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Gruppo Editoriale L’EspressoSocietà per azioni

Report on the 3rd Quarter 2006

Gruppo Editoriale L’Espresso SpAVia Cristoforo Colombo, 149 - 00147 Roma

Capitale Sociale i.v. €65.109.890,70 i.v. - R.E.A. Roma n. 192573 - P.IVA 00906801006Codice Fiscale e Iscriz. Registro Imprese di Roma n. 00488680588

Società soggetta all’attività di direzione e coordinamento di CIR S.p.A.

Gruppo Editoriale L’Espresso – Report of the Board of Directors at September 30, 2006

REPORT OF THE BOARD OF DIRECTORS ON THE GROUP OPERATIONS AT SEPTEMBER 30, 2006 Operating performance for the first nine months of 2006

Consolidated results (€ million) Jan - Sept2005

Jan - Sept 2006

% change 2006/2005

Revenues 787.7 814.1 +3.3%Operating profit before public grants 117.0 111.3 -4.9%Operating profit 134.6 114.9 -14.7%Net profit 65.4 65.6 +0.2%

(€ million) Dec. 31,

2005Sept. 30,

2006 Net financial position (252.6) (240.0) Group Shareholders’ Equity 550.0 525.0 Employees 3,397 3,412

The Espresso Group closed the first nine months of 2006 reporting consolidated revenues of €814.1 million, up 3.3% on the same period in 2005. The growth in consolidated revenues was positively affected by a 5.3% increase in advertising revenues, particularly in the newspaper and magazine sector (up 5%) and in the Internet area (up 60%). In the first eight months of the year the Group’s publications recorded an increase in advertising sales over 2% higher than the respective market segments (source: FCP), registering an acceleration from February. To achieve stronger advertising revenues than its competitors in a weak market, the Group exploited in full use its wide range of media (press, magazines, radio, TV and Internet), which none of its competitors can count on, to develop an integrated offer, winning new customers who are seeking new audiences as an alternative to general television ones, which are declining at least in quality. With respect to the first nine months of 2005, consolidated profit was negatively affected by the absence of €14 million in grants on the purchase of paper, no longer available in 2006. Net of all grants, consolidated net profit declined from €117 million in the first nine months of 2005, to €111.3 million in the same period in 2006. The strong performance of advertising revenues offset only in part the lower contribution of add-on products, due partly to a different issue schedule, the increase in the price of raw materials and of personnel costs, in addition to start-up costs of All Music, RepubblicaTv, and Metropoli (la Repubblica’s supplement dedicated to immigrants).

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The Group’s publications in the various media performed well also in terms of circulation, traffic and audience. In September, the Group’s internet sites reached an audience of 9.4 million unique users and recorded 408 million page views. A strong impulse towards the attainment of this new record was given by the new graphic design and new contents added to sites, with the launch of sections dedicated to podcasting and audio-video contents contributed by users. La Repubblica confirmed its ranking, for the fourth consecutive time and registering an increasing trend, as the most read newspaper in Italy, with over 3 million readers and an average circulation of 627 thousand copies per issue. L’espresso reported over 2.3 million readers and an average of 405 thousand copies per week, while local newspaper reached a total of 3.2 million readers and an average circulation of 478 thousand copies per issue. The Group’s radio stations continued to rank first among Italian private radio stations, with an average daily audience of almost 9 million listeners (up over 3% on the last poll), and an average weekly audience of 23 million listeners (up 4%). Radio Deejay achieved an average weekly audience of 13.7 million listeners, and an average daily audience of 5.8 million, while Radio Capital reached average daily and weekly audience respectively of over 2 million and 6.5 million. m2o maintained its average daily audience of 1 million and an average weekly audience of 2.8 million. All Music’s television audience also grew considerably to 2.7 million viewers in the 15 to 34 year-old range (source: Istituto IPSOS), a third of which were acquired in less than a year. From the second half of the year, All Music is broadcasted also on the Sky platform.

