such investments. It is the Group s policy to undertake full hedging, where possible, of significant exposures arising from receivables and payables denominated in currencies other than the euro. Interest risk The Group s operating result is exposed to fluctuations in market interest rates, with special reference to net financial expense relating to special facilitated medium-/long-term loans of the variable-rate type. The return on financial investments, consisting of short-term cash investments with a maturity of not more than three months, is not affected by changes in interest rates. To address the interest risk, the Group uses interest-rate derivatives mainly interest rate swaps (IRSs) to eliminate or mitigate, at acceptable economic conditions, the impact of interest rate fluctuations on profit performance. As at 30 June 2008, 100% of exposure calculated for this risk in connection with medium-/long-term liabilities was hedged. The main way of raising financial resources from third parties used by the Group is medium-/long-term facilitated loans, also because of the interest subsidies they envisage, which substantially reduce the cost of financial resources. In 2005, the parent company stipulated three facilitated loans under Italian Law 62/2001 (Contributions to the Publishing Industry), which mature on 30 June 2015, i.e. a loan of 6,976 thousand from Credito Emiliano (100% used); two loans from Intesa Sanpaolo, respectively of 3,595 thousand (100% used) and of 8,199 thousand (a loan issued according to project completion status and partly used vs. a total authorised amount of 10,530 thousand). These loans are to be repaid in fixed amounts of principal every six months and were stipulated at a floating rate of interest linked to 6-month Euribor. As part of the Group's risk management policy, appropriate financial hedges were set up to mitigate the risk of fluctuations in the interest rates on these loans. On 17 January 2006, the company signed three Payer Interest Rate Swaps - Forward Start (i.e. the hedge takes effect after the date that the IRS contract is stipulated) for which it pays a fixed rate that transforms the interest rate on the underlying loan from floating to fixed, with an exchange of interest flows as from 31 December 2007 to 30 June 2015 (the maturity date). 55

57 Each IRS follows the trend of the repayment plan and of the interest settlement dates for the loan to which it refers. A delayed start to the IRSs was decided so as to benefit, during the first 18 months of the loans, from the expected positive differential between the expected trend of the 6-month Euribor and the fixed rate quoted in the IRSs. The IRSs made it possible to convert the floating rate of the loans into a fixed rate of approximately 3.20%. The Group has evaluated the effectiveness of the hedges, using the hedge accounting methodology based on the cash flow hedge model. This refers to hedging of exposure to the variability of cash flows, attributable to the particular risk associated with the underlying liability. Based on this methodology, after determining the fair value of the derivative, the value of the effective part of the hedge is recognised in a special equity reserve, whereas the value of the ineffective part of the hedge is recognised in the income statement. The effectiveness of the hedging relationship is measured by comparing the change in the clean fair value of the derivative with that of a hypothetical swap representing a synthetic fixed-rate bond at the market conditions existing when the hedge was stipulated. The ex-ante effectiveness of the hedge of the instrument has been evaluated by analysing critical items and by measuring the fair value of the hedging derivative and of the hypothetical derivative. The retrospective effectiveness of the hedge (ex-post effectiveness test) is evaluated regularly by calculating the change in the fair value of the hedging derivative compared with that of the hypothetical derivative, caused by the fluctuation that has occurred between the current interest rate curve compared with the rate curve at the date when the swap was stipulated (cumulative based test). The hedge is considered retrospectively effective if the ratio between the two variances, in absolute terms, lies within a range of %. This test is performed on a cumulative basis, performing calculations as at the date of the test and as at the start date. Price risk The main raw material used by the Group that could be exposed to significant price risk is paper. Paper is handled centrally for all of the Group's business units by means of careful procurement planning and inventory management. In line with best market practice, supply contracts are stipulated with leading Italian and foreign counterparties for fixed quantities at fixed prices for the maximum period that the market currently permits, i.e. about one year. The Group does not use hedges such as paper swaps, as they offer limited liquidity in terms both of counterparties and of maturities. Credit risk Credit risk is the risk of a customer or of one of the counterparties of a financial instrument causing a financial loss by not honouring an obligation. In the case of the Group, credit risk relates to trade receivables from sales of products and services by the various business units, as well as to financial receivables in connection with the investment of surplus cash. Considering the type of customers that the Group has for its products and services, management does not believe there is a high level of trade credit risk. As there is no high concentration of this risk, the policy is to limit sales to any customers that are considered insolvent or are unable to provide adequate guarantees. Customer credit risk is controlled by grouping customers by type and business area, considering whether customers are advertising agencies, financial companies and institutions, public entities, professionals and natural persons, distributors and bookstores, or other customers. Other factors examined are geographical location, business sector, credit age, the due dates of invoices issued, and previous payment behaviour. In the face of this risk, specific provision for bad and doubtful debts is made to cover any losses caused by non-collectability. As regards financial receivables, it is believed that the Group is not exposed to significant risk as it invests surplus cash only with banks of premier standing, mainly using short-term investment instruments with maturities of not more than 3 months (on-demand or term deposits). 56

58 Liquidity risk Liquidity risk is the risk of the Group having difficulty in meeting obligations associated with financial liabilities and therefore of having difficulty in accessing, at economical conditions, the financial resources necessary for its operations. In managing the liquidity risk, the Group s approach is to ensure, as far as possible, that there are always sufficient financial reserves to meet its obligations at maturity, both in normal conditions and in conditions of any financial stress. Besides the trend in market interest rates, the main factors determining Group liquidity are (a) the cash flows generated or absorbed by operating and investing activity and (b) the flows relating to repayment of financial liabilities and cash-in of income relating to financial investments, plus trends in market interest rates. The Group has taken a series of actions designed to optimise management of financial resources and mitigate the liquidity risk. More specifically: centralised management of Group liquidity via constant withdrawal of cash surpluses from subsidiaries and via coverage of the latter s requirements with resources provided by the parent company; maintenance of an adequate reserve of available liquidity; availability of adequate short-term lines of credit; planning of the future financial situation, also as regards the incidence of medium-/long-term debt on the overall net financial position; utilisation of an appropriate internal control system to assess available liquidity in relation to operational planning. For coverage of any short-term financial requirements, as at 30 June 2008 the Group had the following credit facilities: 19.8 mn relating to current-account overdrafts, subject to collection and with value-date penalties for late collection, unsecured, paid at an average interest rate of 5.34%; 82.9 mn relating to revocable lines of credit that can be used for short-term temporary financial requirements, at an average cost equal to Euribor +0.12%. Management believes that the present financial resources and the credit lines available as mentioned above together with cash flow generated by operating activity are sufficient to cover requirements relating to investing activity, management of working capital, and to ongoing repayment of medium-/long-term loans. 8. Principal reasons for uncertainties in estimates Estimates are used mainly to recognise impairment losses on assets, to calculate probable future returns of publications that have been distributed, to determine the extent to which receivables and inventories should be written down, and to quantify the amounts to be provisioned for probable risks. Estimates are also used in the actuarial calculation of employee benefit obligations and to quantify income taxes. These estimates and assumptions are reviewed at least once a year and the effects of each change are immediately reflected in the income statement. In particular, publication returns are estimated using statistical techniques and updated monthly on the basis of actual figures. The estimate of legal risks also takes the nature of the litigation into account. 57

59 9. Scope of consolidation Company name Business Registered location Currency Share capital fully paid in % Stake Owned by Fully consolidated subsidiaries Nuova Radio SpA Radio Milan EUR 16,120, % Il Sole 24 ORE SpA broadcasting Il Sole 24 ORE Business Sector-specific Milan EUR 10,000, % Il Sole 24 ORE SpA Media Srl publishing 24 ORE Television SpA Dormant Milan EUR 1,134, % Il Sole 24 ORE SpA 24 ORE Motta Cultura Art-related Milan EUR 1,049, % Il Sole 24 ORE SpA Srl products Il Sole 24 ORE UK Ltd. Advertising sales London EUR 50, % Il Sole 24 ORE SpA Data Ufficio SpA Software solutions Rome EUR 1,550, % Il Sole 24 ORE SpA STR SpA Software solutions Pegognaga EUR 520, % Il Sole 24 ORE SpA Alinari 24 ORE SpA Photographs & Florence EUR 3,000, % Il Sole 24 ORE SpA exhibitions Faenza Editrice Iberica SL Ceramic-sector publishing Spain EUR 3, % Il Sole 24 ORE Business Media Srl Associates HS 24 Srl in liquidazione (being wound up) Milan EUR ,00% Il Sole 24 ORE SpA Diamante SpA Software solutions Verona EUR 680, % Il Sole 24 ORE SpA Blogosfere Srl Internet Milan EUR 21, % Il Sole 24 ORE SpA ItaliaNews Srl E-publishing Bologna EUR 100, % Il Sole 24 ORE SpA Other minority shareholdings Editorial Ecoprensa SA Madrid EUR 297, % Il Sole 24 ORE SpA Ansa Soc. Coop a.r.l. Press agency Rome EUR 12,307, % Il Sole 24 ORE SpA Actinvest Group Ltd. Financial analysis London GBP 33, % Il Sole 24 ORE SpA Immobiliare Editoriale Giornali Srl Rome EUR 830, % Il Sole 24 ORE SpA S.F.C. Soc. Consortile p.a. Rome EUR 236., % Il Sole 24 ORE SpA Consuledit Soc. Market research Milan EUR 20, % Il Sole 24 ORE SpA Consortile a.r.l. Audiradio Srl Radio listenership surveys Milan EUR 234, % Nuova Radio SpA Equity interests in trade consortia: - Consorzio Mercury in liquidazione, C.s.i.e.d (Investor = Il Sole 24 ORE SpA) - Consorzio Polo Ceramico (Investor = Il Sole 24 ORE Business Media Srl) - Capitolato Italiano Iai (Investor = STR SpA) - Promingros (Investor = Data Ufficio SpA) 58

