_________________________________________________________ Annual Financial Report at 31 December 2015

Cairo Communication S.p.A. Head office: Via Tucidide 56, Milan Share capital Euro 4,073,856.80

Translation into the English language solely for the convenience of international readers

Governance

Board of Directors

Urbano Cairo*	Chairman
Uberto Fornara	CEO
Laura Maria Cairo	Director
Roberto Cairo	Director
Marco Janni	Director
Antonio Magnocavallo	Director
Stefania Petruccioli	Director
Marco Pompignoli	Director
Roberto Rezzonico	Director
Mauro Sala	Director
Control and Risk Committee
Roberto Rezzonico	Director
Mauro Sala	Director
Antonio Magnocavallo	Director
Remuneration Committee
Antonio Magnocavallo	Director
Roberto Rezzonico	Director
Stefania Petruccioli	Director
Related Party Committee
Marco Janni	Director
Mauro Sala	Director
Stefania Petruccioli	Director

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Board of Statutory Auditors

Marco Moroni Chairman Marco Giuliani Standing auditor Maria Pia Maspes Standing auditor Emilio Fano Alternate auditor Enrico Tamborini Alternate auditor

Audit Firm

KPMG S.p.A.

* Ordinary and extraordinary executive powers exercised with single signatory, as limited by the Board of Directors

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The Group at 31 December 2015

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3

DIRECTORS' REPORT

Separate and consolidated financial statements at 31 December 2015

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Dear Shareholders,

the separate and consolidated financial statements as at and for the year ended 31 December 2015, submitted for your approval, show, respectively, a profit of Euro 8,109 thousand and a profit attributable to the owners of the parent of Euro 11,053 thousand.

In 2015, the Cairo Communication Group operated as a:

publisher of magazines and books (Cairo Editore/Editoriale Giorgio Mondadori and Cairo Publishing);
TV (La7, La7d) and Internet (La7.it, TG.La7.it) publisher;
multimedia advertising broker (Cairo Pubblicità) for the sale of advertising space on TV, in print media, on the Internet and in stadiums;
network operator (Cairo Network), for the activities of which, in 2015, work continued on the realization of the mux.

In 2015, the general economic and financial context, marked by a high degree of uncertainty, continued to report negative effects. To date, there remains uncertainty over the period required for a return to normal market conditions.

Based on AC Nielsen figures, advertising investments in Italy in 2015 amounted to approximately Euro 6.3 billion, down 0.5% versus 2014. The analysis by media shows that in 2015:

the magazine advertising market dropped by 4.1% versus 2014, when it had slid by 6.5% versus 2013,
the TV advertising market basically confirmed (0.7%) the amounts of 2014, when it had confirmed (-0.5%) those of 2013.

The uncertainty factors in the short-medium economic term also hit magazine sales figures.

In 2015, despite such economic context in general and specifically of its relevant markets (advertising and publishing), and despite the drop reported by advertising revenue also as a result of the market trend, the Cairo Communication Group:

reported in 4Q15 a strong improvement in the results trend versus the first nine months of the year, achieving gross operating profit (EBITDA) of approximately Euro 6.8 million, exceeding the result achieved in 4Q14 (Euro 6.6 million);
continued its growth strategy by launching "Nuovo TV", the new TV weekly led by Riccardo Signoretti, out on newsstands from 21 September; in the first 22 issues, it posted average sales of approximately 142 thousand copies, highly satisfactory results in line with forecasts; Thanks also to the results achieved by "Nuovo TV", on 26 January 2016, the Group launched "Nuovo e Nuovo TV Cucina", the fortnightly magazine dedicated to good food for every cooking connoisseur, presenting easy, affordable and successful recipes, sold as an option with the two weeklies "Nuovo" and "Nuovo TV", which reported average sales of approximately 165 thousand copies in the first 5 issues;

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reported a strong growth in results in the magazine publishing segment which, despite incurring total costs of Euro 1.4 million in September and October to launch the new weekly, achieved gross operating profit (EBITDA) and operating profit (EBIT) of Euro 14.6 million and Euro 13.5 million (up by approximately 6.1% and 7.7% versus 2014), confirming the high circulation levels of the publications, and worked on improving the levels of efficiency reached in containing costs (production, publishing and distribution);
continued in a persistently weak advertising market to work on strengthening the results of the rationalization and cost-curbing measures achieved in the TV publishing segment (La7) in 2013 and 2014, and succeeded in posting, in 2015 too, a positive gross operating profit (EBITDA) of approximately Euro 1.6 million; specifically, in 4Q15, gross operating profit (EBITDA), amounting to approximately Euro 4.7 million, grew by about 50% versus the figure achieved in 4Q14, thanks also to the trend in advertising sales on La7 and La7d channels in December 2015, up by more than 10% versus December 2014.

In 2015, consolidated gross operating profit (EBITDA) and operating profit (EBIT) came to Euro 17.6 million and Euro 9.3 million (Euro 28.2 million and Euro 23 million in 2014). Profit attributable to the owners of the parent came to approximately Euro 11.1 million (Euro 23.8 million in 2014).

Looking at the business segments, in 2015:

in the magazine publishing segment, gross operating profit (EBITDA) and operating profit (EBIT) came to Euro 14.6 million and Euro 13.5 million (Euro 13.8 million and Euro 12.5 million in 2014). The period under review confirmed the excellent circulation results (Euro 72.6 million versus Euro 73.4 million in 2014). Total costs of approximately Euro 1.4 million were incurred in September and October 2015 for the launch of "Nuovo TV", which was supported by an advertising campaign also at newsstands;
in the TV publishing segment (La7), the Group continued to work on strengthening the results of the rationalization and cost-curbing measures achieved in 2013 and 2014, and succeeded in posting, in 2015 too, a positive gross operating profit (EBITDA) of approximately Euro 1.6 million. Operating profit (EBIT) came to a negative figure of approximately Euro 4.9 million and benefited in the consolidated financial statements from lower amortization and depreciation of Euro 9.2 million, due to the write-down of tangible and intangible assets made in 2013 in the purchase price allocation of the investment in La7. In 2014, gross operating profit (EBITDA) and operating profit (EBIT) came to approximately Euro 9 million and Euro 6.2 million. Operating profit (EBIT) benefited in the consolidated financial statements from lower amortization and depreciation of Euro 18.2 million;

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in the advertising segment, gross operating profit (EBITDA) and operating profit (EBIT) came to Euro 1.3 million and Euro 0.7 million (Euro 5.2 million and Euro 4 million in 2014). In 2015, gross advertising sales on La7 and La7d channels amounted to Euro 140.1 million (Euro 152.9 million in 2014); specifically, thanks to the results achieved in December, the performance of advertising sales (approximately -3%) in 4Q15 showed a marked improvement versus the first nine months of the year (over -10%);
in the network operator segment, in January 2015, the Group company Cairo Network, which took part in 2014 in the tender procedure opened by the Ministry of Economic Development for the assignment of rights to use TV frequencies for digital terrestrial broadcasting systems, winning the rights to use a lot of frequencies ("mux") for a period of 20 years, entered with EI Towers S.p.A. ("EIT") into the agreements for the realization (currently in progress) and subsequent long-term technical management in full service mode (hospitality, service and maintenance, use of broadcasting infrastructure, etc.) of the mux.

Specifically, the results achieved in 4Q15 showed a clear improvement versus those reported in the course of the year. Consolidated gross operating profit (EBITDA) came to approximately Euro 6.8 million, up from the figure achieved in 4Q14 (Euro 6.6 million). Operating profit (EBIT) came to Euro 4.5 million (Euro 5.4 million in 4Q14). Profit attributable to the owners of the parent came to approximately Euro 4.4 million (Euro 4.9 million in 4Q14). Specifically, as mentioned earlier, in 4Q15, the Group's TV publishing segment (La7) achieved gross operating profit (EBITDA) of Euro 4.7 million, up by approximately 50% versus 4Q14.

Regarding weeklies, with approximately 1.8 million average copies sold in the January-December twelve-month period of 2015, the Group retains its position as the leading publisher in

copies of weeklies sold at newsstands, with an approximately 28% market share. Taking also into account the average sales of "Nuovo TV" in the first 15 issues, overall copies sold increase to approximately 1.9 million.

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In 2015, La7's average all-day share was 3.06% and 3.7% in prime time (from 8:30 PM to 11:30 PM), with a high-quality target audience. La7d's share was 0.51%. The audience figures of the channel's news and discussion programmes - such as the 8 PM newscast (5.1% from Monday to Friday), "Otto e mezzo" (5.1%), "Piazza Pulita" (4.4%), "Crozza nel Paese delle Meraviglie" (7.5%) "Servizio Pubblico" (5.5%), "Le invasioni Barbariche" (3%), "Coffee Break" (4.4%), "Omnibus" (4.3%), "La Gabbia" (3.5%), "L'aria che tira" (5.5%), "Bersaglio Mobile" (4%), "Di martedì" (5.3%), "In Onda" (4%), and "L'Aria d'estate" (4.6%) - were positive.