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Net profit for the 3rd Quarter and for the first nine months of 2006 benefited from the recording of deferred tax assets on accumulated losses of subsidiary Elemedia SpA, part of which were recorded in 2005 and will be recorded in full by the end of 2006. The consolidated net financial position improved from an indebtedness of €252.6 million at December 31, 2005, to an indebtedness of €240 million at September 30, 2006. The strong cash flow from operations, amounting to €146.5 million, more than offset the outlay of €62.5 million in dividends, the capital expenditure amounting to €30.7 million, in addition to the acquisition of 7,700,000 treasury stocks for €31 million, allowing the Group to reduce its debt exposure.

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Subsequent events and outlook Velvet, a new monthly supplement of la Repubblica dedicated to fashion, luxury goods and beauty, treated with a novel approach, will be launched on November 9. In the last Quarter of the year, advertising sales and add-on products are showing a positive performance. Current sales initiatives are meeting a good reception and results are expected to be stronger than those achieved in the 4th Quarter of 2005, though sales of add-on products for the year as a whole will prove slightly lower than in the previous year due to stronger competition. In view of the above and following the raise in the cover price of some of the Group’s local newspapers introduced in August, revenues and margins for the last quarter of 2006 are expected to exceed those recorded in the same period in 2005. Consolidated operating profit for the year, net of the effect of public grants, is therefore expected to be in line with the previous year. Results for the 3rd Quarter of 2006 (€ million) 3rd Qtr.

20053rd Qtr.

2006 % change

2006/2005Revenues 220.2 212.6 -3.5%Operating profit before public grants 16.4 7.9 -51.6%Operating profit 26.1 9.2 -64.9%Net profit 10.6 10.8 +1.6%

The effect of the public grants in 2006 had a significant impact on the profit for the 3rd Quarter, as all grants on the purchase of paper for the year were recorded in the 3rd Quarter of 2005 due to the fact that European Authorities granted the authorization for paper grants for the year only in the 2nd half of 2005. The 3rd Quarter was also negatively affected by a different calendar for the issue of add-on products sold in conjunction with the Group’s publications, offset only in part by stronger advertising sales (up 2.7%). As mentioned in the first part of the present report, net profit is affected by the recording of deferred tax assets arising from accumulated losses of subsidiary Elemedia.

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RESULTS BY DIVISION FOR THE FIRST NINE MONTHS OF 2006 Repubblica Division

(€ million) Jan - Sept2005

Jan - Sept 2006

% change 2006/2005

Revenues 379.3 401.3 +5.8%Operating and personnel costs (311.4) (347.7) +11.7%Gross operating profit 67.9 53.6 -21.0%Depreciation, amortization and write-downs (9.4) (9.1) -3.4%Operating profit 58.5 44.5 -23.9%Employees 701 711

Figures for the division include the share in revenues and costs of the Parent Company that may not be attributed to a specific activity The growth in revenues was achieved thanks to a 3.8% increase in the number of copies of la Repubblica sold at newsstands, to the publication of XL, that continues to meet a good reception by the public, and in particular to the growth in advertising sales of both the newspaper and its supplements. Color advertising continues to be the main component of growth, with sales up a further 36%, ahead of the competition from the 2nd Quarter to the present. Among supplements, D-la Repubblica delle Donne performed particularly well (with gross advertising sales up 12.3%), reaping the benefits, better than other magazines in the sector, of the recovery of the fashion and cosmetics sectors. In the first nine months of the year, products sold optionally with newspaper la Repubblica registered sales of 11 million copies. New books and DVD collections launched after the summer were well received by the market; in September, series Arte sold more than 520 thousand copies, while the first issue of the Disney’s English course series, sold an average of over 105 thousand copies. The higher number of issues (163 in the first nine months of 2006, as compared to 157 in the corresponding period in 2005) and the need to invest in higher quality products, led to an increase in promotional and production costs of sales initiatives, slightly depressing margins. In the Internet area, site Repubblica.it, after developing an ongoing exchange with readers through blogs, forums, videos and stories, moved further steps towards the development of a continuously updated multimedia newspaper. A new service named Ultimo Minuto, allowing readers to print free of charge a constantly updated version of the newspaper on line, was launched. Margins of the Repubblica Division were affected by the lack of public grants (accounting for €11.2 million), higher prices of raw materials (prices of paper, ink and other printing materials grew by about 4%) and by a reduction in the margin of add-on products, offset only in part by the good performance of advertising and other sales.