60 10. Notes to financial statements Non-current assets (1) Property, plant, and equipment As at 30 June 2008 the carrying value of property, plant, and equipment was 92,701 thousand. Changes were as follows: Amounts in '000 Opening balance Purchase s Disposals Depreciation & amortisation Reclassificati ons and other changes Closing balance Historical cost: Land 2, ,870 Buildings 30, ,845 Plant and equipment 129,579 1,358 (488) - (93) 130,356 Other tangible assets 52,537 1,489 (10,076) ,106 Assets under 253 1, (49) 2,197 construction & down payments Total historical cost 215,976 4,855 (10,564) ,374 Cumulative amortisation: Land and buildings (12,131) - - (547) (42) (12,720) Plant and equipment (65,893) (4,333) (16) (69,821) Other tangible assets (43,287) - 10,055 (1,810) (90) (35,132) Assets under (37) (1) construction & down payments Total cumulative (121,348) - 10,477 (6,690) (112) (117,673) depreciation Property, plant and equipment: Land and buildings 21, (547) 52 20,995 Plant and equipment 63,686 1,358 (67) (4,333) (109) 60,535 Other tangible assets 9,250 1,489 (21) (1,810) 66 8,974 Assets under 216 1, (13) 2,197 construction & down payments Total 94,628 4,855 (88) (6,690) (4) 92,701 During 1H08 investments totalling 4,855 thousand were made in: Buildings = 15 thousand for the buildings at Via Busto Arsizio 36 in Milan ( 9 thousand), in Via Tiburtina Valeria in Carsoli ( 5 thousand), and for the building in Rome Plant & machinery = 1,358 thousand, for sorting equipment for the Milan and Carsoli production sites ( 405 thousand), rotary presses ( 142 thousand), subscriber wrapper printers ( 133 thousand), radio broadcasting plant ( 125 thousand), and bundling equipment ( 90 thousand) 59

61 Other assets = 1,489 thousand, primarily for hardware purchases ( 1,220 thousand) Assets under construction = 1,993 thousand. This referred to production plant in the process of being installed. Depreciation on property, plant and equipment, based on their estimated useful life which did not change vs. 31 December totalled 6,690 thousand. Assets purchased during 1H08 are depreciated as from their start of operations. The following table presents the useful life of the assets included in the various categories shown in the balance sheet: Asset category Useful life Rate Land Indefinite - Buildings Industrial buildings years 3% % Temporary buildings years 8.33% - 10% Plant and equipment Generic plant years 5% - 10% Plant (leasehold improvements) 3-15 years 6.66% % Rotary printing presses 5-10 years 10% - 20% Finishing machinery 5-10 years 10% - 20% Electronic photocomposition and photoreproduction 3-5 years 20% % systems Radio broadcasting plant 3-8 years 12% - 33% Other tangible assets Hardware 4-5 years 20%-25% Furniture and fittings 5-8 years 12% - 20% Electronic office machinery 5 years 20% Air-conditioning systems 5-20 years 5% -20% Internal means of transport 5-10 years 10-20% Sundry tools & minor equipment items 4 years 25% The parent company s balance sheet comprises buildings revalued pursuant to Italian Law 413/1991 amounting to 1,105 thousand. There are no discretionary or voluntary revaluations. (2) Goodwill Goodwill carried in the balance sheet amounted to 39,377 thousand. It did not change during 1H08 and its breakdown is as shown below: (Amounts in 000) Magazine ORE Motta Cultura goodwill 2,330 Motta Architettura 201 Il Sole 24 ORE Business 25,440 Media goodwill Data Ufficio 2,446 STR 8,447 Total 39,377 60

62 (3) Intangible assets Intangible assets amounted to 78,004 thousand. In 1H08 the following changes took place: Amounts in '000 Opening balance Purchas es Disposals Depreciation & amortisation Reclassificat ions and other changes Closing balance Historical cost: Publications 43, ,856 Trademark Radio broadcasting frequencies 99,039 1, ,650 Other intangible fixed assets 96,468 1,719 (1,117) - 1,390 98,460 Assets under construction & down 5, (1,389) 4,377 payments Total historical cost 245,752 3,484 (1,117) ,127 Cumulative amortisation: Publications (17,207) - - (1,406) 57 (18,556) Trademark (722) - - (1) (3) (727) Radio broadcasting frequencies (67,986) - - (5,341) (1) (73,328) Other intangible fixed assets (74,569) - 1,117 (4,000) (61) (77,513) Total cumulative amortisation (160,484) - 1,117 (10,748) (8) (170,123) Intangible assets Publications 26, (1,406) 57 25,300 Trademarks (1) 3 58 Radio broadcasting frequencies 31,053 1,610 - (5,341) - 27,322 Other intangible fixed assets 21,899 1,719 - (4,000) 1,329 20,948 Assets under construction & down 5, (1,389) 4,377 payments Total 85,268 3,484 - (10,748) - 78,004 During 1H08 investments totalling 3,484 thousand were made relating to: Radio frequencies = 1,610 thousand, to provide and extend radio signal coverage of stretches of road Other intangible assets, which mainly consist of software and related assets. 1H08 investments of 1,719 thousand referred to systems, licenses and management software projects, of which the main ones were 810 thousand for licenses and software development for the CRM (Customer Relationship Management) and SOA (Service-Oriented Architecture) platforms, 409 thousand for business divisions management and production systems, and 127 thousand for central management systems Assets under formation = 155 thousand. 61

63 The following table shows the useful life of the assets included in the various categories shown in the balance sheet, which did not change compared with 31 December 2007: Asset category Useful life Rate Publications Agrigiornale del Commercio 10 years 10% Colture Protette 10 years 10% Contoterzista 10 years 10% Frutticoltura 10 years 10% Informatore Zootecnico 10 years 10% Macchine & Motori 10 years 10% Obiettivi Veterinari 10 years 10% Suinicoltura 10 years 10% Terra e Vita 10 years 10% Vignevini 10 years 10% Ambiente e sviluppo 5 years 20% Area 20 years 5% D'A 3 years 33.33% Materia 5 years 20% Occhio Clinico 5 years 20% Bargiornale 20 years 5% GDO Wek 20 years 5% Other publications in food range 20 years 5% 01 Net.it (internet publication) 20 years 5% Top Trade 20 years 5% Applicando 20 years 5% Eurosat 3 years 33.33% Millecanali 3 years 33.33% Other publications in ICT range 20 years 5% Mark up 20 years 5% Ambiente Cucina 20 years 5% Ceramica 20 years 5% Other publications in Building range 20 years 5% Medicina 3 years 33.33% Motta Architettura trademark Indefinite - Editoria Specializzata trademarks 10 years 10% Radio broadcasting frequencies 6 years 16.67% Other intangible assets 3-5 years 20% - 33% Intangible assets with an indefinite useful life An intangible asset is considered as having an indefinite useful life when, based on an analysis of its key factors, there is no foreseeable limit on the period during which the asset should be able to generate cash inflows for the Group. 62

64 The intangible assets identified as having an indefinite useful life and goodwill subjected to impairment testing are as follows: Trademark Motta Architettura Goodwill Magazine 24 Goodwill Motta Architettura Goodwill Il Sole 24 ORE Business Media Goodwill 24 ORE Motta Cultura Goodwill Data Ufficio Goodwill STR In the last annual report approved, the publication Area was shown among the assets with an indefinite useful life. As of 2008 the publication has been attributed with a finite useful life (20 years), consistently with similar Group publications. Intangible assets with an indefinite useful life are not amortised, but are tested for recoverability of carrying value, i.e. impairment testing. This test is carried out on the value of the individual asset or of the cashgenerating unit (CGU) to which it belongs. An impairment test is performed whenever it is felt that there may have been a loss in value, and in any case at least once a year. The following table provides a list of the intangible assets with an indefinite useful life, together with their respective carrying value as at 30 June 2008, compared with figures shown in the last annual report approved.. Assets Motta Architettura trademark ,050 Goodwill: Magazine Motta Architettura Il Sole 24 ORE Business Media 25,440 25,440 - goodwill 24 ORE Motta Cultura goodwill 2,330 2,330 2,297 Data Ufficio 2,446 2,446 - STR 8,447 8,447 - (4) Investments in associates Amounts in '000 Initial Balances Purchase Final balances HS 24 srl Diamante S.p.A. 1,291-1,291 Blogosfere S.r.l Italia News S.r. l Total 1, ,970 The changes refer to subscription of a 20% equity interest in Italia News Srl, executed via a capital increase. 63