PERFORMANCE

Cairo Communication Group – Consolidated figures

The main consolidated income statement figures in 2015 can be compared with the figures in 2014:

(€ thousands)	31/12/2015	31/12/2014

Gross operating revenue	250,603	266,014
Advertising agency discounts	(24,021)	(25,748)
Net operating revenue	226,582	240,266
Change in inventory	33	(28)
Other revenue and income	9,403	11,627
Total revenue	236,018	251,865
Production cost	(157,505)	(163,048)
Personnel expense	(60,955)	(60,634)
Gross operating profit (EBITDA)	17,557	28,183
Amortization, depreciation, provisions and impairment losses	(8,217)	(5,221)
EBIT	9,340	22,962
Net financial income	692	1,829
Income (loss) on investments	-	(2)
Pre-tax profit	10,032	24,789
Income tax	1,040	(973)
Non-controlling interests	(18)	(24)
Profit from continuing operations attributable to the owners of	11,054	23,792
the parent
Profit/ (loss) from discontinued operations attributable to the		(1)
owners of the parent	(1)
Profit attributable to the owners of the parent	11,053	23,791

In 2015, consolidated gross revenue amounted to approximately Euro 260 million, comprising gross operating revenue of Euro 250.6 million and other revenue and income of Euro 9.4 million (Euro 277.6 million in 2014, comprising gross operating revenue of Euro 266 million and other revenue and income of Euro 11.6 million). Consolidated gross operating profit (EBITDA) and operating profit (EBIT) came to approximately Euro 17.6 million and Euro 9.3 million (Euro 28.2 million and Euro 23 million in 2014). The costs incurred in September and October 2015 to launch the new TV weekly amounted to approximately Euro 1.4 million. Consolidated profit was approximately Euro 11.1 million (Euro 23.8 million in 2014). The increase in "amortization, depreciation, provisions and impairment losses" in 2015 is attributable to the amortization of television rights acquired by La7 effective from 1 May 2013.

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As mentioned earlier, in 2015 operating profit (EBIT) in the TV publishing segment (La7) benefited in the consolidated financial statements from lower amortization and depreciation of Euro 9.2 million, due to the write-down of tangible and intangible assets made in 2013 in the purchase price allocation of the investment in La7. For the same reason, in 2014, operating profit (EBIT) in the TV publishing segment (La7) benefited in the consolidated financial statements from lower amortization and depreciation of Euro 18.2 million.

(€ thousands)	31/12/2015	31/12/2014
Consolidated statement of comprehensive income
Profit attributable to the owners of the parent	11,053	23,791
Other non-reclassifiable items
of the comprehensive income statement
Actuarial profit (loss) from defined benefit plans	(38)	(1,367)
Tax effect	10	376
Total comprehensive income	11,025	22,800

The Group statement of comprehensive income can be analyzed as follows:

The Group's performance can be read better by analyzing the 2015 results by main business segment [magazine publishing, advertising, TV publishing (La7), network operator (Cairo Network) and Il Trovatore]:

2015	Magazine Publishing	Adver tising	TV publishing	Trovatore	Network operator	Intra group	Total
(€ thousands)			(La7)		(Cairo Network)	and unallocated
Gross operating revenue	95,037	168,588	102,098	893	-	(116,013)	250,603
Advertising agency discounts	-	(24,021)	-	-	-	-	(24,021)
Net operating revenue	95,037	144,567	102,098	893	-	(116,013)	226,582
Change in inventory	33	-	-	-	-	-	33
Other income	1,803	1,151	6,349	2	98	-	9,403
Total revenue	96,873	145,718	108,447	895	98	(116,013)	236,018
Production cost	(62,640)	(136,368)	(73,684)	(684)	(143)	116,013	(157,505)
Personnel expense	(19,615)	(8,015)	(33,191)	(77)	(57)	-	(60,955)
Gross operating profit (EBITDA)	14,618	1,335	1,572	134	(102)	-	17,557
Amortization, depreciation, provisions and	(1,139)	(632)	(6,445)	-
impairment losses					(1)	-	(8,217)
EBIT	13,479	703	(4,873)	134	(103)	-	9,340
Income (loss) on investments	-	-	-	-	-	-	-
Net financial income	(16)	73	631	4	-	-	692
Pre-tax profit	13,463	776	(4,242)	138	(103)	-	10,032
Income tax	(4,658)	(726)	6,447	(51)	28	-	1,040
Non-controlling interests	-	-	-	(18)	-	-	(18)
Profit from continuing operations	8,805	50	2,205	69	(75)	-	11,054
attributable to the owners of the parent
Profit / (loss) from discontinued operations	-	-	-	-	-	(1)	(1)
Profit	8,805	50	2,205	69	(75)	(1)	11,053

2014	Magazine Publishing	Adver tising	TV publishing	Trovatore	Network operator	Intra group	Total
(€ thousands)			(La7)		(Cairo Network)	and unallocated
Gross operating revenue	96,708	181,332	110,913	834	-	(123,773)	266,014
Advertising agency discounts	-	(25,748)	-		-	-	(25,748)
Net operating revenue	96,708	155,584	110,913	834	-	(123,773)	240,266
Change in inventory	(28)	-	-		-	-	(28)
Other income	1,321	919	9,323	62	2	-	11,627
Total revenue	98,001	156,503	120,236	896	2	(123,773)	251,865
Production cost	(65,098)	(144,026)	(77,016)	(673)	(8)	123,773	(163,048)
Personnel expense	(19,120)	(7,251)	(34,221)	(42)	-	-	(60,634)
Gross operating profit (EBITDA)	13,783	5,226	8,999	181	(6)	-	28,183
Amortization, depreciation, provisions	(1,261)	(1,181)	(2,778)	-			(5,221)
and impairment losses					(1)	-
EBIT	12,522	4,045	6,221	181	(7)	-	22,962
Income / (loss) on investments	-	(2)	-	-	-	-	(2)
Net financial income	17	390	1,423	(1)	-	-	1,829
Pre-tax profit	12,539	4,433	7,644	180	(7)	-	24,789
Income tax	(4,502)	(1,795)	5,385	(61)	-	-	(973)
Non-controlling interests	-	-	-	(24)	-	-	(24)
Profit from continuing operations	8,037	2,638	13,029	95	(7)	-	23,792
attributable to the owners of the parent
Profit / (loss) from discontinued	-	-	-	-			(1)
operations					-	(1)
Profit	8,037	2,638	13,029	95	(7)	(1)	23,791

Gross operating revenue in 2015, split up by main business segment, can be analyzed as follows versus the amounts of 2014:

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Gross revenue (€ thousands) 2015 Magazine publishing Advertising TV publishing (La7) Trovatore Network operator (Cairo Network) Intra-group eliminations and unallocated Total Magazine over-the-counter sales 72,557 - - - - - 72,557 Print media advertising 20,106 26,675 - - - (19,865) 26,916 TV advertising - 137,427 98,706 - - (94,284) 141,849 Stadium signage - 3,057 - - - - 3,057 Internet advertising - 828 971 552 - (1,021) 1,330 Revenue from concession of programming schedule spaces - - 1,200 - - - 1,200 Other TV revenue - - 1,221 - - - 1,221 Subscriptions 2,831 - - - - - 2,831 Books and catalogues 971 - - - - - 971 Other revenue 4 601 - 341 - (843) 103 VAT relating to publications (1,432) - - - - - (1,432) Total gross operating revenue 95,037 168,588 102,098 893 - (116,013) 250,603 Other revenue 1,803 1,151 6,349 2 98 - 9,403 Total revenue 96,840 169,739 108,447 895 98 (116,013) 260,006

Gross revenue

2014

(€ thousands)

	Magazine publishing	Advertising	TV publishing (La7)	Trovatore Network	operator (Cairo Network)	Intra-group eliminations and unallocated	Total
Magazine over-the-counter sales	73,400	-	-	-	-	-	73,400
Print media advertising	20,931	27,687	-	-	-	(20,641)	27,977
TV advertising	-	149,636	106,991	-	-	(101,412)	155,215
Stadium signage	-	2,537	-	-	-	-	2,537
Internet advertising	-	870	759	494	-	(878)	1,245
Revenue from concession of	-	-	982	-	-	-	982
programming schedule spaces
Other TV revenue	-	-	2,181	-	-	-	2,181
Subscriptions	2,883	-	-	-	-	-	2,883
Books and catalogues	980	-	-	-	-	-	980
Other revenue	-	602	-	340	-	(842)	100
VAT relating to publications	(1,486)	-	-	-	-	-	(1,486)
Total gross	96,708	181,332	110,913	834	-	(123,773)	266,014
operating revenue
Other revenue	1,321	919	9,323	62	2	-	11,627
Total revenue	98,029	182,251	120,236	896	2	(123,773)	277,641

(€ thousands)	31/12/2015	31/12/2014
Statement of financial position
Property, plant and equipment	3,080	3,069
Intangible assets	60,917	56,871
Financial assets	1,702	1,175
Deferred tax assets	4,186	3,983
Net current assets	(17,438)	(19,071)
Total assets	52,447	46,027
Non-current borrowings and provisions	41,973	43,741
(Net financial position)/Net debt	(105,776)	(124,061)
Equity attributable to the owners of the parent	116,196	126,311
Equity attributable to non-controlling interests	54	36
Total equity and liabilities	52,447	46,027

The main figures of the consolidated statement of financial position at 31 December 2015 can be analyzed versus the situation at 31 December 2014:

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At their Meeting on 28 April 2015, the shareholders approved the distribution of a dividend of 0.27 Euro per share, inclusive of tax, with coupon detachment date on 11 May 2015.

It should be noted that in the consolidated financial statements for the year ended 31 December 2013, the acquisition of La7 had been accounted for under IFRS 3, applying the "acquisition method", by measuring the fair value of identifiable assets and liabilities acquired, considering the future profit-generating capacity of La7 S.p.A. (former La7 S.r.l.) at the date of acquisition. This approach determined:

the recognition of "provisions for future risks and charges" of Euro 21.4 million, regarding certain contracts whose non-discretionary costs to fulfill obligations exceeded the assumed economic benefits, and specific risk situations related to existing and/or performed contracts and pending and potential litigation,
the full write-down of non-current assets at the date of acquisition of La7 (30 April 2013), consisting primarily of TV broadcasting rights, and specific technical equipment, whose value was deemed unrecoverable in view of the income prospects of La7 S.r.l. at the acquisition date.