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Periodicals Division


Jan - Sept 2006

% change 2006/2005

Revenues 93.2 90.8 -2.6%Operating and personnel costs (85.0) (79.3) -6.8%Gross operating profit 8.2 11.5 +40.3%Depreciation, amortization and write-downs (0.5) (0.7) +31.2%Operating profit 7.7 10.8 +40.9%Employees 123 120

Figures for the division include the share in revenues and costs of the Parent Company that may not be attributed to a specific activity The area includes weekly magazine L’espresso, monthly magazine National Geographic, the two magazines Limes and Micromega and the Guide de L’espresso guide books. Two contrasting factors affected the comparison of results for the first nine months of 2006 and those for the same period in the previous year: the presence in the first nine months of 2005 of costs incurred for the launch and production of TvMagazine, whose publication was discontinued in December and the recording in the same year of €1.6 million in grants on paper purchases, no longer available in 2006. Net of the effect of these two phenomena, the operating margin of the division for the two periods is unchanged at about 12%. Circulation revenues of L’espresso were positively affected by an 8% increase in the number of copies sold under subscription, while, thanks to the success of series as Storia della Filosofia (80 thousand copies per issue), Fumetti and Grandi Monografie (both averaging 30 thousand copies per issue), add-on products registered an increase in both revenues and margins. With regards to audiences, the number of readers of L’espresso grew by 1%, with a strong increase recorded by the number of women readers (up 6%, thus reaching 895 thousand), and users of internet site (1.4 million unique users and 5.8 million page views), almost trebling after the restyling of the web site of the magazine, with the addition of interactive and multimedia areas and a new section dedicated to fashion and design.

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Local newspapers (€ million) Jan - Sept

2005Jan - Sept

2006 % change

2006/2005Revenues 193.8 193.6 -0.1%Operating and personnel costs (145.2) (148.8) +2.5%Gross operating profit 48.7 44.7 -8.1%Depreciation, amortization and write-downs (10.5) (10.0) -5.0%Operating profit 38.2 34.7 -9.0%Employees 1,311 1,302

In the first nine months of 2006, local newspapers were negatively affected, together with all other publications of the Group, by the absence of grants on paper (accounting for €2.1 million) and by the increase in paper prices. Competition in the field has moreover increased, with the penetration at the local level of the free press and new offers providing for the sale of two newspapers for the price of one, in addition to the increasing selectiveness of the market for add-on products. In this framework, local newspapers of the Group devoted their efforts to maintain the respective market shares by concentrating on a more careful coverage of news and events affecting the respective city and/or province, while intensifying the offer of add-on products able to stimulate the regional identity of readers, concentrating on the history, tradition and culture, also gastronomic, of the respective areas through the offer of high-quality series of books and photographs. This strategy allowed to sell over 1.3 million add-on products, thus achieving higher revenues than in the same period in 2005 despite a slight reduction in margins due to the higher number of issues that led to higher production costs. Advertising sales grew by 2%, shifting progressively towards a different composition of customers. Together with national advertising, local advertising also posted a good growth, favored by business ads. A determining factor in the growth of all advertising continues to be the availability of color spaces whose sales increased by 41%.