65 (5) Financial assets available for sale This item relates to minority investments and amounted to 5,583 thousand, with the following breakdown: Amounts in '000 Initial balances Purchase Disposals Other changes Final balances Minority investments Editorial Ecoprensa S.A. 4,966 4,966 Ansa Soc. Coop a r.l Actinvest Group S.r.l Consorzio Mercury in liquidation - 2 (2) - C.S.I.E.D Immobiliare Editoriale Giornali S.r.l Consorzio di Faenza Iberica S.F.C. Soc. Consortile per azioni Audiradio S.r.l Promingros Capitolato italiano I.A.I Total 5, ,583 (6) Other non-current financial assets Non-current financial assets are shown in the balance sheet at an amount of 17,586 thousand, with an increase of 249 thousand vs. FY2007. This item relates to a with-profits endowment policy with a guaranteed minimum yield of 3% stipulated with Monte Paschi Vita and with maturity on 1 April The 2008 increase over 2007 relates to consolidation of the relevant reversionary bonuses. (7) Other non-current assets These assets amounted to 760 thousand (vs. 880 thousand as at 31 December 2007) and consist of guarantee deposits. 64

66 (8) Deferred tax assets and liabilities These items show the impact of deferred tax assets and liabilities. These are respectively calculated on the deductible and taxable differences that temporarily emerge between financially reported amounts and their tax value. The detail of these items is as follows: Amounts in '000 Balance at Balance at Change Deferred tax assets 16,784 16, Deferred tax liabilities 20,014 32,198 (12,184) Deferred tax assets and liabilities refer to the following items: Amounts in '000 Opening balance 2008 Changes recognised in income statement 2008 Changes recognised in equity Attribution of change in tax rate and reallocations Closing balance Property, plant and equipment 1, (184) 1,720 Intangible assets 1, (1) 1,225 Receivables and provisions 7, (326) 7,530 Other 7,037 (70) 157 (815) 6,309 Change in statutory tax rate (1,326) - - 1,326 - Total assets 16,697 (70) ,784 Property, plant and equipment 11,028 (10,188) - (1,173) (333) Intangible assets 19,805 (2,083) - (1,282) 16,440 Receivables and provisions (60) 557 Other 3,377 (64) ,350 Change in statutory tax rate (2,477) - - 2,477 - Total liabilities 32,198 (12,335) 152 (1) 20,014 We point out the following changes: 65

67 a decrease in deferred tax liabilities of 10,188 thousand by virtue of Article 1, paragraph 48 of Italian Law no. 244 of 24 December 2007 (2008 National Budget Law) which gave the possibility of aligning tax-reporting amounts with financially reported amounts by applying a substitute tax on accelerated depreciation, outside accounts, deducted in the EC section of tax returns up to Against this reduction, the Group posted substitute tax of 4,876 thousand, as discussed in Note 41; a further decrease in deferred tax liabilities of 2,083 thousand following amortisation of consolidation differences; an increase in deferred tax liabilities of 152 thousand due to accounting treatment of postemployment benefits. Deferred and prepaid taxes are calculated by converting each company s taxable and deductible differences at the statutory tax rate applicable. For the parent company this rate is 27.5% for corporate income tax (Italian acronym = IRES) and 3.9% for regional business tax (Italian acronym = IRAP). The Group does not dispose of concessional tax rates either in Italy or abroad. Deferred taxes were not recognised on subsidiaries prior losses because they are not expected to be used. No company calculated taxes on reserves taxable if distributed because it is not planned to distribute them. The parent company did not post deferred tax assets of 1,982 thousand on some taxed provisions for slow-moving items. Current assets (9) Inventories Amounts in '000 Balance at Balance at Change Paper 5,208 11,415 (6,207) Ink (7) Photographic material Other materials (8) Raw and secondary materials plus consumables 5,970 12,111 (6,141) Work in progress and semi-finished products (74) Books 7,585 7, Software (3) CDs Other products 3,756 3,815 (59) Provision for obsolete & slow-moving finished (2,652) (2,538) (114) products Finished goods and merchandise 8,769 8, Software purchased for resale 6 8 (2) Third-party books purchased for resale (2) Other merchandise bought in Provision for obsolete & slow-moving merchandise (63) (63) - Finished products and merchandise Total 15,193 21,350 (6,157) Inventories are shown net of the provisions for obsolete and slow-moving goods, which featured the following movements: 66

68 Amounts in '000 Opening balance Provisions Use of provisions Reclassificatio ns and other changes Closing balance Provision for obsolete and slowmoving (2,538) (218) (2,652) finished products Provision for obsolete and slowmoving (63) (63) merchandise Total (2,601) (218) (2,714) (10) Trade receivables Trade receivables stem from the normal course of current business and featured the following breakdown: Amounts in '000 Balance at Balance at Change Trade receivables 267, ,927 49,156 Provision for returns to be received (books, magazines, (33,170) (30,152) (3,018) and newspaper) Provision for bad debts (17,533) (16,531) (1,003) Net trade receivables 216, ,244 45,135 Ordinary advances to suppliers 7,303 7, Agents and agencies 73 1,013 (939) Minor customers, associates, and affiliates (99) Customers of parent companies Total 224, ,559 45,100 Trade receivables amounted to 224,659 thousand with an increase of 45,100 thousand vs. 31 December The increase over the previous FY was due to seasonal factors. The following table shows the breakdown of trade receivables by age: Amounts in 000 Balance at Balance Change Not yet due 162, ,498 21,869 Past due days 27,911 10,638 17,273 Past due days 35,566 37,526 (1,960) Past due days -1 year 25,333 16,076 9,258 Past due by more than 1 year 15,905 13,189 2,717 67

69 Total 267, ,927 49,156 Trade receivables are shown net of the provision of 33,170 thousand for book, newspaper and magazine returns to be received in future periods. Receivables are also shown net of the provisions for bad and doubtful debts of 17,533 thousand. Changes in these provisions were as follows: Amounts in '000 Opening balance Provisions Use of provisions Reclassificatio ns and other changes Closing balance Provision for returns to be (30,152) (30,701) 27,745 (62) (33,170) received (books, magazines, and newspaper) Provision for bad debts (16,531) (2,449) 1,455 (8) (17,533) Total (46,683) (33,150) 29,200 (70) (50,703) (11) Other receivables The item amounted to 10,757 thousand and featured the following breakdown: Amounts in '000 Balance at Balance at Change Current tax assets 1,408 4,538 (3,130) Employee receivables Current tax assets Tax assets 360 2,891 (2,531) Other receivables 7,737 2,577 5,160 Total 10,757 10, Tax receivables amounted to 360 thousand and their breakdown was as detailed below: Amounts in '000 Balance at Balance at Change VAT receivables 222 2,521 (2,299) Tax credits for asset-related grants (230) Advances paid on regional productivity tax - 2 (2) Substitute tax paid as advance personal income tax on revaluation of post

70 employment benefit provision, as per Law 47/2000 Receivables from foreign tax authorities VAT pending rebate Tax advances under Law 140/ / Total 360 2,891 (2,531) Receivables from employees relate to expense allowances and loans to dependent employees. The Other receivables category increased due to amounts receivable from agents for advances on commissions ( 4,754 thousand). The majority of these will be closed at year-end. (12) Other current assets Amounts in '000 Balance at Balance at Change Deferred income 10,770 6,115 4,655 Financial assets held for trading Total 11,606 6,784 4,822 The breakdown of prepaid expenses was as follows: Amounts in '000 Balance at Balance at Change Agents commissions 4,214 2,037 2,177 Administrative services 1,422-1,422 Production costs for serial products 892 1,090 (198) Hardware and software maintenance fees IT services Insurance premiums License fees Employee insurance (122) Rental costs Royalty and copyright costs (216) Information and data expenses Other production services (313) Conference organisation expenses (150) MPS life insurance policy (139) Miscellaneous Total 10,770 6,115 4,655 69

71 The increase in prepaid expenses for agent commissions relates to accrual accounting of software revenue, in turn relating to the different way in which the revenue is recognised (switch from one-shot to subscription sales). As these are now accrued on an annual basis, the related commission expense is treated in the same way. Financial assets held for trading totalled 835 thousand. The item refers to the fair value of the Interest Rate Swap contracts (floating/fixed), taken out at the beginning of 2006 to hedge the risk of fluctuations in interest rates on the three facilitated loans granted under the Law for the Publishing Industry at the end of 2005 (see Note 22). The Interest Rate Swaps, which took effect as from 30 June 2007, have made it possible to convert the floating rate on the three loans into a set fixed rate. (13) Cash and cash equivalents Cash and cash equivalents amounted to 221,698 thousand, decreasing by 21,369 thousand vs. 31 December They consist of cash in hand, valuables and demand or short-term bank deposits that are effectively available and easily realisable. In the cash flow statement, cash and cash equivalents are shown at net of current account overdrafts and of current portions of bank loan repayments. Equity (14) Share capital Share capital, fully subscribed and paid in, amounts to 35,123,787, divided into 133,333,213 shares, of which 90,000,000 ordinary shares (67.50% of share capital) and 43,333,213 special shares (32.50%), of which 6,554,125 treasury shares. At the beginning of FY2008 treasury shares numbered 7,910,029. As part of the IPO process, the company had granted the Global Co-ordinators of the global public offer an option to purchase, at the IPO price (a green-shoe/over-allotment option), a maximum number of 5,263,723 special shares, to be exercised, totally or in part, up to 30 days after the start of trading on the Milan screen-based equity market. The option was exercised at the beginning of January 2008 for 1,355,904 special shares, thus reducing the number of treasury shares to 6,554,125. These movements did not change the entity of share capital value. (15) Equity reserves Equity reserves amounted to 180,316 thousand and underwent no changes vs. 31 December They consist of the share premium reserve of 192,652 thousand, arising from the listing of special shares on the Milan screen-based equity market, net of IPO costs of 12,336 thousand charged to equity. (16) Revaluation reserves Amounts in '000 Balance at Balance at Change 70