The consolidated net financial position at 31 December 2015, versus the situation at 31 December 2014, can be summarized as follows:

(€ thousands)	31/12/2015	31/12/2014	Change
Cash and cash equivalents	125,776	149,061	(23,285)
Current financial assets	-	-	-
Bank loans	(20,000)	(25,000)	5,000
Total	105,776	124,061	(18,285)

The bank loan granted by Unicredit S.p.A. and used by Cairo Network to pay part of the rights of use of the TV frequencies, is secured by a guarantee issued by the parent Cairo Communication. To analyze the major financial indicators, the consolidated asset structure at 31 December 2015 can be examined using a reclassified statement showing increasing liquidity/settlement:

	31/12/2015	31/12/2014
(€ thousands)

Non-current assets
Property, plant and equipment and intangible assets	63,997	59,940
Financial assets	1,702	1,175
Deferred tax assets	4,186	3,983
Total non-current assets	69,885	65,098
Current assets
Inventories	3,141	3,296
Trade receivables (unavailable liquid funds)	78,539	79,957
Other unavailable liquid funds	8,464	14,969
Total current operations assets	90,144	98,222
Available liquid funds	125,776	149,061
Total current assets	215,920	247,283
Invested capital	285,805	312,381

Equity attributable to owners of the parent	116,250	124,347
Consolidated liabilities
Post-employment benefits and provisions for risks and
charges	41,973	43,741
Non-current borrowing liabilities	15,000	20,000
Total consolidated liabilities	56,973	63,741
Current liabilities
Current operating liabilities	107,582	117,293
Current borrowing liabilities	5,000	5,000
Total current liabilities	112,582	122,293
Financing capital	285,805	312,381
Profit	11,053	23,791
Operating profit (EBIT)	9,340	22,962
Sales	226,582	240,266

An analysis of the financial position of the Group using the main financial indicators indicates that the Cairo Communication Group is suitably capitalized to maintain financial equilibrium in the medium/long term and has a very sound equity position as it has significant cash resources,

and generates positive results in its traditional segments, and can finance its current operations even within the dynamics of its current assets. Looking at the TV publishing segment, in 2016, the Group will continue to work on strengthening the results of the rationalization and costcurbing measures achieved in 2013 and 2015.

(€ thousands)	Description	31/12/2015	31/12/2014
Solvency indicators Current assets less current liabilities margin	Current assets-current liabilities	103,338	124,990
Current assets less current liabilities ratio	Current assets /current liabilities	1.92	2.02
Treasury margin	(Unavailable liquid funds + available liquid funds)-current	100,197	121,694
Treasury ratio	liabilities (Unavailable liquid funds + available liquid funds)/current liabilities	1.89	2.00
Non-current asset financing indicators
Own funds less fixed assets margin	Own funds – non-current assets	46,365	61,249
Own funds less fixed assets ratio	Equity /non-current assets	1.7	1.9
Own funds plus non-current liabilities less non-current assets margin	(Own funds+ non-current liabilities) – non-current assets	88,338	104,990
Own funds plus non-current liabilities less non-current assets ratio	(Own funds+ non-current liabilities)/	2.3	2.6
Financing structure indicators
Total debt ratio	(non-current + current liab.)/own funds	1.5	1.5
Financing debt ratio	Third-party funds/Own funds	0.2	0.2
Current operating assets - current operating liabilities		(17,438)	(19,071)
Profitability indicators
ROE	Profit /Own funds	9.5%	18.8%
ROI	(Inv. op. capital – op. liabilities)	5.2%	11.8%
Other indicators
Receivables turnover		105	101

Solvency indicators (liquidity) represent the ability of the company to maintain short-term financial equilibrium, to meet short-term outflows (current liabilities) with existing cash (available liquid funds) and short-term inflows (unavailable liquid funds). Specifically, available and unavailable liquid funds fully cover current liabilities. The statement is used to analyze overall dynamics and origins of cash movements.

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The financing structure and non-current assets financing indicators express the strength of equity, and the ability of the company to maintain financial equilibrium in the medium/long term, which depends on:

the methods of funding medium/long term commitments,
the composition of funding sources.

Specifically, these indicators, overall, disclose that there are no risks related to stability in the composition of the assets and liabilities/equity.

Regarding profitability indicators, the ROI (Return on Invested capital) is an indicator that expresses the level of efficiency/effectiveness of corporate management. Invested capital as the denominator is restated for an equivalent amount of liabilities without explicit maturity since their cost is substantially included in operating profit.

As further non-financial key performance indicators, the Group mainly uses data relating to circulation and audience ratings that indicate the "success" of each title and programme.

Performance for weeklies and monthlies may be analyzed as follows:

Weeklies	Dipiu'	Diva & donna	Dipiu' TV		Dipiu' TV Cucina	Nuovo	F	TV Mia
ADS average 2015	523,754	194,562		319,409	153,067	219,092	125,892	143,864
ADS average 2014	536,601	202,572		335,709	164,151	213,816	136,755	154,109

Monthlies	For Men Magazine	Natural Style	Bell'Italia		Bell'Euro pa	In Viaggio	Airone	Gardenia
ADS average 2015	45,779	49,793	51,033		24,071	21,473	55,431	56,014

These figures show how circulation managed to hold ground, despite the tough market in 2015.

ADS average 2014 54,894 50,866 51,808 26,727 26,126 61,544 56,298

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Cairo Communication S.p.A. – Parent performance

The main income statement figures of Cairo Communication S.p.A. in 2015 can be compared as follows versus those in 2014:

(€ thousands)	31/12/2015	31/12/2014


Gross operating revenue	106,026	116,595
Advertising agency discounts	-	-
Net operating revenue	106,026	116,595
Other revenue and income	528	350
Total revenue	106,554	116,945
Production cost	(101,646)	(108,636)
Personnel expense	(3,045)	(2,990)
Gross operating profit (EBITDA)	1,863	5,319
Amortization, depreciation, provisions and impairment
losses	(259)	(290)
EBIT	1,604	5,029
Net financial income	23	365
Income (loss) on investments	7,218	7,084
Pre-tax profit	8,845	12,478
Income tax	(735)	(1,891)
Profit from continuing operations	8,110	10,587

Loss from discontinued operations	(1)	(1)
Profit	8,109	10,586

In 2015, Cairo Communication continued to operate in TV advertising sales (La7, La7d and theme channels Cartoon Network, Boomerang and CNN) and on the Internet through its subsidiary Cairo Pubblicità on a sub-concession basis, invoicing advertising spaces directly to its customers and returning to Cairo Communication a share of revenue generated by resources managed on a sub-concession basis. Specifically:

gross operating revenue was approximately Euro 106.5 million (Euro 116.9 million in 2014);

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parent gross operating profit (EBITDA) was approximately 1.9 million (Euro 5.3 million in 2014);
operating profit (EBIT) was approximately Euro 1.6 million (Euro 5 million in 2014);
profit was approximately Euro 8.1 million (Euro 10.6 million in 2014).

"Income (loss) on investments" includes the dividends approved by the subsidiary Cairo Editore, amounting to Euro 7.5 million, as well as the value adjustment of the investment held in Cairo Publishing S.r.l., amounting to a negative Euro 0.2 million. In 2014, it included the dividends approved by Cairo Pubblicità, amounting to Euro 1 million, and Cairo Editore, amounting to Euro 6.2 million, as well as the value adjustment of the investment held in Cairo Publishing S.r.l., amounting to a negative Euro 0.2 million.

		The Parent's statement of comprehensive income can be analyzed as follows:
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(€ thousands)	31/12/2015	31/12/2014
Statement of comprehensive income of the Parent
Profit	8,109	10,586
Other non-reclassifiable items of the comprehensive income statement
Actuarial profit (loss) from defined benefit plans	28	(135)
Tax effect	(8)	37
Total comprehensive income	8,129	10,488

The main figures of the statement of financial position at 31 December 2015 can be analyzed versus the situation at 31 December 2014:

(€ thousands)	31/12/2015	31/12/2014
Statement of financial position
Property, plant and equipment	368	457
Intangible assets	296	320
Financial assets	23,027	23,124
Other non-current financial assets	8,963	1,663
Net current assets	3,908	7,325
Total assets	36,562	32,889
Non-current borrowings and provisions	1,452	1,485
(Net financial position)/Net debt	(9,039)	(25,768)
Equity	44,149	57,172
Total equity and liabilities	36,562	32,889

As mentioned in the notes to the consolidated statement of financial position, at their Meeting on 28 April 2015, the shareholders approved the distribution of a dividend of 0.27 Euro per share, inclusive of tax, with coupon detachment date on 11 May 2015.

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The increase in "other non-current financial assets", amounting to Euro 7.3 million, is attributable to the shareholder loan granted to the subsidiary Cairo Network S.r.l.

The net financial position of the Parent at 31 December 2015, versus the situation at 31 December 2014, is summarized as follows:

(€ thousands)	31/12/2015	31/12/2014	Change
Cash and cash equivalents	9,039	25,768	(16,729)
Current financial assets	-	-	-
Total	9,039	25,768	(16,729)

Statement of reconciliation of the Parent's equity and profit and Group equity and profit

The statement of reconciliation of equity and profit of Cairo Communication S.p.A. and Group equity and profit can be analyzed as follows:

(€ thousands)	Equity	Net profit
Financial statements of Cairo Communication S.p.A.	44,149	8,109
Elimination of the carrying amount of consolidated equity investments:
Difference between carrying amount of investments and their equity value	113,225
Share in subsidiaries' profit net of investment impairment losses		276
Effects of the purchase price allocation of La7 S.p.A.	(29,462)	9,952
Allocation of excess consideration paid:
Goodwill	7,198
Elimination of intra-group profits net of income tax	(18,914)	181
Elimination of intra-group dividends		(7,465)
Consolidated financial statements of Cairo Communication S.p.A.	116,196	11,053

Main business segment operating results and related risk factors and

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strategic opportunities

PRINT MEDIA PUBLISHING

CAIRO EDITORE - CAIRO PUBLISHING

The results achieved by Publishing in 2015 can be analyzed as follows:

Publishing	31 December	31 December
(€ thousands)	2015	2014

Operating revenue	95,037	96,708
Other income	1,803	1,321
Change in inventory	33	(28)
Total revenue	96,873	98,001
Production cost	(62,640)	(65,098)
Personnel expense	(19,615)	(19,120)
Gross operating profit (EBITDA)	14,618	13,783
Amortization, depreciation, provisions and impairment losses	(1,139)	(1,261)
EBIT	13,479	12,522
Income (loss) on investments	-	-
Net financial income	(16)	17
Pre-tax profit	13,463	12,539
Income tax	(4,658)	(4,502)
Non-controlling interests		-
Profit from continuing operations attributable to the owners of	8,805	8,037
the parent
Loss from discontinued operations	-	-
Profit	8,805	8,037

In 2015, Cairo Editore strengthened the results of its publications and worked on improving the levels of efficiency reached in containing production, publishing and distribution costs. Specifically:

Cairo Editore continued its growth strategy by launching "Nuovo TV", the new TV weekly led by Riccardo Signoretti, out on newsstands from 21 September 2015; in the first 22 issues, it posted average sales of approximately 142 thousand copies, highly satisfactory results in line with forecasts;
the operating results of the Group's publishing segment increased sharply versus 2014, despite incurring total costs of approximately Euro 1.4 million in September and October to launch the new weekly;
the period under review basically confirmed the excellent circulation results, with revenue reaching Euro 72.6 million (Euro 73.4 million in 2014);
Group gross advertising sales, which reached Euro 26.1 million, dropped by approximately 4% versus Euro 27.2 million in 2014.