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Radio


Jan - Sept 2006

% change 2006/2005

Revenues 54.5 55.5 +1.8%Operating and personnel costs (27.2) (29.5) +8.3%Gross operating profit 27.3 26.1 -4.6%Depreciation, amortization and write-downs (2.3) (2.4) +5.5%Operating profit 25.0 23.6 -5.6%Employees 153 162

Advertising sales for the first nine months of 2006 had an uneven performance, with a strong growth in the 1st Quarter and a slower development in subsequent ones, though registering an overall 1.8% growth for the first nine months of the year. The operating margin was equal to 42.6%. In the context of the development of synergies between Group media, cooperation between radio stations and new television platforms, All Music and RepubblicaTv, was tested successfully, while the integration with the Group’s internet area was consolidated. On the radio stations’ sites it is now in fact possible to download programs, dialog with artists and participate in forums and chats. The aim is that of gaining audience throughout the day through different platforms. Since August, Elemedia became the exclusive provider of 25 audio theme channels that will be part of the offering on Sky’s satellite platform. The channels will become part of Sky World’s bouquet already hosting satellite TV channel Deejay TV and analog TV channel All Music. All Music The comparison with the previous year is not significant as the television station was acquired by the Group only in April 2005 (thus contributing to the Group’s operations only for six months in 2005 as opposed to nine months in 2006), and due to start-up costs of the television station, which included the reorganization of its structure, the introduction of a new graphic design and new programs, the renovation of its studios and technical equipment, in addition to the strengthening of its signal coverage. In the first nine months of 2006, the TV station generated €15 million in revenues, reporting an operating loss of €3.5 million, after €1.9 million in depreciation charges on capital expenditure on low and high-frequency broadcasting equipment.

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Consolidated Financial Statementsfor the 3rd Quarter of 2006

Gruppo Editoriale L’Espresso – Consolidated Financial Statements for the 3rd Quarter of 2006

Gruppo EspressoConsolidated Income Statement

Jan - Sept Jan - Sept(€ million) 2005 2006

Revenues 787,7 814,1 Change in inventories 1,2 (0,5) Other operating income 23,2 11,1 Purchases (114,7) (126,8) Services received (311,6) (327,5) Other operating charges (12,4) (1Investments valued at equity 0,6 1,0 Personnel costs (207,3) (213,5) Depreciation, amortization and write-downs (32,2) (3

Operating profit 134,6 114,9

Financial income (expense) (17,4) (15,1)

Pre-tax profit 117,2 99,8

Income taxes (51,4) (33,9)

Net profit 65,8 65,9

Minority interests 0,4 0,3 GROUP NET PROFIT 65,4 65,6

Earnings per share, basic 0,152 0,153 Earnings per share, diluted 0,148 0,148

2,6)

0,3)

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Gruppo EspressoConsolidated Income Statement

3rd Quarter 3rd Quarter(€ million) 2005 2006

Revenues 220,2 212,6 Change in inventories 1,2 1,3 Other operating income 10,7 2,9 Purchases (35,7) (37,Services received (94,7) (92,6) Other operating charges (2,3) (2,9) Investments valued at equity 0,1 0,3 Personnel costs (62,4) (65,0) Depreciation, amortization and write-downs (11,0) (10,2)

Operating profit 26,1 9,2

Financial income (expense) (5,7) (4,8)

Pre-tax profit 20,3 4,3

Income taxes (9,6) 6,6

Net profit 10,8 10,9

Minority interests 0,2 0,1

GROUP NET PROFIT 10,6 10,8

2)

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Gruppo EspressoConsolidated Balance Sheet

ASSETS December, 31 September, 30(€ million) 2005 2006

Intangible assets with an indefinite useful life 633,6 636,3 Other intangible assets 4,5 4,1

Total intangible assets 638,0 640,4

Property, plant and equipm ent 250,0 234,4 Investm ents valued at equity 23,9 26,0 Other investm ents 4,1 4,0 Non-current receivables 2,6 3,2 Deferred tax assets 47,5 57,1

NON-CURRENT ASSETS 966,1 965,2

Inventories 32,2 33,4Trade receivables 266,4 232,4 Marketable securities 0,1 0,1 Current financial receivables 0,4 1,0 Tax receivables 59,9 58,5 Other receivables 22,6 25,0 Cash and cash equivalents 204,5 218,6

CURRENT ASSETS 586,1 568,8

TOTAL ASSETS 1.552,2 1.534,0

LIABILITIES AND SHAREHOLDERS' EQUITY December, 31 September, 30(€ million) 2005 2006