72 Revaluation reserve as per Law 342/ ,786 18,786 - Revaluation reserve as per Law 350/2003 1,775 1,775 - Total 20,561 20,561 - (17) Hedging and translation reserves The hedging and translation reserve amounted to 606 thousand. It relates to the fair value of the Interest Rate Swaps, set up to hedge the risk of fluctuations in interest rates on three facilitated loans, net of related deferred tax assets. More specifically, the portion of fair value forming the reserve in question concerns the IRS contracts classified as cash flow hedges, the value of which amounts to 835 thousand (pre-tax), and that are considered effective for the purposes of IAS 39 application. (18) Reserves - Others Amounts in '000 Balance at Balance at Change Negative goodwill reserve 10,358 11,272 (914) Reserve for asset-related grants under 9,374 9,374 - Law 416/1981 Legal reserve 7,025 5,213 1,812 Post-employment benefit reserve (IAS 1,371 1, adjustment) Stock granting reserve 2,762 1, Stock options reserve Other 1, ,215 Total 33,003 29,182 3,821 The Reserves Others item increased from 29,182 thousand to 33,003 thousand due to: a decrease of 914 thousand in the negative goodwill reserve, applying the merger resolution concerning Motta Architettura Srl, Il Sole 24 ORE Editoria Specializzata Srl, and Il Sole 24 ORE Business Media Srl, and to cover the 1,182-thousand loss of Motta Architettura Srl; an increase of 1,812 thousand in the legal reserve following allocation of FY2007 earnings until reaching the limit established by Article 2430 of the Italian Civil Code; an increase of 293 thousand due to accounting treatment of post-employment benefit obligations; an increase of 905 thousand for the fair value of shares distributed to employees to execute the bonus stock granting plan resolved by the Board of Directors of Il Sole 24 Ore SpA on 30 October 2007; an increase of 510 thousand for the fair value of option rights for the purchase of 2,250,000 special-category shares relating to the stock option resolved by the Board of Directors of Il Sole 24 Ore SpA on 30 October 2007; an increase of 1,215 thousand in optional or statutory reserves, following allocation of some subsidiaries FY2007 earnings. 71

73 The reserve for grants related to assets ( 9,374 thousand) was set up in prior years for grants related to assets received by the parent company on the basis of Article 8 of Italian Law 416/81. These are grants that were paid up until 1987 to finance the purchase of property, plant, and equipment assets that have since been fully depreciated. As laid down in this law, the reserve is taxable on distribution. (19) Retained earnings Retained earnings rose from 53,049 thousand to 72,516 thousand, increasing by 19,467 thousand vs. FY2007 due to an increase of: 11,671 thousand = allocation of FY2007 earnings 7,796 thousand = gross cash-in from exercise of the over-allotment option. (20) Profit for the period 1H08 profit amounted to 21,337 thousand. Profit attributable to equity holders of the parent company amounted to 21,590 thousand. The following tables provide reconciliation with the financial statements of the parent company: Reconciliation of separate and consolidated profit for the period Amounts in 000 1H H 2007 Separate profit for the period reported by parent company 26,204 26, Subsidiaries profit/(loss) for the period (291) (1,104) 2. Amortisation of Radio 24 frequencies (3,143) (3,149) 3. Use of deferred tax provision for Radio 24 frequencies 987 1, Amortisation of intangible assets from (811) (406) Business Media S.r.l. 5. Use of deferred tax provision on amortisation of intangible assets from Il Sole 24 OREBusiness Media S.r.l. acquisition 6. Amortisation of intangible assets from (1,153) - Data Ufficio S.p.A. acquisition 7. Use of deferred tax provision on amortisation of intangible assets from Data Ufficio S.p.A. acquisition 8. Amortisation of intangible assets from (1,539) - STR S.p.A. acquisition 9. Use of deferred tax provision on amortisation of intangible assets from STR S.p.A. acquisition 10. Equity-accounted associates: - (85) Il Sole 24 ORE Group s share of profit/(loss) 11. Other changes (17) (3) Consolidated profit reported for the period 21,337 23,310 Reconciliation of parent company and consolidated equity Amounts in Separate profit for the period reported by parent company 384, , Difference in profit for the period (4,867) (9,845) 2. Change in retained earnings (16,552) (6,828) 72

74 3. Change in post-employment benefit reserve (IAS adjustment) Consolidation reserve Change in reserve for fair value of stock granting Share of equity attributable to minority interests 1,365 1,485 Consolidated equity reported 364, ,776 Non-current liabilities (21) Non-current financial liabilities Non-current financial liabilities amounted to 14,836 thousand ( 16,407 thousand in FY2007). They relate to the long-term portion of the facilitated loans received under the Italian Publishing Industry Law, as summarised in the following table: Amounts in '000 Bank Facilitation Amount paid out Interest rate Date of maturity Current portion M/L-term portion Residual value at Unicredit Banca d'impresa S.p.A. Credito Emiliano S.p.A. Intesa Sanpaolo S.p.A. Intesa Sanpaolo S.p.A. Law 416/81 Publishing Industry Law 62/2001 Publishing Industry Law 62/2001 Publishing Industry Law 62/2001 Publishing Industry 7, % 30/06/ ,010 2,930 6,976 6-mo, Euribor % 3,595 6-mo, Euribor % 8,199 6-mo, Euribor % 30/06/ ,406 5,140 30/06/ ,271 2,649 30/06/2015 1,025 6,149 7,174 Total 26,517 3,057 14,836 17,893 For the first, fixed-rate loan, no guarantees have been given nor have covenants been requested. The last three loans taken out at a floating rate (6-month Euribor + spread), the residual value of which is 17,893 thousand in total, of which 3,057 thousand short-term, are hedged against fluctuations in interest rates by means of specific derivatives, as already described in Section 7 - Risk Management. These loans do not envisage collateral but specific covenants, which to date have always been met. The decrease of 1,571 thousand compared with the figure as at 31 December 2007 was due to repayment of six-monthly instalments on the loans and to discharge, on 30 June 2008, of the facilitated loan under Italian Law 416/1981, amounting to 1,270 thousand, set up with Intesa Sanpaolo. 73

75 (22) Employee benefits (personnel provisions) Amounts in '000 Opening balance Provisions Use of provisions Reclassifications and other changes Closing balance Managers 3, (231) 275 3,539 White-collars 23, (766) (1,481) 22,055 Blue-collars 2, (35) (20) 2,801 Journalists 18, (687) ,031 Trainees Correspondents (52) Other employees Total reported in 48,063 1,630 (1,771) (201) 47,723 separate financial statements IAS adjustment (7,505) (342) (7,554) Total 40,558 1,630 (1,478) (543) 40,169 The main assumptions used in estimating the benefits to be awarded on termination of employment are as follows: 1. Demographic assumptions: the SIM and SIF 2002 tables (mortality rates by individual age for Italian males and females based on 2002 census data) were used for mortality rates; the annual probabilities of elimination for reasons other than death have been directly deduced from recent statistics of employee eliminations in the companies being evaluated by means of suitable equalisations; the annual probability of a post-employment benefit advance being requested has been set at 2.44%, based on historical data of the companies being evaluated. 2. Economic and financial assumptions: the discount rate was determined as the average of the Euro swap, bid and ask rates at 31 December 2006; as regards the inflation rate, necessary for revaluation of post-employment provisions made, the rate applied was 2%; the percentage of accrued post-employment benefits requested in advance was set at 66.75% based on historical figures. 74

76 (23) Provisions for risks and charges Amounts in '000 Opening balance Provisions Use of provisions Reclassificatio ns and other changes Closing balance Provision for legal disputes 10, (956) - 10,298 Provision for sundry risks 8, (1,591) - 7,317 Provision for agent indemnities 5, (109) - 5,594 Total 24,781 1,084 (2,656) - 23,209 Provisions for legal disputes ( 10,298 thousand) cover litigation risks known at the date of preparation of this balance sheet. Such risks relate in particular to personnel lawsuits ( 1,791 thousand), lawsuits against the newspaper ( 1,506 thousand) and disputes involving suppliers and contractors ( 2,383 thousand), disputes with social security institutions ( 4,030 thousand), forecast legal expenses ( 373 thousand), and other litigation ( 215 thousand). Provision for sundry risks ( 7,317) is to cover the residual risks relating to the contractual obligations connected with construction of the building in Via Monte Rosa, Milan ( 3,930 thousand) and other risks of a contractual nature ( 3,387 thousand). Agents' severance indemnities are provisions to cover the risks deriving from early termination of the contract and those relating to discontinuation of the agency relationship as per Article 1751 of the Italian Civil Code. (24) Other non-current liabilities These liabilities totalled 2,084 thousand (vs. 2,072 thousand as at 31 December 2007) and mainly consisted of: 648 thousand relating to probable earn-out amounts concerning the subsidiary STR SpA based on the contractual agreements leading to the latter s acquisition 1,281 thousand for the put option accorded to Federico Motta Editore SpA for the 43% stake in 24 ORE Motta Cultura. Current liabilities (25) Bank overdrafts and loans due within 1 year These amounted to 3,555 thousand (vs. 4,494 thousand as at 31 December 2007). They include the current portion of the medium-/long-term loans already described in Note 21, as well as the short-term borrowings of the subsidiaries 24 ORE Motta Cultura Srl, Il Sole 24 ORE Business Media Srl, and Data Ufficio SpA, already described in Note 21. (26) Trade payables Amounts in '000 Balance at Balance at Change 75