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In 2015, gross operating profit (EBITDA) and operating profit (EBIT) came to approximately Euro 14.6 million and approximately Euro 13.5 million, up by approximately 6.1% and 7.7% versus 2014 (Euro 13.8 million and Euro 12.5 million), despite total costs of Euro 1.4 million incurred to launch the new weekly.

The Group weeklies confirmed the excellent circulation results achieved, with an average ADS circulation in the January-December twelve-month period of 2015 of 523,754 copies for "Settimanale DIPIU", 319,409 copies for "DIPIU' TV", 153,067 copies for "Settimanale DIPIU' e DIPIU'TV Cucina", 194,562 copies for "Diva e Donna", 219,092 copies for "Settimanale Nuovo", 125,892 copies for "F", 143,864 copies for "TVMia" and 110,105 copies for "Settimanale Giallo", reaching a total of approximately 1.8 million average copies sold, and making the Group the leading publisher in copies of weeklies sold at newsstands, with an approximately 28% market share. Taking also into account the average sales of "Nuovo TV" in the first 22 issues, overall copies sold increase to approximately 1.9 million.

Thanks also to the results achieved by "Nuovo TV", on 26 January 2016, the Group launched "Nuovo e Nuovo TV Cucina", the fortnightly magazine dedicated to good food for every cooking connoisseur, presenting easy, affordable and successful recipes, sold as an option with the two weeklies "Nuovo" and "Nuovo TV", which reported average sales of approximately 165 thousand copies in the first 5 issues.

As far as circulation is concerned, the features of the Group's publications and the Group strategy help maintain a strong lead over competitors in the current publishing market. Specifically:

cover prices of the weeklies are lower, some half the price of those of the main competitors; this gap increases appeal and allows space for potential price increases, hence for increased profitability;
sales are mostly over-the-counter (95%), with a minimum impact of revenue generated by gifts and sundry editorial material (approximately 2% on total publishing revenue, including advertising), whose sales figures have collapsed in the publishing segment; the Group has opted to focus on the quality of its publications; in 2015, gross advertising revenue generated by the Group's publications accounted for 26% (26% in 2014 too) - an extremely low figure, therefore based to a lesser extent on the economic

cycle - while the remaining 74% (74% in 2014 too) came from direct sales and subscriptions, proof of the high editorial quality of publications;

weekly magazines, which account for approximately 90% of publishing sales revenue, are sold as single copies and not bundled with other weeklies and/or dailies to bolster sales;

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the remarkable sales volumes achieved, both in absolute terms and versus Cairo Editore's competitors, make the advertising pages highly appealing in terms of advertising cost per copy sold (equal to the difference between the price of the advertising page and copies sold), currently lower than the publications of its competitors.

In 2016, Cairo Editore will continue its growth strategy with the launch of new products, and will continue to pursue opportunities to optimize production, publishing and distribution costs, with the revision and reorganization of printing processes, the optimization of bordereau costs, and the revision of a number of other corporate processes.

ADVERTISING

Looking at the advertising segment, in 2015 the Cairo Communication Group continued to operate as advertising broker - with its subsidiary Cairo Pubblicità - selling space in the print media for Cairo Editore ("For Men Magazine", "Natural Style", "Settimanale DIPIU'", "DIPIU' TV" and weekly supplements "Settimanale DIPIU' e DIPIU'TV Cucina" and "Settimanale DIPIU' e DIPIU'TV Stellare", "Diva e Donna", "TV Mia", "Settimanale Nuovo", "F", "Settimanale Giallo" and "Nuovo TV"), the Editoriale Giorgio Mondadori division ("Bell'Italia", "Bell'Europa", "In Viaggio", "Airone", "Gardenia", "Arte" and "Antiquariato") and for Editoriale Genesis ("Prima Comunicazione" and "Uomini e Comunicazione"), for the sale of advertising space on TV for La7 and La7d, and for Turner Broadcasting (Cartoon Network, Boomerang, CNN), on the Internet (La7.it, TG.La7.it, Cartoon Network.it) and for the sale of stadium signage and space at the Olimpico in Turin for Torino FC.

The results achieved by Advertising in 2015 can be analyzed as follows:

Advertising	31 December	31 December
(€ thousands)	2015	2014

Gross operating revenue	168,588	181,332
Advertising agency discounts	(24,021)	(25,748)
Net operating revenue	144,567	155,584
Other income	1	919
Change in inventory	1,151	-
Total revenue	145,718	156,503
Production cost	(136,368)	(144,026)
Personnel expense	(8,015)	(7,251)
Gross operating profit (EBITDA)	1,335	5,226
Amortization, depreciation, provisions and impairment losses	(632)	(1,181)
EBIT	703	4,045
Income (loss) on investments	-	(2)
Net financial income	73	390
Pre-tax profit	776	4,433
Income tax	(726)	(1,795)
Non-controlling interests	-	-
Profit from continuing operations attributable to the owners	50	2,638
of the parent
Loss from discontinued operations	-	-
Profit for the year	50	2,638

In 2015, total gross advertising revenue, which includes TV advertising revenue invoiced directly by La7 (Euro 5.4 million), came to approximately Euro 173 million (Euro 187.5 million in 2014). Gross advertising sales on La7 and La7d channels amounted to Euro 140.1 million (Euro 152.9 million in 2014); specifically, thanks to the results achieved in December, the performance of advertising sales (approximately -3%) in 4Q15 showed a marked improvement versus the first nine months of the year (over -10%);

Gross operating profit (EBITDA) and operating profit (EBIT) came to Euro 1.3 million and Euro 0.7 million (Euro 5.2 million and Euro 4 million in 2014).

TV PUBLISHING (La7)

The Group started operations in the TV field in 2013, following acquisition from Telecom Italia Media S.p.A. of the entire share capital of La7 S.p.A. (former La7 S.r.l.) as from 30 April 2013, with the upstream integration of its concessionaire business for the sale of advertising space, diversifying its publishing activities previously focused on magazines.

At the acquisition date, the financial situation of La7 had called for the implementation of a restructuring plan aimed at reorganizing and streamlining the corporate structure and at curbing costs, while retaining the high quality levels of the programming.

Starting from May 2013, the Group began to implement its own plan to restructure the company, achieving, as early as the May-December eight-month period of 2013, a positive gross operating profit (EBITDA) of Euro 3.7 million, and strengthened in 2014 and in 2015 the results of the cost rationalization measures implemented, succeeding in achieving in 2014 a positive gross operating profit (EBITDA) of Euro 9 million and, in 2015, despite the drop in advertising revenue, a positive gross operating profit (EBITDA) of Euro 1.6 million.

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The trend of results (gross operating profit, EBITDA) achieved by La7 is shown in the chart below:

				The results achieved by TV Publishing (La7) in 2015 can be analyzed as follows:
--	--	--	--	---------------------------------------------------------------------------------

TV publishing	31 December	31 December
(€ thousands)	2015	2014

Gross operating revenue	102,098	110,913
Other income	-	-
Change in inventory	6,349	9,323
Total revenue	108,447	120,236
Production cost	(73,684)	(77,016)
Personnel expense	(33,191)	(34,221)
Gross operating profit (EBITDA)	1,572	8,999
Amortization, depreciation, provisions and impairment losses	(6,445)	(2,778)
EBIT	(4,873)	6,221
Income (loss) on investments	-	-
Net financial income	631	1,423
Pre-tax profit	(4,242)	7,644
Income tax	6,447	5,385
Non-controlling interests	-	-
Profit attributable to owners of the parent	2,205	13,029

In 2015, the TV publishing segment (La7) achieved a positive gross operating profit (EBITDA) of approximately Euro 1.6 million. Operating profit (EBIT) came to a negative figure of approximately Euro 4.9 million and benefited in the consolidated financial statements from lower amortization and depreciation of Euro 9.2 million, due to the write-down of tangible and intangible assets made in 2013 in the purchase price allocation of the investment in La7. The increase in "amortization, depreciation, provisions and impairment losses" is attributable to the amortization of television rights acquired by La7 effective from 1 May 2013. In 2014, gross operating profit (EBITDA) and operating profit (EBIT) came to approximately Euro 9 million and Euro 6.2 million. Operating profit (EBIT) benefited in the consolidated financial statements from lower amortization and depreciation of Euro 18.2 million;

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Specifically, in 4Q15, the Group's TV publishing segment achieved a positive gross operating profit (EBITDA) of approximately Euro 4.7 million, up by approximately 50% versus the figure achieved in 4Q14, due also to the trend in advertising sales on La7 and La7d channels in December, up by more than 10% versus December 2014. Operating profit (EBIT) came to a positive figure of approximately Euro 2.8 million, and in 4Q15 benefited in the consolidated financial statements from lower amortization and depreciation of Euro 1.3 million, due to the write-down of tangible and intangible assets made in 2013 in the purchase price allocation of the investment in La7. In 4Q14, gross operating profit (EBITDA) and operating profit (EBIT) came to approximately Euro 3.1 million and Euro 2.4 million. Operating profit (EBIT) benefited in the consolidated financial statements from lower amortization and depreciation of Euro 2.8 million.