Share capital 65,1 65,1 Reserves 342,5 347,5Retained earnings (loss carry-forwards) 26,1 46,8 Net profit (loss) 116,3 65,6

Group Shareholders' Equity 550,0 525,0 Minority interests 10,8 10,6

SHAREHOLDERS' EQUITY 560,8 535,6

Financial debt 432,6 422,4 Provisions for risks and charges 13,4 11,6 Employee term ination indem nity and other retirement benefits 105,0 106,9 Deferred tax liabilities 102,6 108,0

NON-CURRENT LIABILITIES 653,5 649,0

Financial debt 25,0 37,1 Provisions for risks and charges 10,0 10,8 Trade payables 196,7 164,7 Tax payables 16,1 52,4 Other payables 90,1 84,4

CURRENT LIABILITIES 338,0 349,5

OTAL LIABILITIES 991,4 998,5

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1.552,2 1.534,0

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Gruppo EspressoStatement of Consolidated Cash Flows


OPERATING ACTIVITIESNet profit (loss) for the period, including minority interests 65,8 65,9 Adjustments: - Depreciation, amortization and write-downs 32,2 30,3 - Accruals to provisions for stock option costs 1,9 2,0 - Net change in provisions for personnel costs 5,6 2,0 - Net change in provisions for risks and charges (1,6) (1,5) - Losses (gains) on disposal of equity investments 0,0 - - Write-down (revaluation) of equity investments - 0,6 - Adjustments for investments valued at equity (0,2) 0,3 - Dividends received (0,0) (0,0) - Losses (gains) on sale of fixed assets (0,0) 0,0 Cash flow from operating activities 103,6 99,5 Change in current assets and other flows 24,6 47,0 CASH FLOW FROM OPERATING ACTIVITIES 128,2 146,5 of which:Interests received (paid) (7,3) 1,3 Received (outlay) for income taxes (22,7) 0,0

INVESTING ACTIVITIESOutlay for purchase of fixed assets (162,2) (31,1) Received on disposal of fixed assets 0,3 0,4 Public grants received 0,1 1,3 Dividends received 0,0 0,0 CASH FLOW FROM INVESTING ACTIVITIES (161,8) (29,3) FINANCING ACTIVITIESIncreases in capital and reserves 3,2 0,8 Acquisition of treasury stocks (1,1) (31,0) Issue (repayment) of bonds (191,0) - Issue (repayment) of other financial debt (8,9) (4,1) Net change in marketable securities and available-for-sale assets 20,1 0,0 Dividends paid (55,8) (62,5) Other changes (0,4) (0,4) CASH FLOW FROM FINANCING ACTIVITIES (233,9) (97,2) Increase (decrease) in cash and cash equivalents (267,5) 20,0 Cash and cash equivalents at beginning of the period 374,5 194,8 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 107,0 214,8

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Gruppo EspressoChanges in the Net Financial Position


SOURCES OF FUNDS

Net profit (loss) for the period, including minority interests 65,8 65,9 Depreciation, amortization and write-downs 32,2 30,3 Accruals to provisions for stock option costs 1,9 2,0 Net change in provisions for personnel costs 6,8 2,0 Net change in provisions for risks and charges (1,6) (1,5) Losses (gains) on disposal of fixed assets (0,0) 0,0 Losses (gains) on disposal of equity investments 0,0 - Write-down (revaluation) of equity investments - 0,6 Adjustments for investments valued at equity (0,2) 0,3 Cash flow from operating activities 104,8 99,6

Increase in payables / Decrease in deferred tax assets 6,1 (4,1) Increase in payables / Decrease in tax receivables 11,5 37,7 Decrease (increase) in inventories 1,1 (1,2) Decrease (increase) in current receivables 33,6 32,0 Decrease (increase) in current payables (31,1) (27,6) Changes in current assets 21,2 36,9 CASH FLOW FROM OPERATING ACTIVITIES 126,0 136,4

Increases in capital and reserves 3,2 0,8 TOTAL SOURCES OF FUNDS 129,2 137,2 USES OF FUNDS