77 Suppliers 106, ,284 (12,223) Deferred income 74,291 59,904 14,387 Trade accounts payable to associates Trade accounts payable to minority 91 1,501 (1,410) investee companies Other trade payables 9,109 7,945 1,164 Total 189, ,634 1,988 Deferred income increased by 14,387 thousand vs. the beginning of FY2008 due to the effect of subscription sale of products. This increase stems from the subscription seasonality as subscriptions have an impact in the first part of the year. The breakdown of deferred income was as shown below: Amounts in '000 Balance at Balance at Change Sale of magazines 33,098 27,816 5,282 Il Sole 24 ORE newspaper subscriptions 18,424 17,021 1,403 Online publications by subscription 15,757 10,692 5,065 IT services 5,020 2,725 2,295 Software by subscription 1,993 1, Total 74,291 59,904 14,388 Other trade payables mostly consisted of amounts payable to agents. 76

78 (27) Other current liabilities Amounts in '000 Balance at Balance at Change Deferred income 12,661 4,002 8,659 Accrued liabilities Current tax liabilities 6,910 1,025 5,885 Total 20,423 5,812 14,611 The increase in deferred income was mostly due to the different contractual method, compared with FY2007, used to market management applications, which have switched from one-shot sales to automatically renewable subscriptions. The breakdown of deferred income was as detailed below: Amounts in '000 Balance at Balance at Change Sales of software licences 8, ,479 Conferences 1,803 2,420 (617) Employee payments for private use of company cars Annual portion of asset-related grants Interest on m/l loans Rental income Interest on employee loans 4-4 Other deferred income (17) Total 12,661 4,002 8,659 (28) Other payables Amounts in '000 Balance at Balance at Change Holiday accruals 16,354 13,235 3,119 Social security institutions 9,257 12,548 (3,291) Other employee payables 3,767 9,104 (5,337) Tax payables 10,907 7,204 3,703 13th and 14th-month salaries [payable as from June and December] accrued and not yet paid 5,345 2,963 2,382 77

79 Miscellaneous payables 12,308 16,339 (4,031) Total 57,939 61,393 (3,455) Tax payables mainly refer to amounts payable to the Inland Revenue for withholding tax on payroll and on freelancers invoices. They also include liabilities for the substitute tax on alignment of carrying values with tax-reporting amounts for some categories of tangible assets. The breakdown of miscellaneous payables was as follows: Amounts in '000 Balance at Balance at Data Ufficio S.p.A. acquisition 4,450 4,450 - Royalties on add-on products 4,166 4,573 (407) Listing costs 384 2,680 (2,296) HS24 S.r.l. loss Publishing Area s promotional expenses (732) Cost of magazine dispatch (705) Other payables 3,045 2, Total 12,308 16,339 (4,031) Income Statement (29) Revenue from newspapers, books, and magazines Amounts in '000 1H H 2007 Change % change Newspaper 41,794 43,373 (1,579) -3.6% Periodicals 35,170 37,284 (2,114) -5.7% Add-ons 20,122 39,372 (19,250) -48.9% Books 10,323 9,251 1, % Total 107, ,280 (21,871) -16.9% (30) Advertising revenue Advertising revenue amounted to 137,805 thousand, with an increase of 12, 992 thousand, i.e %, over 1H07. 78

80 (31) Other revenue Amounts in '000 1H H 2007 Change % change Software 17,608 14,338 3, % Digital publications 14,832 13,802 1, % IT products 14,281 15,333 (1,052) -6.9% Revenue from other products and services 10,326 4,207 6, % Revenue from conferences and training 7,200 5,410 1, % Total 64,247 53,090 11, % (32) Other operating income Amounts in '000 1H H 2007 Change % change Prior period income 2, , % Sundry expenses recoveries 1,006 1, % Rental income % Grants (216) -47.3% Other 921 1,149 (228) -19.8% Total 5,896 4,155 1, % 79

81 (33) Personnel expense Amounts in '000 1H H 2007 Change % change Wages & salaries 58,102 48,588 9, % Social security charges & pension 18,995 16,240 2, % contributions Post-employment benefits 4,879 (491) 5, % Holiday accruals 3,313 3, % Overtime 1,528 1, % Other personnel expenses 1, ,805 nmf Total 88,625 68,943 19, % Other costs include the portions of personnel s stock grants ( 905 thousand) and stock options ( 510 thousand). In 1H07 personnel cost also included the positive one-off effect of 4,690 thousand arising from recalculation of post-employment benefits based on the changes introduced by the pension reform. (34) Purchases of raw materials and consumables Amounts in '000 1H H 2007 Change % change Paper 12,333 21,219 (8,886) -41.9% Photographic material and ink 1,075 1,164 (89) -7.6% Goods for resale % Plant maintenance materials % Stationery & printed materials % Fuel % Spare parts (159) -46.2% Packaging materials % Other sundry costs % Total 15,796 23,900 (8,104) -33.9% (35) Costs for services Amounts in '000 1H H 2007 Change % change Distribution 22,367 23,085 (718) -3.1% Printing 22,299 20,789 1, % 80

82 Commissions & other selling expenses 19,018 18,017 1, % Advisory services-freelancers 12,955 11,213 1, % Advertising & promotion 12,891 14,426 (1,535) -10.6% Editorial costs 12,363 11,346 1, % Set-up costs 4,146 3, % News purchase 3,926 4,047 (121) -3.0% Advertising costs for publishers 3,463 3,882 (419) -10.8% Utilities (telephone, electricity, water, etc.) 3,195 2, % Miscellaneous production costs 2,934 1,203 1, % Employee expense refunds 2,814 2, % Conferences 2,645 1, % Maintenance & repairs 2,526 2, % Packing costs 2,345 4,239 (1,894) -44.7% General facility services 2,268 2, % Employee services (canteen, meal vouchers, and 1,820 1, % training courses, etc.) Press agencies 1,600 1, % Product warehousing costs 1,043 1,133 (90) -7.9% Insurance % Software development 606 2,245 (1,639) -73.0% Bank expenses % Transmission (93) -37.3% Total 138, ,833 3, % (36) Use of third-party assets Amounts in '000 1H H 2007 Change % change Rental costs 8,301 6,864 1, % Royalties 4,838 6,576 (1,738) -26.4% Copyright royalties 2,514 3,677 (1,163) -31.6% Car rental for company/private use 1,892 1, % Rental of radio transmission equipment % Other fees % Hardware rental/leasing Other sundry costs (116) -39.6% Total 18,689 19,722 (1,033) -5.2% The decrease in royalties and copyright expense vs. 1H07 was due to the lower number of add-on products produced and sold in 1H08. 81

83 (37) Other operating costs Amounts in '000 1H H 2007 Change % change VAT borne by publisher 1,893 2,137 (244) -11.4% Costs & charges not relating to period s % operations Purchase of newspapers and magazines % Entertainment expenses % Miscellaneous taxes (excluding income tax) % Association membership dues % Purchase of books and magazines for promotional activities Other miscellaneous expenses 1,039 1,822 (783) -43.0% Total 5,521 6,004 (483) -8.0% Other sundry expenses included 535 thousand for the portion of the mandatory due paid to the Italian Communications Authority (Italian acronym = AGCOM) (38) Gains/losses on sale of non-current assets These capital gains and losses relate to sale of non-current assets and liabilities. As at 30 June 2008 they amounted to a net gain of 2 thousand. They specifically referred to: losses of 19 thousand on disposal of various asset items; gains of 21 thousand on disposal of various asset items. (39) Financial income (expense) Amounts in '000 1H H 2007 Change % change Financial income from investment of 5,722 1,848 3, % surplus cash Other financial income (13) -15.7% Total income 5,792 1,931 3, % Exchange rate gains and losses 4 (20) % Financial expenses on short-term (16) (13) (3) -23.1% borrowings Financial expenses on medium-/longterm (447) (301) (146) -48.5% borrowings Other financial expenses (71) (26) (45) % Total expenses (530) (360) (170) -47.2% Total 5,262 1,571 3, % 82

84 Net financial income amounted to 5,262 thousand and consisted of: financial income of 5,792 thousand on cash resources and on short-term cash investments. It was 3,861 thousand higher than in 1H07 because of the greater liquidity available after listing on the stock market in December 2007; financial expense of 530 thousand mainly relating to facilitated medium-/long term loans, 170 thousand higher than in 1H07 due to the effect of the interest subsidies received for a facilitated loan paid out by the Credito Emiliano bank relating to (40) Other income (expense) from investment assets and liabilities Amounts in '000 1H H 2007 Change % change Minority investments (1) 305 (306) % Total (1) 305 (306) % As up to 30 June 2008, expense from minority investments consisted of the write-down of the investment in Consorzio Mercury. Income relating to 1H07 consisted of the dividends totalling 305 thousand received from Borsa Italiana SpA. This equity interest was sold in October