At end 2015, with a view to focusing activities also at Group level, La7 chose WebSystem 24 (24 ORE Group) for the exclusive management of advertising sales on the websites La7.it, TgLa7.it, La7d.it and on the apps TgLa7 and Crozza nel Paese delle Meraviglie, in order to also speed up revenue growth in its digital business. The contract expires on 31 December 2016 and is

renewable for a further year, subject to the achievement of important pre-established annual advertising revenue targets.

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On 23 February 2016, the Extraordinary General Meeting of La7 S.r.l. approved its transformation into a joint-stock company; the registered office, corporate object, share capital and the duration remain unchanged.

IL TROVATORE

In 2015, Il Trovatore continued operations, mainly providing technological services to develop and maintain the online platforms of the Group's companies.

NETWORK OPERATOR (CAIRO NETWORK)

As mentioned earlier, in 2014 the subsidiary Cairo Network took part in the tender procedure opened by the Ministry of Economic Development for the assignment of rights to use TV frequencies for digital terrestrial broadcasting systems, submitting its binding bid and winning the rights to use a lot of frequencies ("mux") for a period of 20 years.

In January 2015, Cairo Network and EI Towers S.p.A. ("EIT") entered into the agreements firstly for the realization and then long-term technical management in full service mode (hospitality, service and maintenance, use of broadcasting infrastructure, etc.) of the mux.

Alternative performance indicators

In this Report, in order to provide a clearer picture of the financial performance of the Cairo Communication Group, besides of the conventional financial indicators required by IFRS, a number of alternative performance indicators are shown that should, however, not be considered substitutes of those adopted by IFRS.

The alternative indicators are:

EBITDA: used by Cairo Communication as a target to monitor internal management, and in public presentations (to financial analysts and investors). It serves as a unit of measurement to evaluate Group and Parent operational performance, with the EBIT, and is calculated as follows:

Profit from continuing operations, pre tax

+/- Net finance income

+/- Share in associates

EBIT- Operating profit
- Amortization & depreciation
- Bad debt impairment losses
- Provisions for risks

EBITDA – Operating profit, before amortization, depreciation, write-downs and impairment losses

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The Cairo Communication Group also considers net financial position as a valid indicator of the Group's ability to meet financial obligations, both current and future. As can be seen in the table used above, which details the equity figures used for the calculation of Group net financial position, this figure includes cash and other cash equivalents, bank deposits, securities and other current financial assets, reduced by current and non-current bank borrowings.

Transactions with parents, subsidiaries and associates

In 2015, transactions with related parties, including with Group companies, were not considered to be atypical or unusual, and were part of the ordinary activities of Group companies. These transactions were carried out on market terms, taking account of the goods and services provided.

Information on transactions with related parties is disclosed in Note 34 to the consolidated financial statements and in Note 28 of the separate financial statements.

Main risks and uncertainties to which Cairo Communication S.p.A. and its Group are exposed

Risks associated with the general economic climate

The financial position, results and cash flows of the Cairo Communication Group may be influenced by various factors within the macro-economic environment, such as the increase or decrease of GNP, the level of consumer and corporate confidence, the advertising expenditure/GDP ratio, interest rate trends and cost of raw materials.

In 2015, the general economic and financial climate, marked by a high degree of uncertainty, continued to show its negative effects, creating an increasingly complex competitive scenario. To date, there remains uncertainty over the period required for a return to normal market conditions.

Should this situation of uncertainty continue for some time, the operations, strategy and outlook for the Group may be impacted.

To challenge the tough market scenario, the Group implemented, starting in previous periods, and also in 2015, a series of measures to increase efficiency and effectiveness of the production, publishing and distribution processes, and will continue in 2016 to benefit from the high levels of efficiency achieved. Looking at the TV publishing segment, in 2016, the Group will continue to work on strengthening the results of the rationalization and cost-curbing measures achieved in 2013-2015.

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Risks associated with advertising and publishing market trends

In 2015, the persisting short and medium-term economic uncertainty impacted negatively on the advertising market.

Based on AC Nielsen figures, in 2015 advertising investments in Italy amounted to approximately Euro 6.3 billion, down 0.5% versus 2014 (specifically, -4.1% the magazine advertising market and +0.7% the TV advertising market). The Cairo Communication Group holds approximately 3.9% of the TV advertising market (4.4% in 2014) and approximately 5.7% of the magazine advertising market (5.7% in 2014). This market share leaves the Group room enough for growth, given the high quality and significant distribution of its own titles, in particular weeklies, and of the TV resources (own and under concession), quality, circulation and audience ratings that provide significant competitive edge.

The economic climate has slowed the pace of the sale of dailies and magazines. Despite the challenging market, in 2015, it confirmed the remarkable circulation results, with revenue at Euro 72.6 million versus Euro 73.4 million in 2014.

Advertising

The Cairo Communication Group is significantly exposed to advertising sales performance, which has progressively decreased over time as a result of significant developments in the publishing business. Advertising sales are currently the main source of revenue for the TV publishing segment.

Advertising sales of the advertising segment today represent approximately 65% (approximately 65% in 2014) of total Group revenue. Considering also advertising revenue directly generated by La7 (approximately Euro 5.4 million), the impact of advertising revenue increases to 67% (approximately 68% in 2014).

Considering the Group's publishing business alone, advertising revenue in 2015 accounted for 26% - an extremely low percentage, therefore based to a lesser extent on the economic cycle - while the remaining 74% was generated by distribution and subscription revenue, demonstrating the great publishing strength of advertising products.

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The sale of advertising space is monitored daily by reference to the percentage saturation of the catchment time, average sales price and the variation from forecasts. Daily monitoring also provides/enables a review of the sales forecasts by month in order to act – with reference to print media – on advertising pages and thus on the structure of product costs.

Management's attention is focused on the definition of strategy and commercial policy to ensure an effective presentation of the high value of the product offering. The features of the resources offered represent strength for the Group in the current competitive climate.

La7 boasts an exceptional audience profile, particularly appealing in terms of advertising.

Regarding Group titles, the remarkable distribution volumes, in absolute terms and considering competition, which enabled the Group to become the leading publisher of weeklies by copies sold on newsstands, net of weeklies attached to dailies, make the advertising pages appealing in terms of advertising cost per copy sold (equal to the ratio between the price of the advertising page and the copies sold), which is currently lower than competition.

Distribution

Regarding distribution, the features of the products published by the Group as well as its strategy, are such as to build a significant competitive edge in the current climate of the publishing segment. This is largely explained by the fact that:

cover prices of the weeklies are lower, some significantly lower than those of the main competitors;
sales are mostly over-the-counter (95%), with a minimum impact (approximately 2% on total publishing revenue, including advertising) of revenue generated by gifts and sundry editorial materials;
weekly magazines, which account for approximately 90% of the total publishing segment revenue, are sold as single copies and not bundled with other weeklies and/or dailies to bolster sales.

Risks associated with extraordinary transactions

As mentioned earlier, the Group started operations in the TV field in 2013, following acquisition from Telecom Italia Media S.p.A. of the entire share capital of La7 as from 30 April 2013, with the upstream integration of its concessionaire business for the sale of advertising space, diversifying its publishing activities previously focused on magazines.

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In 2016, the Group will continue to work on strengthening the results of the rationalization and cost-curbing measures achieved in 2013-1514.

Risks associated with developments in the media segment

The media segment has seen an increase in the level of penetration of new communication resources, in particular the Internet, and the new unencrypted theme channels on the digital terrestrial platform, together with technology innovations that may lead to changes in demand by consumers, who in future will probably request personalized content by even directly selecting the source. As a result, this may change the relative importance of the various media and audience distribution, with consequent greater market fragmentation.

Whereas the development of the Internet may impact on the share of print media, mainly on dailies and to a much lesser extent on the weeklies published by the Group, the growth of the Internet and of digital theme television may impact on the generalist TV audience. Any development of new TV channels by the Group may allow it to take advantage of this situation.

The Group constantly monitors the level of penetration of new resources as well as changes in the business model related to the distribution of content available to assess the opportunity to develop the various distribution platforms, with particular attention to the Internet.

Developments in the regulatory framework are also continually monitored for the media segment and their disclosure within the Group is ensured.

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Risks associated with Management and "key staff"

The Group's success depends on the talents of its executive Directors and other members of Management to efficiently manage the Group and the individual business segments.

Editors and TV personalities, too, have a significant role in the titles published and programmes hosted.

The loss of the services of an executive Director, editor, TV personality or other key resource without an appropriate substitute, as well as the difficulty in attracting and retaining new and qualified resources, may impact negatively on the prospects, operations and financial results of the Group.

Risks associated with retaining the value of the brands of the Group titles and TV programmes

The Cairo Communication Group publishes a number of highly successful Italian weeklies, "Settimanale Dipiù" (523,754 copies), "DipiùTV" (319,409 copies), "Settimanale Dipiù e DipiùTV Cucina" (153,067 copies), "TVMia" (143,864 copies) "Diva & Donna" (194,562 copies), "Settimanale Nuovo" (219,092 copies), "F" (125,892 copies), Settimanale Giallo" (110,105 copies) and "Nuovo TV" (approximately 142,000 copies in the first 22 issues). Among the monthlies, "Gardenia", "Bell'Italia", "For Men Magazine", "Natural Style" and "Arte" are leaders in their own segment.