Net investment in fixed assets (168,9) (27,3) Net investment in equity investments and other long-term financial assets (0,0) (3,4) Acquisition of treasury stocks (1,4) (31,0) Dividends paid (55,8) (62,5) Other changes (1,8) (0,4) TOTAL USES OF FUNDS (227,9) (124,6) Financial surplus (deficit) (98,7) 12,7 BEGINNING NET FINANCIAL POSITION (143,2) (252,6) ENDING NET FINANCIAL POSITION (241,8) (240,0)

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Gruppo EspressoNet Financial Position

December, 31 September, 30(€ million) 2005 2006

Marketable securities 0,1 0,1

Financial receivables 0,4 1,0

Cash and cash equivalents 194,8 214,8

Total financial assets 195,3 215,9

Bonds (309,1) (320,2)

Bank debt and loans (134,5) (133,0)

Other financial debt (4,3) (2,7)

Total financial liabilities (447,9) (455,8)

NET DEBT (252,6) (240,0)

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Notes to the Consolidated Financial Statementsat September 30, 2006

Gruppo Editoriale L’Espresso – Notes to the Consolidated Financial Statements at September 30, 2006

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 2006 Foreword The Consolidated Quarterly Report of the Espresso Group at September 30, 2006 has not been audited and was prepared in compliance with international accounting principles (IFRS).

Valuation criteria applied to the Balance Sheet and the Income Statement are consistent with those adopted in the preparation of the Consolidated Financial Statements at December 31, 2005.

The present Consolidated Quarterly Report was prepared in compliance with article 82 of CONSOB Resolution no. 11971/1999 (as modified by CONSOB Resolution no. 14990 dated April 14, 2005) and with the Attachment 3D of the same regulation. Provisions of international accounting principle on interim reports (IAS 34 “Interim reports”) were therefore not adopted. Changes in the consolidation area The following changes in the consolidation area occurred on the third quarter of 2005: • in December 2005, Elemedia SpA completed the sale of its subsidiary Radio Bonton

(Czech Republic) and put in liquidation Radio Deejay Kft (Hungary). For these reasons and for the immateriality of the two companies for the purposes of the consolidation, the two subsidiaries were excluded from the consolidation area at September 30, 2006;

• on March 3, 2006, the Parent Company acquired, through subsidiary Finegil Editoriale Spa, a 40% stake in Editoriale Corriere di Romagna Srl. At September 30, 2006, the investment was consolidated at equity.

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INCOME STATEMENT As already reported for the Annual Report at December 31, 2005, to provide a clearer representation of the operating performance of the Group, a number of items relating to the Income Statement for the first nine months of 2005 were reclassified for comparative purposes. Reclassifications included: - “Changes in inventories”, which were reported separately; - the €2,416 thousand write-down of receivables, reclassified from “Depreciation,

amortization and write-downs” to “Other operating charges”; - charges on the discounting back of employee retirement benefits (Employee

termination indemnity and similar), amounting to €3,359 thousand, reclassified from “Personnel costs” to “Financial income (expense)”.

Revenues

Jan - Sept 2005

Jan - Sept2006

Circulation 356.0 361.4Advertising 410.9 432.9Other revenues 20.8 19.9Total 787.7 814.1

Circulation and advertising revenues are commented upon in the first part of this report, to which we refer. Other revenues relate primarily to the sale of internet services in the business to business web solutions area, in addition to revenues from printing services. Other operating income The €12.1 million decline is due primarily to the fact that in the first nine months of 2005 the item included €13.6 million of grants on paper purchases, no longer available in 2006. The item includes also extraordinary income recorded in the period and other grants on investments. Purchases

Jan – Sept 2005

Jan - Sept 2006

Paper for newspapers and magazines (74.0) (80.3)Other purchases (40.7) (46.6)TOTAL PURCHASES (114.7) (126.8)

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Purchases of paper for newspapers and magazines grew by €6.2 million on the corresponding period of 2005 due to the increase in average paper prices and to the higher circulation and advertising pages of la Repubblica and its supplements, offset only in part by savings resulting from the discontinuation of the publication of TvMagazine.