85 (41) Income taxes The main components of income-taxes for the 6-month periods ended on 30 June 2008 and 30 June 2007 were as follows: Amounts in '000 1H H 2007 Change % change - IRES (corporate income tax) 9,482 12,417 (2,935) -23.6% IRAP (regional productivity tax) 3,712 4,862 (1,150) -23.7% Foreign taxes % Total Current income tax 13,378 17,361 (3,983) -22.9% Deferred tax assets/liabilities (2,079) 3,596 (5,675) % - Alignment of financial-reporting and taxreporting (5,312) - (5,312) nmf amounts - Prior-year taxes (530) (107) (423) % Total taxes 5,457 20,850 (15,393) -73.8% As a result of Article 1, paragraph 33, of Italian Law no. 244 of 24 December which abolished, starting in 2008, the possibility of making outside-accounts deductions in tax returns in the so-called EC section prepaid/deferred taxes were substantially nil. Article 1, paragraph 48 of the same law granted the possibility of aligning the tax-reporting amounts of property, plant, and equipment assets with their carrying value, applying a substitute tax on outside-accounts deductions made for accelerated depreciation in the EC section until To apply this provision, Group companies asked to release, through payment of tax, accelerated depreciation totalling thousand already deducted in tax returns and will pay a substitute tax of 4,876 thousand. The net balance of this operation is positive and amounts to 5,311 thousand. There are no material differences in the tax rates applied to the various companies of the Group. For the foreign investments, provision has been made for the Italian taxes that will have to be paid when dividends are distributed. No company has calculated taxes on reserves taxable on distribution as there are no plans for their distribution. Starting in 2004 the parent company activated the group tax filing procedure (i.e. domestic tax consolidation). At present only Nuova Radio SpA takes part. As a result of this procedure, the parent company receives (or pays) a monetary amount equal to the loss (or profit) transferred multiplied by the current rate of IRES (corporate income tax). The following table shows the reconciliation between the parent company s theoretical tax rate applicable and the effective tax rate. Amounts in '000 1H H 2007 Theoretical income taxes/applicable tax rate 8, % 16, % 84

86 Tax effect of permanent differences 3, % 4, % Personnel expense 2, % 2, % Car & telephone costs % % Non-deductible depreciation & amortisation % % Difference between taxable bases for IRES (77) -0.29% (87) -0.20% (corporate income tax) and IRAP (regional productivity tax) Other permanent differences (additions) % 1, % Income from investments % (96) -0.22% Grants (32) -0.12% (65) -0.15% Other permanent decreases (144) -0.54% % Prior-year income taxes (530) -1.98% (107) -0.24% Tax effect of different tax rates (3) -0.01% (10) -0.02% Use of tax losses (135) -0.50% Tax differences previously not recognised % % Effects of financial-/tax-reporting alignment (5,312) % - Reported income taxes 5, % 20, % We highlight the fact that the alignment of tax-reporting and financially reported amounts described earlier, helped to reduce the tax rate significantly. Notwithstanding full application of the so-called tax wedge measure, the non-deductibility of personnel expense from the taxable base for regional business tax (IRAP), plus the lower pre-tax result, played a decisive role in determining the effective tax rate. 85

87 11. Segment reporting Segment reporting has been prepared using the source and principal nature of the Group s risks and rewards as the primary basic framework. The Group produces groups of products and services that are subject to different levels of profitability and to different growth opportunities, growth prospects, and risks. Because the Group s risks and rewards are influenced above all by differences in the products and services marketed, the primary segment reporting format is by business segment. The secondary segment reporting format by geographical segment is not meaningful because the Group does business mainly in Italy, whereas business in other geographical areas is insignificant. The business segments identified for external reporting purposes reflect the internal organisational and management structure and the internal reporting system forming the basis of reference used by the Board of Directors and CEO to identify business risks and rewards, assess business progress, and decide on future resource allocation. Our segment reporting has been prepared in compliance with the IFRSs used to present financial statements as at balance sheet date. 86

88 AREA Noncaptive revenue Intersegment Revenue Tot. Revenue Gross Operating Profit (GOP) GOP as % of revenue Operating Profit (OP) ROS Publishing 1H ,643 81, ,243 22, , H ,485 77, ,641 32, , System 1H , ,891 (1,331) -1.1 (1,333) H , ,432 1, , Professionals 1H ,861 1, ,118 21, , H , ,345 22, , Multimedia 1H ,587 4,021 19, H ,987 3,249 20,236 1, Radio 1H ,901 7, (5,518) H ,505 6, (5,246) CORPORATE AND CENTRALIZED SERVICES 1H , ,743 (4,790) (8,171) H (2,220) (5,209) Consolidated 1H , ,461 38, , H , ,183 56, ,

89 12. Other information 12.1 Guarantees Group policies envisage the issue of guarantees mainly in the following cases: for prize competitions, as regulated by Italian Presidential Decree 430/2001; for Public Administration tenders/contracting, as required in tendering or adjudication rules; as guarantee for use of group VAT consolidation procedures; for rental contracts instead of guarantee deposits; for special service supply contracts. Group policy gives preference to the issue of bank suretyships at parent-company level, avoiding their issue by subsidiaries. As at 30 June 2008 the Group had bank suretyships outstanding for a total of 20,151 thousand, as summarised below: Suretyships totalling 10,847 thousand given by the parent company to the Inland Revenue as guarantee for netting performed in Group consolidated VAT returns filed for 2005 and Suretyships of 377 thousand given to the Inland Revenue by the subsidiary Il Sole 24 Ore Business Media Srl as guarantee for netting performed in consolidated group VAT returns filed in periods before acquisition of control by Il Sole 24 Ore SpA. Suretyships totalling 5,344 thousand given by the parent company to Stemmata, owner of the Via Monte Rosa building. Suretyships totalling 2,494 thousand given by the parent company to Italian government ministries, government entities, or municipalities as guarantee for prize competitions and service supply contracts, etc. Suretyships totalling 1,089 thousand given by the parent company and its subsidiaries to private independent counterparties for trading operations and supply contracts, etc. We point out that some of the suretyships indicated above for a total amount of 741 thousand have been issued as guarantee for the commitments of Group subsidiaries, against lines of credit under the parent company s signature Related-party transactions Related-party transactions are limited to those with subsidiaries and associates concerning commercial, administrative and financial services. These transactions form part of the Group's normal business operations and of the core business of each of the companies involved, and are regulated at market conditions. Company Trade receiva bles Financi al receiva bles Trade payables (net of deferred income) Financi al liabilitie s Revenu e and operatin g income Costs Financi al income Financi al expens es Confederazione Generale dell'industria Italiana (Confederation of Italian Industry) Total ultimate parent entity ORE Television S.p.A. (32) (1,578) (32) 88

90 Nuova Radio S.p.A. (1,005) (4,538) 1,232 (6,901) 87 (90) Il Sole 24 ORE UK Ltd (652) - (652) ORE Motta Cultura goodwill 1, Data Ufficio S.p.A. 5,253 0 (65) STR S.p.A. (13) (67) 7 (127) 1-24 ORE Television S.p.A. 1,169 (5) 11 (32) 20 - Il Sole 24 ORE Business Media S.r.l. 5,619 (649) 2,458 (851) 164 (19) Faenza Editrice Iberica S.L Total subsidiaries ,561 (2,356) (6,184) 3,798 (8,627) 412 (142) HS 24 S.r.l Diamante S.p.A. - - (30) Blogosfere S.r.l. - - (39) Italia News S.r. l Total associates - - (69) Sipi S.r.l. (13) (5) Total other related parties - - (13) - - (5) - - Total related parties ,561 (2,425) (6,184) 3,798 (8,627) 412 (142) Change vs. previous year (1,199) (2,419) (3,404) (16,003 ) Total in Group consolidated financial statements Total in parent company s separate financial statements % impact on parent company s separate financial statements 224,659 17,586 (115,331 ) - 315,357 (273,08 2) 5,791 (530) 185,350 13,561 (98,289) (6,184) 275,335 (238,23 6,130 (594) 4) 0.47% % % 3.62% 6.73% 23.81% % % Net cash flow generated by Group operating activities Net cash flow generated by parent company s operating activities % impact on net cash flow generated by parent company s operating activities (11,198 ) (11,198) (11,198 ) (16,307 (16,307) (16,307 ) ) 7.35% 20.87% % (11,198 ) (16,307 ) 52.91% Net cash flow absorbed by Group financing activities Net cash flow absorbed by parent company s financing activities % impact on cash flow absorbed by parent company s financing activities (1,098) (1,098) (1,098) (1,098) (805) (805) (805) (805) % % % 17.59% % impact on parent company s equity 0.28% 4.29% -0.77% -1.96% % impact on parent company s profit 17.80% % 1.93% -0.66% Trade receivables vis-à-vis parent companies relate to IPO costs of 840 thousand borne on behalf of Confindustria, the ultimate parent entity. The invoice for these costs was paid on 2 July The remaining 29 thousand related to trade receivables concerning the parent company s products, i.e. subscriptions, books, and advertisements. Financial receivables related to: current-account relationships with the subsidiaries Motta Architettura Srl, 24ORE Motta Cultura Srl, STR SpA, and Alinari 24ORE SpA to optimise the yield of subsidiaries cash balances. To its receivable balances, the parent company applies an interest rate of 1-month Euribor/365 basis; a loan from the parent company to Il Sole 24 Ore Business Media Srl. This loan was given on 30 March 2007 to replace two previous bank loans and initially totalled 8,588 thousand. On 30 June 89