The audience figures of the channel's news and discussion programmes - such as the 8 PM newscast (5.1% from Monday to Friday), "Otto e mezzo" (5.1%), "Piazza Pulita" (4.4%), "Crozza nel Paese delle Meraviglie" (7.5%) "Servizio Pubblico" (5.5%), "Le invasioni Barbariche" (3%), "Coffee Break" (4.4%), "Omnibus" (4.3%), "La Gabbia" (3.5%), "L'aria che tira" (5.5%), "Bersaglio Mobile" (4%), "Di martedì" (5.3%), "In Onda" (4%), and "L'Aria d'estate" (4.6%) - were positive.

The value of Group brands and TV programmes must be continuously protected by maintaining the current level of quality and innovation.

The Group publishing strategy has always been focused on the quality of its products, driven by the efforts of Management and the editors. Under the agreements with the directors, a significant part of their remuneration may be linked to the results of distribution, audience ratings and/or sale of advertising space of the titles and TV programmes.

Risks associated with business with suppliers

A number of the Group's production processes, particularly magazine printing and use of broadcasting capacity in the TV publishing segment, are outsourced. The outsourcing of production processes requires close cooperation with the suppliers which, on one hand, can result in economic benefits in terms of flexibility, efficiency and cost reduction, but on the other hand, results in the Group's reliance on these suppliers.

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Risks associated with legal and regulatory developments

La7's activity is mainly governed by Legislative Decree no. 177 of 31 July 2005 as amended by Legislative Decree no. 44 of 15 March 2010 (hereinafter Legislative Decree no. 177/05 as amended, also called "Consolidated Act"), which sets the general principles for the provision of audiovisual and radio media services.

With regard to the Automatic Numbering Plan, the numbers currently in use (7 for La7 and 29 for La7d) are those assigned by the Ministry of Economic Development in 2010, under AGCOM resolution 366/2010/CONS. The Resolution had been challenged by Telenorba and other local broadcasters, with partial annulment specifically regarding the assignment of numbers 7-8 and 9 by the Council of State through Ruling 4660/12.

On 21 March 2013, the Communications Authority (AGCOM) unanimously approved the New Automatic Numbering Plan for digital terrestrial television (LCN) by Decision 237/13/CONS. The decision confirmed, for national traditional broadcasters, the assignment of numbers 0-9 of the first block of LCN numbering (see p. 39-40 and 44 of AGCOM Decision no. 237/13/CONS).

Deeming that the New Plan evaded the Council of State's ruling (given that it confirmed assignment to the national traditional broadcasters of numbers 0-9 in the first block of LCN numbering), Telenorba filed an appeal for compliance with ruling n. 4660/12. The appeal was upheld by the Council of State (ruling no. 6021 of 16 December 2013), which declared the New Numbering Plan void (pursuant to Resolution 237/2013) for numbers from 8 to 9, and appointed a special commissioner tasked with verifying the correct assignment of numbers from 8 to 9 within 90 days from the beginning of the proceedings, which started on 24 February 2014. However, since the partial annulment of the previous Plan initially included number 7, on initiation of the procedure, the special commissioner - inappropriately in the opinion of La7 also referred to number 7, which instead, under the Ruling, is not subject to verification by the

Commissioner. AGCOM has in the meantime re-extended the previous Plan (based on current assignments), as also suggested in the State Council's ruling, in order to avoid a regulatory void.

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In execution of ruling no. 6021, the Special Commissioner launched a public consultation on an outline provision named "Automatic numbering plan of digital terrestrial free-to-air and pay TV channels, procedures for allocating numbers to providers of audiovisual services authorized to broadcast audiovisual content using digital terrestrial technology and relating conditions of use." Telenorba, All Music and AGCOM have challenged the acts adopted by the Commissioner, lodging enforcement reviews and claims before the State Council (the court of compliance), arguing that the Commissioner had exceeded the requirements of sentence no. 6021 of 2013.

Following orders n. 5041, 5127 and 5859 of 2014 and n. 27 of 2015, under which the Council of State has given the Commissioner certain regulations to discharge the task, the Commissioner adopted a new outline provision (no. 7 of 2015), accompanied by an explanatory report.

With such orders, deeming his task completed, the Commissioner stated that LCN numbers 7, 8 and 9 established by AGCOM in the first plan of 2010 (Resolution no. 366/2010/CONS) should be confirmed. Specifically, the Commissioner determined that: a) in light of user preferences and habits at the time of the switch-off, numbers 7, 8 and 9 were to be assigned to a national broadcaster; b) in March 2010, seven national private commercial analogue broadcasters and three public channels were in operation (including La7); c) 9 broadcasters had a generalist schedule (including La7).

Telenorba lodged a complaint with the Council of State requesting the annulment of or a declaration of invalidity and/or ineffectiveness of the Special Commissioner's Resolution No. 7 of 2015, and relating annexes (and of any other resolutions adopted by the Commissioner to the extent that Telenorba is concerned). All Music also lodged a complaint against the resolution and the report recently adopted by the Commissioner.

Through sentence no. 432 of 2016, the Council of State ruled for the fairness of the Commissioner's provision, specifically on the point where all three positions - 7, 8, 9 - were to be assigned to national, not local, broadcasters, and confirmed that Telenorba, as a local broadcaster, had no entitlement to be assigned any such positions.

Through concurrent ruling no. 1836 of 2016, the joint session of the Court of Cassation overturned ruling no. 6021 of 2013 of the Council of State (which, as explained, had annulled

AGCOM's 2013 Plan and had appointed the Commissioner), owing to violation of the outer limits of administrative jurisdiction.

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To date, the effects of the Court of Cassation's ruling on AGCOM activities (and the Commissioner's) are difficult to predict, especially with regard to the effectiveness of AGCOM resolutions no. 366/2010/ Cons and no. 237/13/Cons.

In any case, in the opinion of La7 and its legal advisers, further assessments on number 7 are unlikely to be made, nor will the allocation of this number to La7 be revoked.

Liquidity risk

The Cairo Communication Group is not exposed to liquidity risk, in that on one hand, significant financial resources are held, with a net available positive financial position of Euro 105.8 million whilst on the other hand, it generates positive results in its traditional segments, and can finance its current operations within the dynamics of its current assets, even in the current market. An analysis of the company's equity structure shows both liquidity, or the ability to maintain financial stability in the short term, and solidity, or the ability to maintain financial stability in the medium/long term.

It is Group policy to invest available cash in on-demand or short-term bank deposits, properly spreading the investments, essentially in banking products, with the prime objective of maintaining a ready liquidity of the said investments. The investment products are selected on the basis of their credit rating, their reliability and the quality of services rendered.

Interest rate and currency risk

The Cairo Communication Group is not exposed to interest rate and currency risk, in that on one hand, the net financial position shows a positive figure, while on the other hand, Group operations are carried out exclusively in Italy, so all revenue is generated in Italy and main costs are incurred in Euro.

Interest rate risk only affects the yield on available cash.

Movements in the cash flows and the liquidity of Group companies are centrally monitored and managed by Group Treasury in order to guarantee effective and efficient management of financial resources.

Given the limited exposure to both interest rate and FOREX risk, the Group limited use of financial hedging instruments, to hedge currency risk on the acquisition of TV rights from film companies.

Credit risks

The Group is exposed to credit risk, primarily in relation to its advertising sales activities. This risk is however mitigated by the fact that exposure is distributed across a large number of customers and that credit monitoring and control procedures are in place. In terms of concentration, the top 10 customers represent approximately 11% (12% in 2014) of total sales, whilst the top 100 customers represent 50% (54% in 2014). These ratios are basically in line with prior years.

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The persisting uncertainty factors in the short and medium term, along with the resulting credit squeeze, may of course impact negatively the quality of credit and general payment terms.

The publishing segment, on the other hand, presents limited exposure to credit risk as publishing revenue is basically generated by one single party - the Group - while for distribution revenue, the distribution contract provides for an advance payment equal to a highly significant percentage of the estimated sales of each magazine.

The Group's maximum theoretical exposure to credit risks at 31 December 2015 is given by the carrying amount of trade receivables and other recognized current assets totaling Euro 83.8 million (88.4 million at 31 December 2014), and by the nominal amount of guarantees given on third-party debts or commitments as indicated in Note 33.

The credit risks associated with cash and cash equivalents, with a maximum theoretical exposure of Euro 125.8 million (Euro 149.1 million at 31 December 2014), are considered irrelevant as they are deposits spread across various banks.

Risks associated with litigation

The notes on "other information" (Note 33 to the consolidated financial statements) contain information on a number of cases of litigation. The evaluation of the potential legal and tax liabilities requires the Group to use estimates and assumptions in relation to forecasts made by the Directors, based upon the opinions expressed by the Group's legal and tax advisers, in relation to the probable cost that can be reasonably considered to be incurred. The actual results may vary from these estimates

Report on corporate governance and ownership structure

1 Issuer profile

Cairo Communication has adopted a traditional system of administration and control.

The Shareholders are the corporate body that expresses the will of the shareholders through its resolutions at its meeting. It typically appoints the Chairman.

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The Board of Directors has the broadest management powers to achieve corporate objects, within the rules, including self-regulatory rules, that apply. Elected every three years at the Shareholders' Meeting, it appoints one or more Chief Executive Officers and determines their powers, and those of the Chairman.

The Remuneration Committee and the Control and Risk Committee, set up within the Board of Directors, comprise members of the Board of Directors and provide consultative and proposalmaking functions to the Board of Directors. The bodies now also include the Related Party Committee, provided for by the procedures for related party transactions adopted in 2010. For the following reasons, it was deemed not to establish an Appointment Committee.

The Board of Statutory Auditors is the body with the functions of overseeing observance of the law and the company bylaws and management control.

The audit process is entrusted to an Audit Firm registered in the relevant professional roll and is the Company's external control body. The Firm checks, throughout the year, that the company's accounts are kept properly and that accounting entries accurately reflect its operation. It is also its responsibility to ensure that the separate and consolidated financial statements match the accounting entries and verifications performed, and that these accounting documents conform to the governing rules.