Other purchases include printing materials and costs for the acquisition and production of add-on products sold in conjunction with Group publications. The €5.9 million increase is due primarily to the higher number of sales initiatives launched in the first nine months of 2006 and the resulting higher production costs of add-on products. Services received

Jan - Sept 2005

Jan - Sept 2006

Printing of newspapers and magazines (41.4) (42.0)Other printing costs (25.7) (28.7)Promotions (33.4) (28.9)Distribution costs (23.7) (25.1)Publishers’ fees (13.0) (12.0)Agent and agency fees (21.8) (24.2)Rights (27.9) (32.5)Other operating costs (124.8) (134.1)TOTAL SERVICES RECEIVED (311.6) (327.5)

Costs incurred in the Quarter for the printing of newspapers and magazines are in line with the corresponding period in the previous year. Higher consumption linked to full color printing and the higher circulation of la Repubblica and periodicals, were in fact offset by savings resulting from the choice made to manage internally (from April 2005) printing activities of the Padua plant. Other printing costs relate to the printing of add-on products. The €3 million increase on the first nine months of 2005 reflects higher quantities produced and published.

Promotions decline by €4.6 million on the first nine months of 2005 as in such period they included costs incurred for the launch of the by-weekly TV Magazine and monthly magazine XL.

Distribution costs grow by €1.4 million due primarily to higher transport costs relating to add-on products distributed with newspapers and periodicals of the Group.

Rights include royalties paid for add-on products, radio and television broadcasting rights and reproduction rights for contents of internet sites. The €4.6 million increase is due to higher rights paid for book collections, CDs and DVDs sold in conjunction with la Repubblica and L’espresso.

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The €9.3 million increase in other operating costs is connected with the launch of XL and Metropoli, in addition to the development of RepubblicaTV and of All Music’s new programming. Other operating charges These include primarily accruals to provisions for risks and charges, extraordinary losses and the write-down of receivables. They are in line with the first nine months of 2005. Personnel costs Personnel costs amount to €213.5 million, up €6.2 million on the same period in 2005, due to the combined effect of automatic salary increases, the hiring by the Padua division of Finegil Editoriale of personnel of the former printing cooperative, and the increase in personnel for the development of new projects (XL, Metropoli and RepubblicaTV). In the first nine months of 2006, the item includes also €3.4 million relating to personnel of All Music (€2 million in the same period of 2005 but just from April to September). Depreciation, amortization and write-downs Depreciation and write-down costs amount to €30.3 million, down €1.8 million on the first nine months of 2005 due primarily to the upward revision of the expected useful life and, consequently, of the depreciation period (from 5 to 10 years), of the rotary press owned by subsidiary Rotosud. Financial income (expense) Financial income amounts to €15.1 million, down €2.3 million on the first nine months of 2005 due primarily to the decline in interest rates applicable to existing financial debt.

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BALANCE SHEET Intangible assets amount to €640.4 million, up €2.4 million on December 31, 2005 due primarily to expenditure made on radio frequencies by subsidiary Elemedia (with a net balance between acquisitions and disposals of 18 additional base radio stations as compared with December 31, 2005). Property, plant and equipment amount to €234.4 million, down €15.5 million on December 31, 2005 (€250 million), as depreciation charges (€28.7 million) more than offset net capital expenditure (€13.1 million) for the period. Investments valued at equity amount to €30.1 million, up €2.1 million on €28 million at December 31, 2005 due to the acquisition from Editrice La Stampa of a 40% share in Editoriale Corriere di Romagna, owner of newspaper Corriere di Romagna. Non-current receivables amount to €3.2 million and relate to security deposits and tax receivables on advances paid on Employee termination indemnity. The €0.6 million increase on December 31, 2005 is due mainly to the acquisition from Cooperativa Editoriale Giornali Associati of an option giving the right to the Espresso Group to acquire within a term of three years the whole capital stock of Editoriale Corriere di Romagna. Deferred tax assets amount to €57.1 million and include temporary differences between amounts reported in the accounts and those recognized for tax purposes. The €9.6 million increase on December 31, 2005 is due to the recording of deferred tax assets on accumulated losses of subsidiary Elemedia, part of which were recorded in 2005 and will be recorded in full by the end of 2006. Inventories amount to €33.4 million and include inventories of paper, printing materials, publications and add-on products. Trade receivables amount to €232.4 million, down €34 million on December 31, 2005 due to seasonal swings in the collection of advertising receivables. Tax receivables amount to €58.5 million, in line with €59.9 million at December 31, 2005. The use in the period of tax credits on capital expenditure (Law 62/2001, Law on Publishing”) and those on paper purchases (Law 311, December 30, 2004), in addition to the receivables on tax advances refunded by Parent Company CIR to Elemedia at the end of 2005 in the context of the tax consolidation procedure, were offset by a different recording of the income tax (Ires) balance with CIR.