91 2008 there was partial repayment - 1,073 thousand representing the fourth instalment. The interest rate applied is 6-month Euribor/365 basis. The loan is set to last until 31 December 2010 and repayment is based on 6-monthly instalments of 1,073 thousand. The debt of Il Sole 24 ORE Business Media Srl towards the parent company consists of the remainder of the loan ( 6,441 thousand) and of the intercompany current-account balance ( 251 thousand); a loan from the parent company to Data Ufficio SpA. This loan was given on 25 October 2007 to replace bank overdraft facilities, for an initial amount of 3 mn. The interest rate applied is 6-month Euribor/365 basis. The loan is set to last until 31 December 2009, with lump-sum repayment at maturity. Data Ufficio SpA s debt towards the parent company consists of the above loan and of the intercompany current-account balance of 2,253 thousand; On 1 April 2008 Il Sole 24 ORE SpA waived the financial receivable of 7,170 thousand that, as at 31 December 2007, was payable by Nuova Radio SpA. Extinction of the receivable is for partial coverage of losses made by the latter company in FY2008 and in previous FYs. Trade payables net of deferred items referred mainly to: Nuova Radio SpA = for the broadcaster s share of the sale of advertising space on the radio station ( 809 thousand) and website ( 18 thousand), for production of Web-TV services ( 86 thousand), and interest on intercompany transactions ( 90 thousand); Il Sole 24 ORE UK Ltd. = for its commercial activity of sale of advertising space in the UK; Il Sole 24 ORE Business Media Srl = for the publisher s share of the sale of advertising space ( 471 thousand), for provision of editorial services ( 105 thousand); charge-back for rental of the building located in Bologna (at Via Goito 13) and use of related infrastructure ( 41 thousand), for interest on intercompany transactions ( 19 thousand), and for work on Agrisole products ( 10 thousand); Blogosfere Srl = for sales of blog advertising space; 24 ORE Television SpA = for interest on intercompany transactions; Diamante SpA = for royalties and software development; Alinari 24 ORE SpA = for the supply of photographic material. Financial payables referred to intercompany current-account relationships for Group cash management, to optimise the yield of subsidiaries cash balances. To its payable balances, the parent company applies an interest rate of 1-month Euribor/365 basis minus 0.25% point. Revenue mainly referred to: advertising sales agency services by Il Sole 24 ORE Business Media Srl for magazines in the areas of Building ( 703 thousand), Farming ( 412 thousand), and Medicine ( 417 thousand), and for conference sponsorship ( 217 thousand); letting to Nuova Radio SpA of premises in Via Monte Rosa 91 in Milan and charge-backs of centralised services. Costs referred mainly to: the publisher s share relating to advertising sales for Nuova Radio SpA and Il Sole 24 ORE Business Media Srl; commission expenses arising from sale of advertising space in the UK by Il Sole 24 Ore UK Ltd.; costs for provision of publishing production services for STR SpA. Financial income referred to interest earned on the financial receivables mentioned above. Financial expense referred to interest paid on the financial payables mentioned above Events after balance sheet date and foreseeable business progress 90

92 Events after balance sheet date In observance of contractual agreements, at the beginning of July the Group paid the second instalment for the purchase of 100% of the company Data Ufficio SpA, with an outlay of 4.5 mn. The total investment to date therefore amounts to 8.5 mn. On 29 July 2008, acquisition was completed, with an investment of 2.3 mn, of 60% of Newton Management Innovation SpA, a company active in managerial and commercial training for companies and professionals. The main services offered are in-house training, communication and distance learning, events organisation, and design and implementation of targeted Web-based solutions concerning organisational operation. With this deal the Il Sole 24ORE Group strengthens its presence in the sector of services for businesses and professionals, also in the training segment. In FY2007 the company achieved revenue of 3.7 mn. In addition, further deals were approved to acquire radio frequencies and installations, to be completed in forthcoming months, for a total of 2.3 mn. These acquisitions will, in particular, permit significant improvement of territorial coverage in Sicily, increasing the percentage of the national population covered by approximately 2.5 points (from 83.8% to 86.3%). Foreseeable business progress The negative overall economic picture should not show signs of improvement in the next few months. The scenario remains particularly difficult for the publishing industry, for which the second half of the year should confirm the slack circulation performance of paid newspapers and the steady, major downsizing of the addon product segment. The advertising sales environment is also expected to deteriorate, with performance of the Il Sole 24ORE Group that, although confirming growth vs and in any case at higher levels than that expected for the market as a whole will be unable to maintain the significant levels of growth achieved in the first six months of the year. The Professionals area - which will also benefit from recouping of software products sales and margins and from the contribution of acquisitions made during should feature revenue and margin growth vs Based on like-for-like consolidation, the area s result is expected to achieve levels in line with those achieved in The items mentioned above lead us to believe that, at present, if there is no increased deterioration of the economic environment, full-year earnings expected for FY2008 also thanks to tax optimisation action taken should achieve levels higher than those of 2007 net of the positive non-recurring effects primarily relating to the capital gain made on London Stock Exchange Group Shares and to new regulations concerning postemployment employee benefit provision Disclosures pursuant to CONSOB resolution no of 27 July 2006 Balance sheet pursuant to CONSOB resolution no of 27 July 2006 Amounts in '000 Note (*) Balance at of which related parties Balance at of which related parties ASSETS Non-current assets Property, plant and equipment (1) 92,701 94,628 Goodwill (2) 39,377 39,377 Intangible assets (3) 78,004 85,268 91

93 Investments in associates and joint (4) 1,970 1,950 ventures Available-for-sale financial assets (5) 5,583 5,580 Other non-current financial assets (6) 17,586 17,337 Other non-current assets (7) Deferred tax assets (8) 16,784 16,697 Total 252, ,717 - Current assets Inventories (9) 15,193 21,351 Trade receivables (10) 224, ,559 Other receivables (11) 10,757 10,648 Other current assets (12) 11,606 6,784 Cash and cash equivalents (13) 221, ,067 Total 483, ,408 - TOTAL ASSETS 736, ,125-92

94 Amounts in '000 Note (*) Balance at of which related parties Balance at of which related parties EQUITY AND LIABILITIES A) Equity Total equity attributable to the shareholders of the parent company Share capital (14) 35,124 35,124 Equity reserves (15) 180, ,316 Fair value and revaluation reserves (16) 20,561 20,561 Hedging and translation reserves (17) Other reserves (18) 33,003 29,182 Retained earnings (19) 72,516 53,049 Profit for the period attributable to the (20) 21,590 27,694 shareholders of the parent company Total equity attributable to the shareholders of the parent company ,411 - Capital and reserves attributable to minority ,485 interests Profit (loss) attributable to minority interests (20) (254) (120) Total equity attributable to minority interests 1,111 1,365 Total 364, ,776 - B) Non-current liabilities Non-current financial liabilities (21) 14,836 16,407 Employee benefit obligations (22) 40,169 40,558 Deferred tax liabilities (8) 20,014 32,198 Provisions for risks and charges (23) 23,209 24,781 Other non-current liabilities (24) 2,084 2,072 Total 100, ,016 C) Current liabilities Bank overdrafts and loans - due within one (25) 3,555 4,494 year Trade payables (26) 193, ,634 Other current liabilities (27) 20,423 5,812 Other payables (28) 53,773 61,393 Total 271, ,333 - Total liabilities (B + C) 371, ,349 TOTAL EQUITY AND LIABILITIES 736, ,125-93

95 Income statement pursuant to CONSOB resolution no of 27 July 2006 Consolidated Income Statement Amounts in '000 Note (*) 1H 2008 of which related parties 1H 2007 of which related parties Revenue from newspapers, books and (29) 107, ,280 magazines Revenue from advertising (30) 137, ,813 Other revenue (31) 64,247 53,090 Total revenue 309, ,183 - Other operating income (32) 5,896 4,155 Personnel expense (33) (88,625) (68,943) Change in inventories (9) (6,158) 2,042 Purchase of raw materials and consumable (34) (15,796) (23,900) materials Costs for services (35) (138,294) (5) (134,833) Use of third party assets (36) (18,689) (19,722) Other operating costs (37) (5,521) (6,004) Provisions (22) (1,084) (1,318) Provisions for bad debts (10) (2,222) (2,660) Gross operating profit 38, ,000 - Amortisation of intangible assets (3) (10,748) (7,206) Depreciation of property, plant and (1) (6,690) (6,455) equipment Gains (losses) on sale of non-current assets (38) Operating profit 21, ,690 - Financial income (expenses) Financial income (39) 5,791 1,930 Financial expenses (39) (529) (360) Total financial income (expenses) 5,262-1,570 - Other income (expenses) from investment (40) (1) 305 assets and liabilities Gains (losses) from valuation of equity investments (41) - (407) Profit before tax 26, ,158 - Income taxes (42) (5,457) (20,849) Profit for the period 21,337-23,309 - Profit attributable to minority interests Profit attributable to shareholders of the 21,590 23,561 parent company Basic EPS ( ) ordinary shares Basic EPS ( ) ordinary shares Basic EPS ( ) special shares 0.17 Diluted EPS ( ) special shares 0.17 (*) Section 10 of the explanatory notes (Notes to the Financial Statements) 94