The duties and methods of operating of these corporate bodies are governed by the law and regulations, by the company bylaws and by the decisions adopted by relevant bodies, in conformity with the regulations set forth in the Corporate Governance Code drawn up by the Corporate Governance Committee of Borsa Italiana S.p.A. in July 2014¹ .

The company bylaws are available at the registered office and in the corporate governance section on the Company's website www.cairocommunication.it.

2 Information on ownership structure (pursuant to art. 123 bis, paragraph 1 of the Consolidated Finance Act – TUF) at 14 March 2016

a) Share capital structure (pursuant to art. 123 bis, paragraph 1, letter a), T.U.F.)

¹ The version of the Corporate Governance Code for Listed Companies approved in July 2015 will come into effect, as provided for therein, by the end of the year beginning in 2016.

At 14 March 2016, the share capital of Cairo Communication S.p.A. was Euro 4,073,856.80, fully paid and subscribed, and it comprised 78,343,400 shares, with no indication of the nominal amount.

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	N° shares	% of share capital	Listed	Rights and obligations
			Borsa Italiana	In accordance with
Ordinary shares	78,343,400	100%	Star Segment	the law and company bylaws

No financial instruments have been issued attributing the right to subscribe to newly-issued shares.

No share incentive plans are foreseen involving share capital increases, even on a freely allocated basis.

b) Restrictions on transfer (pursuant to art. 123 bis, paragraph 1, letter b), T.U.F.) There are no restrictions on the transfer of securities, except as required by the provisions of representation, legitimization, circulation of the company investment required for securities

c) Significant shareholdings (pursuant to art. 123 bis, paragraph 1, letter c), T.U.F.) At 14 March 2016, based on the information received pursuant to art. 120 of the T.U.F. and the update of the shareholders' register, the principal shareholders in Cairo Communication S.p.A. were as follows:

Declarer	Direct shareholder	% of ordinary capital	% of voting capital
URBANO ROBERTO CAIRO	U.T. COMMUNICATIONS S.p.A.	44.876%	44.876%
URBANO ROBERTO CAIRO	U.T. BELGIUM HOLDING S.A.	15.710%	15.710%
URBANO ROBERTO CAIRO	URBANO ROBERTO CAIRO	12.387%	12.387%

d) Securities carrying special rights (pursuant to art. 123 bis, paragraph 1, letter d), T.U.F.)

No securities carrying special controlling rights have been issued.

traded on regulated markets.

e) Employee shareholdings: voting right procedures (pursuant to art. 123 bis, paragraph 1, letter e), T.U.F.)

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There are no employee shareholdings and/or voting rights procedures.

f) Restrictions on voting rights (pursuant to art. 123 bis, paragraph 1, letter f), T.U.F.) There are no restrictions on voting rights other than those provided by law.

g) Shareholders' agreements (pursuant to art. 123 bis, paragraph 1, letter g), T.U.F.) No shareholders' agreements are in place pursuant to art. 122 of the T.U.F.

h) Change of control clauses (pursuant to art. 123 bis, paragraph 1, letter h), T.U.F.) and by-law provisions on takeover bids (pursuant to articles 104, paragraph 1 ter, and 104 bis).

The Parent Company and/or its subsidiaries have signed no significant agreements that come into effect, are altered or terminate in the event of a change in the control of the contracting entity.

As explained in the notes to the statements in the consolidated financial statements (Note 26), the bank loan of initial Euro 25 million, granted by Unicredit S.p.A. in July 2014 to Cairo Network S.r.l. (wholly owned by Cairo Communication S.p.A.) for the purchase of the rights to use television frequencies, provides for early repayment in the event of a change of control of Cairo Network.

Moreover, the bylaws:

do not depart from the provisions on the passivity rule provided by art. 104, paragraphs 1 and 2, of the TUF;
do not provide for the enforcement of the neutralization rule set out in art. 104 bis, paragraphs 2 and 3, of the TUF.
i) Delegations to increase share capital and authorization to acquire and dispose of treasury shares (pursuant to art. 123 bis, paragraph 1, letter m), T.U.F.)

There are no delegations to increase the share capital pursuant to art. 2443 of the Italian Civil Code or to issue equity financial instruments.

At their meeting on 28 April 2015, after revoking a similar resolution adopted on 29 April 2014, the Shareholders approved the proposal to acquire and dispose of treasury shares in accordance with art. 2357 and subsequent articles of the Italian Civil Code, for the purpose of stabilizing the Company share price and sustaining liquidity, and, if deemed necessary by the Board of Directors, through an independent intermediary, of establishing a "shares stock" as provided in Consob regulation 16839/2009. The Board was authorized to acquire treasury shares up to the maximum number permitted by law, for a period of 18 months from the date of authorization, by use of available reserves, including the share premium reserve, as resulting from the last approved annual financial statements. Specifically, the Board of Directors will be authorized to acquire treasury shares on one or more occasions, acquiring shares directly on the market and through authorized intermediary – in accordance with the procedures provided by art. 144 bis, paragraph 1, letter b of the Issuer Regulations and relevant Instructions – and, in case such operations are carried out, according to accepted market practices, pursuant to the regulations introduced by Consob Resolution No. 16839/2009. Minimum price and maximum acquisition price per share are set at an amount equal to the average official purchase price of the share on Borsa Italiana S.p.A. for the 15 working days preceding the purchase, respectively reduced or increased by 20%. In case such operations are carried out according to accepted market practices under Consob Resolution 16839/2009, the purchase of treasury shares shall be subject to further limits, including price limits, provided therein. The Board was authorized to sell, on one or more occasions, any acquired treasury shares, setting the minimum sale price per share no lower than the minimum price calculated following the criteria adopted for their purchase. Should the treasury shares be sold according to accepted market practices under Consob Resolution 16839/2009, the sale of treasury shares shall be subject to further limits, including price limits, provided therein.

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In 2015, as part of the share buy-back plans, no treasury shares were sold or purchased. At 31 December 2015, Cairo Communication held a total of n. 779 treasury shares, or 0.001% of the share capital, subject to art. 2357-ter of the Italian Civil Code.

l) Management and coordination

Cairo Communication, though subject to rightful control by U.T. Communication S.p.A. – which is directly controlled by Urbano R. Cairo – is not subject to the management and coordination of such company, nor of any other entity. The Board of Directors of Cairo Communication has come to such conclusion taking account of the absence of further elements (with respect to mere control) that may lean towards the existence of a unitary direction and the

circumstance that UT Communication S.p.A. is, de facto, a holding company and has never actually exercised any policy-making functions and/or interference in the management of the Issuer, restricting its activities to the management of its own controlling investment.

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***

It should be noted that information prescribed by art. 123-bis, paragraph 1, letter (i) ("agreements between the Company and the directors, members of the management board or supervisory board providing for indemnity in the event of resignation or unjust dismissal …." is found in the section of the Report on Remuneration, published pursuant to art. 123-ter of the TUF, and that there is no information to disclose under art. 123-bis, paragraph 1 letter (l).

3 Compliance (pursuant to art. 123 bis, paragraph 2, letter a), T.U.F.)

The Cairo Communication Group has adopted a Corporate Governance Code for Listed Companies, the 2014 version² of the Corporate Governance Committee and promoted by Borsa Italiana, published on the website of Borsa Italiana at http://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/codice2014.pdf. No Group company is subject to non-Italian law that would influence the structure of Corporate Governance.

4 Board of Directors

4.1 Appointment and replacement of directors and changes to the bylaws (pursuant to art. 123 bis, paragraph 1, letter h), T.U.F.)

The Board of Directors is appointed by the Shareholders on the basis of lists presented by shareholders pursuant to articles 14 and 15 of the bylaws.

Under the bylaws:

lists must be filed with the registered office within the 25th day before the date on which the Shareholders' Meeting is called to decide on the appointment of the members of the Board of Directors, and made available to the public at the registered office, on the Company website and in accordance with the procedures provided for by the law and regulations, at least 21 days before the date of the Meeting;
lists admitted to the voting are those submitted by shareholders who, either individually or jointly with other shareholders, represent at least 2.5% of the shares entitled to vote in the

² See note on p. 34.

ordinary meeting, or other minimum amount set by Consob, which was set at an amount equal to 2.5% by resolution 19499 of 28 January 2016). Ownership of the minimum stake required for submission of the lists is determined on the basis of the shares recorded in the name of the shareholder on the date the lists are filed with the Company. The relevant prescribed certification may also be submitted subsequent to the filing, provided submission is made within the time limit prescribed for publication of the lists;

candidates shall appear in the lists in sequential order and shall be in a number no higher than the maximum amount of directors provided under the bylaws (eleven);
each list must contain candidates possessing the requirements of independence referred to in art. 147-ter, paragraph 4, of the TUF, and further requirements set forth in the Corporate Governance Code of Borsa Italiana S.p.A., in the minimum amount established by the provisions of law and regulations, taking also into account the share listing segment, and where the number of candidates is equal to or higher than three, the minimum number of candidates of the less represented gender under the applicable law and regulations in force;
in order to be admitted to the voting, each list must be accompanied by detailed information on the professional and personal qualifications of the candidates (including gender), by the statement on possession of the requirements of independence prescribed by law and by further requirements set forth in the Corporate Governance Code of Borsa Italiana S.p.A., and by indication of the identity of the shareholders who have submitted the lists and total percentage of shares held;
for the purposes of the appointment of the directors, account is taken exclusively of lists that have received at least half the votes established by the bylaws for the submission of lists;
Should more than one list receive at least half the votes as required by the bylaws for submission of the lists, candidates appointed to the position of director shall be those appearing in the list that has received the highest number of votes, except for the last candidate appearing in the list and the candidate appearing on top of the list that has received the second-highest number of votes that is in no way, even indirectly, connected with the shareholders that have submitted or voted the list that has received the highest number of votes, subject to the possession of the requirements of independence set forth in art. 148, paragraphs 3 and 4 of the TUF and of further requirements set forth in the Corporate Governance Code of Borsa Italiana S.p.A., failing which the appointed candidate, in his/her place, shall be the first candidate appearing in sequential order on the

list possessing the foregoing requirements of independence. Should two or more lists reach a tie, the prevailing list shall be the list possessing the largest shareholding or, in the event of a tie, the highest number of shareholders. Should only one list be submitted or should one list obtain a number of votes equal to at least half the votes set out in the bylaws for the submission of a list, all the directors shall be drawn from that list. Should no list obtain the percentage of votes set out in the above paragraph of this article, all directors shall be drawn from the list that has obtained the highest number of votes;

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according to the above procedure, should the number of directors of the less represented gender be less than the requirements of the laws in force, as many candidates as necessary, elected among those who have come last in the order of preference in the majority list shall be excluded, replacing them with the candidates possessing the necessary gender characteristics drawn from the same list, based on the sequential order of listing. Should this procedure fail to complete the number of directors to elect, the missing directors shall be immediately elected, in compliance with gender requirements – by the Shareholders' Meeting through a resolution passed by simple majority on the proposal of the attending shareholders;
should no list be submitted or admitted, the directors shall be elected by the Shareholders' Meeting by relative majority vote, in compliance with the regulations in force on the less represented gender, in the context of the nominations submitted by the shareholders and filed with the registered office at least seven days before the date set for the Shareholders' Meeting on first call, together with the full information referred to in paragraph seven of this article.