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At December 31, 2005, income taxes receivable were in fact reported net of the theoretical tax expense, while at September 30, 2006 receivables and payables emerging at the time of payment of the first advance installment were recorded separately. Other receivables amount to €25 million and include €8.6 million of subsidies on interest charges relating to loans stipulated at the end of 2005, amounting to €112 million. The €2.3 million increase on December 31, 2005 is due primarily to pre-paid rights for the distribution of add-on products not yet distributed and rights for the broadcasting of television programs of All Music to be aired in the last quarter of the year, in addition to accrued costs incurred in the production of the test issue of the new Velvet magazine, to be launched on November 9. Cash and cash equivalents, held in short-term bank deposits, grow by €14.1 million on December 31, 2005 due to the positive cash flow generated by operations. Shareholders’ Equity amounted at September 30, 2006 to €535.6 million (down from €560.8 million at December 31, 2005), of which €525 million belonging to the Group (€550 million at the end of 2005), and €10.6 million to minority interests (€10.8 million at December 31, 2005). Treasury stocks held by the Parent Company at September 30, 2006, whose value is netted from the Shareholders’ Equity, amounted to 10,900,000 shares, representing 2.5% of the share capital. Non-current financial debt amounts to €422.4 million and includes the €300 million bond issued on October 27, 2004, in addition to 10-year subsidized loans stipulated in the last quarter of 2005. Provisions for current and non-current risks and charges decline by €0.9 million due to the reduction in the provision for early retirement incentives accrued in 2005 as a result of the implementation of corporate restructuring plans of subsidiaries Ksolutions and Editoriale FVG. The provision for Employee termination indemnity and other retirement benefits amount to €106.9 million (€105 million at December 31, 2005), covering all benefits accrued by personnel up to September 30, 2006. Deferred tax liabilities amount to €108 million (€102.6 million at December 31, 2005) and include about €44 million relating to the tax effect of the recording of television frequencies of All Music.

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Current financial debt amounts to €37.1 million, up €12.1 million on December 31, 2005 due to interest accrued on the bond issue and the higher principal repayment installments to be made in the next 12 months as a result of the expiration of the pre-amortization period provided for in the subsidized-loan contracts stipulated in 2005, in addition to the reduction in subsidiary A.Manzoni&C.’s bank debt. Trade payables amount to €164.7 million, down €32 million due to the reduction in payables on capital expenditure (down €10.1 million) as a result of the payment of the balance due on the acquisition of full color rotary presses, and a reduction in payables on purchases of paper, printing materials, finished products and promotions (down €19.4 million), affected by the lower volume of add-on products produced and launched in the summer as compared with those launched in the last part of the year. Tax payables amount to €52.4 million, up €36.3 million due to Ires (corporate) and Irap (local) taxes payable for the period. As mentioned, at December 31, 2005, the theoretical tax expense was netted against the related tax credit. Other payables amount to €84.4 million, down €5.7 million on December 31, 2005 due to the reduction in payables to personnel and social security institutions, settled at the beginning of the year.

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