96 Cash flow statement pursuant to CONSOB resolution no of 27 July 2006 Amounts in '000 Not e (*) 1H 2008 of which related parties 1H 2007 of which related parties A) CASH FLOWS FROM ORDINARY ACTIVITIES Profit attributable to the shareholders of the parent (20) 21,590-23,562 - company Adjustments for: Dividends received - - (305) - Depreciation of property, plant and equipment (1) 6,690-6,455 - Amortisation of intangible assets (3) 10,748-7,206 - (Gain) loss on sale of property, plant and equipment (38) 11 - (8) - (Gain) loss on sale of intangible assets (38) - - (205) - (Gain) loss on sale of business areas (38) (13) - (138) - Increase (decrease) in provisions for risks and (23) (1,572) - (137) - charges Increase (decrease) in personnel provisions (22) (389) - (7,240) - Increase (decrease) in deferred tax assets/liabilities (8) (12,271) - 4,433 - Annual instalment of substitute tax 1, Net financial (income) expenses (5,262) - (1,571) - Cash flows from ordinary activities prior to 20,988-32,052 - change in net working capital (Increase) decrease in inventories (9) 6,158 - (2,430) - (Increase) decrease in trade receivables (10) (45,100) (869) (31,315) - Increase (decrease) in trade payables (26) 1, ,883 - Income taxes paid (3,481) - (5,817) - (Increase) decrease in other assets/liabilities 8,250-20,311 - Changes in net working capital (32,186) (787) (11,368) - TOTAL CASH FLOW FROM (USED IN) ORDINARY ACTIVITIES (A) (11,198) (787) 20,685-95

97 Amounts in '000 Note 1H 2008 of which related parties 1H 2007 of which related parties B) CASH FLOWS USED IN INVESTING ACTIVITIES Dividends received Proceeds on sale of property, plant and equipment Proceeds on sale of intangible assets Proceeds on sale of business areas Investments in property, plant and equipment (1) (4,855) - (3,556) - Investments in intangible assets (3) (3,484) - (2,458) - Other changes in property, plant and equipment (1) 4 - (9) - Other changes in intangible assets (3) - - (8) - Other increases in goodwill (2) - - (139) - Purchase of investments in subsidiaries - - (23,617) - Purchase of investments in associates (4) (20) Other decreases (increases) in other non-current (7) (1) - (24) assets and liabilities Purchases of available-for-sale financial assets (5) (3) - (1,695) - TOTAL CASH FLOW USED IN INVESTING ACTIVITIES (B) (8,134) - (30,699) - FREE CASH FLOW (A + B) (19,331) (787) (10,014) C) CASH FLOWS USED IN FINANCING ACTIVITIES Dividends paid (13,911) - (18,666) - Registering (repayment) of long-term bank loans (21) (1,571) - (951) - Net change in other non-current financial assets (250) Net change in financial assets held for trading - - (624) - Net financial interests received 5,262-1,571 - Change in equity attributable to minority interests (254) - (252) - Other changes in reserves 9,625-1,420 - TOTAL CASH FLOW USED IN FINANCING ACTIVITIES (C) (1,098) - (17,503) - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) (20,430) (787) (27,517) - OPENING CASH AND CASH EQUIVALENTS 238,573-81,338 - CLOSING CASH AND CASH EQUIVALENTS 218,143-53,821 - INCREASE (DECREASE) OF THE PERIOD (20,430) - (27,517) - 96

98 (*) Section 10 of the explanatory notes (Notes to the Financial Statements) 97

99 12.5 Net financial position The following table details the components of the net financial position: Amounts in '000 Balance at Balance at Cash and cash equivalents 221, ,067 Bank overdrafts and loans due within one year (3,555) (4,494) Short-term net financial position 218, ,573 Non-current financial liabilities (14,836) (16,407) Non-current financial assets and fair value changes in 18,422 17,998 financial hedging instruments Medium/long-term net long-term financial position 3,586 1,591 Net financial position 221, , Employee headcount The average number of dependent employees by contractual category was as follows: Category 1H H 2007 Number % Number % Managers 110, ,4 5.3 Journalists 465, , White Collars 1,235, , BLUE-COLLAR 163, ,7 7.6 Total 1,974, ,580,

100 12.7 Disclosures pursuant to CONSOB Regulation no as subsequently amended Stock option plan In 1H08 assignment took place, in just one instalment, of a total number of 2,250,000 option rights to purchase an equal number of the Company s special-category shares, thereby executing the Stock Option Plan approved on 30 October 2007 by Il Sole 24 Ore SpA s Board of Directors and Shareholders Meeting. The aims of the plan are to (i) motivate beneficiaries to achieve common consolidated objectives, to create value for the company and for shareholders, and (ii) retention of beneficiaries. The Plan s beneficiaries are: a. The Chief Executive Officer of Il Sole 24 Ore SpA; b. The following business managers, who report directly to the CEO: b.1 a. Director of the Publishing division; b. Director of the Professionals division; c. Director of the System division, b.2 d. Director of the Multimedia division; e. Director of the Radio division. c. The heads of the Administration, Financial & Control and of the Human Resources functions; d. 6 managers of other staff functions of the CEO The options have been allocated to beneficiaries in the following proportions: a. 750,000 options to the CEO of Il Sole 24 Ore SpA; b. (i) 210,000 options to each of the business managers sub b.1. and (ii) 150,000 options to each of the business managers sub b.2.; c. 105,000 options to each of the heads of the Administration, Finance & Control and of the Human Resources & Labour Relations functions; d. 60,000 options to each of the managers of the other 6 staff functions of the CEO. Beneficiaries cannot exercise options before three years have passed since grant date (vesting period). The options are personal, are not transferable or disposable between living persons, and cannot be pledged or given as collateral in favour of the Company or of third parties. The shares purchase price will be equal to the arithmetical average of daily closing prices of the company s special-category shares on the Milan screen-based equity market (Mercato Telematico Azionario) organised and managed by Borsa Italiana SpA, in the 30 (thirty) calendar days preceding the options grant date ( per share). Vesting of the options is suspensively subject to achievement or overshooting of a consolidated Group gross operating profit (GOP) amount for FYs , corresponding to the sum of forecast consolidated Group GOP amounts for the same FYs, as approved by the company s Board of Directors on 30 October 2007 (the so-called vesting condition ). The objective will be considered to have been achieved even if the sum of actual GOP is 3% lower than the sum of forecast amounts mentioned above. 99

101 The Board of Directors will verify achievement of the above objectives at the meeting held to approve draft annual financial statements for the year ending on 31 December In the event of failure to achieve forecast objectives and therefore of non-materialisation of vesting conditions the options for which vesting conditions have not been met will automatically be extinguished and will not give beneficiaries the right to purchase shares. The ultimate deadline for vesting of options is 30 June Subscription of shares by employees stock granting The plan, approved on 30 October 2007, for the granting of free special-category shares of Il Sole 24 Ore SpA open to all employees of the Parent Company and of Nuova Radio SpA for the years 2007, 2008, 2009, and 2010, has not changed since FY2007. Milan, 31 July 2008 /s/ GIANCARLO CERUTTI Chairman of the Board of Directors 100

102 Attestation of condensed half-yearly financial statements pursuant to Article 81/3 of CONSOB Regulation no of 14 May 1999 as subsequently amended and supplemented 1. The undersigned Claudio Calabi in his capacity as Chief Executive Officer and Giuseppe Crea in his capacity as Corporate Financial Reporting Manager of Il Sole 24 Ore SpA, herewith attest, also having taken into account the requirements of Article 154/2, paragraphs 3 and 4, of Italian Legislative Decree no. 58 of 24 February 1998 [the Italian Consolidated Finance Act]: the adequacy in relation to the entity s characteristics and the effective application, of administrative and accounting procedures for formation of condensed half-yearly financial statements during the first half of FY The adequacy of administrative and accounting procedures for formation of condensed half-yearly financial statements as at and for the period ended on 30 June 2008 has been assessed based on the methodological rules defined by Il Sole 24 Ore SpA and consistent with the Internal Control Integrated Framework model issued by the Committee of Sponsoring Organisations of the Treadway Commission, which is a benchmark framework for the internal control system generally accepted internationally. 3. It is further attested that: 3.1. The condensed half-year financial statements as at 30 June 2008: Have been prepared in compliance with the international accounting standards (IASs - International Accounting Standards and IFRSs International Financial Reporting Standards) recognised in the European Community pursuant to Regulation 1606/2002/EC of the European Parliament and Council dated 19 July 2002, and in particular in compliance with IAS 34 Interim Financial Reporting; Match corporate books and accounting records; Are able to provide fair and true representation of the assets and liabilities, profit or loss, and financial position of the issuer and of the undertakings included in the scope of consolidation The interim management report contains references to the important events occurring in the first six months of the financial year and their impact on condensed half-yearly financial statements, together with a description of the main risks and uncertainties for the remaining six months of the financial year and information on significant related-party transactions. 31 July 2008 /s/ Claudio Calabi Chief Executive Officer /s/ Giuseppe Crea Corporate Financial Reporting Manager 101