Succession planning

To date, the Board has not adopted any succession plans regarding the executive directors. The Board of Directors is, in any event, the body empowered to prepare and manage early replacement.

4.2 Composition (pursuant to art. 123 bis, paragraph 2, letter d), T.U.F.)

At their meeting on 29 April 2014:

	of Di Bo ard tor rec s								Co ntr	ol a nd	ati Re mu ner	on	Re lat ed Pa	rty
									Ris	k	Co itte mm e		Co itte mm e
													Co mm	itte e
Rol e	Mem ber s	Yea r of	Dat e of firs t	Fro m	Unt il	List	Exe c.	Non -exe c.	Ind ep. as	Ind ep. as	N. o ther	%	**	(*)	**	(*)	**	(*)
		birt h	oint t app men			**			Cod per e	TUF per	ts pos
			*								***
Ch airm ◊ an	Urb Ca iro ano	195 7	09/ 07/ 199 7	01/ 01	31/ 12	M	X	-	-	-	-	5/5	-	-		-	-	-
CE O	Ub o F ert orn ara	195 9	22/ 04/ 199 9	01/ 01	31/ 12	M	X	-	-	-	-	5/5	-	-	-	-	-	-
Dir ˙ ect or	Ma Po ign oli rco mp	196 7	23/ 05/ 200 3	01/ 01	31/ 12	M	X	-	-	-	-	5/5	-	-	-	-	-	-
Dir ect or	Lau ra M ari a C air o	197 3	29/ 04/ 20 14	01/ 01	31/ 12	M	-	X	-	-		5/5
Dir ect or	ber to C air Ro o	196 5	22/ 04/ 199 9	01/ 01	31/ 12	M	-	X	-	-	-	5/5	-	-	-	-	-	-
Dir ect or	An io M val lo ton agn oca	193 7	31/ 05/ 200 0	01/ 01	31/ 12	M	-	X	-	-	-	4/5	M	4/4	P	2/2	-	-
Dir ect or	Ste fan ia P cci oli etru	196 7	29/ 04/ 20 14	01/ 01	31/ 12	M	-	X	X	X	1	5/5	-	-	M	2/2	M	1/1
Dir ect or	ber oni Ro to R ezz co	194 1	20/ 11/ 200 0	01/ 01	31/ 12	M	-	X	X	X	-	5/5	P	4/4	M	2/2	-	-
Dir ect or	Sa la Ma uro	194 4	28/ 04/ 20 11	01/ 01	31/ 12	M	-	X	X	X	-	5/5	M	4/4	-	-	M	1/1
Dir ° ect or	Ma Ja nni rco	193 7	31/ 05/ 200 0	01/ 01	31/ 12	M	-	X	X	X	3	5/5	-	-	-	-	P	1/1
N. of eti me ng	s h eld in 20 15:					Bo D:	5		CR	C: 4			RC : 2			RP	C: 1

Quorum required for the submission of lists by non-controlling interests for the appointment of one or more members: 2.5%

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Notes:

Regarding the symbols appearing in the "Position" column:

˙ This symbol indicates the director in charge of the internal control and risk management system.

◊ This symbol indicates the key person in charge of the management of the Issuer (Chief Executive Officer or CEO).

° This symbol indicates the Lead Independent Director (LID).

* Date of first appointment of each director means the date on which each director was appointed for the first time (ever) in the Board of Directors of the Issuer.

** This column indicates M/m depending on whether the director was elected by the majority (M), minority (m) list or BoD (BoD) list.

*** This column indicates number of directorships or statutory auditor positions held in other companies listed on either national or foreign stock exchanges, including finance companies, banks and

insurance companies, or of major companies In the Report on Corporate Governance, positions are shown in full.

(*) This column indicates the participation percentage of directors to the BoD and committee meetings (n. of times present/n. of meetings held during their term, for instance 6/8; 8/8, etc.).

(**) This column indicates the position of the board member in the Committee : "C": Chairman; "M": Member.

Specifically, at their meeting on 29 April 2014:

the Shareholders appointed for a three-year period, until approval of the financial statements at 31 December 2016, on the basis of the single list presented by the majority shareholder, UT Communications S.p.A., approved with a favourable vote by 75.97% of the share capital, the Board of Directors of the company composed of:

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o three Executive Directors: the Chairman Urbano Cairo, Uberto Fornara and Marco Pompignoli,

o three Non-Executive Directors: Laura Maria Cairo Antonio Magnocavallo and Roberto Cairo and

o four independent directors: Marco Janni, Stefania Petruccioli, Mauro Sala and Roberto Rezzonico.

Urbano Cairo is the founder of the Group and has led its growth and development. A graduate in business administration from the Bocconi University, he has significant experience in the publishing and advertising segments. He started working with Fininvest in 1982. He went to work for Publitalia '80 in 1985, where he was appointed Deputy-General Manager in 1990. In 1991 he was appointed as managing director of Mondadori Pubblicità. In December 1995 he founded Cairo Pubblicità, which initiated its advertising sales broker activity for a number of RCS Group magazines. He has therefore been the main leader behind Cairo Communication Group's growth, whose main phases are associated with the 1998 acquisition of the company Telepiù Pubblicità, followed by Cairo TV, dedicated PAY TV advertising sales broker, the February 1999 acquisition of Editoriale Giorgio Mondadori, Cairo Communication's listing in 2000, the contract for the exclusive rights for the sale of advertising space on La7 at the end of 2002, the birth of Cairo Editore in 2003 and his subsequent activity in developing successful new publishing initiatives (launch of "For Men Magazine" and "Natural Style" in 2003, "Settimanale Dipiù" in 2004, "Dipiù TV" and "Diva e Donna" in 2005, "TV Mia" in 2008, "Settimanale Nuovo" and weekly magazine "F" in 2012, "Settimanale Giallo" in 2013, "Nuovo TV" in 2015 and the fortnightly "Nuovo e Nuovo TV Cucina" at the start of 2016), and the acquisition of La7 in 2013, which marks the entry in the TV publishing field.

Uberto Fornara is a graduate in business administration from the Bocconi University, and has worked within the Group since its inception, having previously gained significant experience in the publishing segment with Publitalia '80 from 1998 and then in Mondadori Pubblicità, of which he was appointed Director of Customer Service in 1994. He is also CEO of Cairo Pubblicità S.p.A.

Marco Pompignoli was appointed as Chief Financial Officer in June 2000 and is Financial Reporting Manager of Cairo Communication S.p.A. He is a graduate in business administration and has previously worked in leading audit firms, having gained experience in Italy and abroad. Laura Maria Cairo, sister of Urbano Cairo. A graduate in law, she has worked with several law firms in Milan and Alessandria, gaining experience in bankruptcy, civil and corporate law; since 2006, she has practised as a lawyer in Alessandria.

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Roberto Cairo, Urbano Cairo's brother, is an entrepreneur in real-estate brokerage through Il Metro Immobiliare, with offices in Milan and in Liguria.

Antonio Magnocavallo has been a civil and corporate lawyer in Milan since 1961 and is currently in a partnership (Magnocavallo e Associati). He is presently board member of Fondazione Gruppo Credito Valtellinese and chairman of a number of well-known foundations and associations. Mr. Magnocavallo has provided legal assistance and consultancy to the Cairo Communication Group since 1998.

Stefania Petruccioli, a graduate in business administration from the Bocconi University - where she worked until 2004 as an adjunct and assistant professor - chartered accountant, has gained significant experience as a manager and partner in management companies specializing in private equity and venture capital. She is currently fund manager in Principia SGR and independent director in the listed companies De Longhi S.p.A. and Interpump Group S.p.A.

Marco Janni, graduated in civil procedural law in 1960 and was assistant to the chair of civil procedural law at the University of Milan. He is of counsel at the NCTM law firm, which deals with civil, commercial and corporate law. He was a director in large banking groups.

Roberto Rezzonico, chartered accountant, is currently Chairman of the Board of Statutory Auditors or statutory auditor in a number of important industrial groups.

Mauro Sala, chartered accountant and auditor, judge in the Regional Tax Commission of Lombardy from 1996 to 2007, is currently Chairman of the board of statutory auditors, statutory auditor and/or director of a number of companies.

At its meeting approving this Report, the Board established the following general criteria on the maximum number of administrative and control positions in other companies considered compatible with the effective performance of the role of director of the Issuer:

• executive directors may not hold any other executive office, or, in any case, be appointed as statutory auditors in other companies listed on regulated markets, financial companies, banks, insurance companies or major companies, and may hold up to five non-executive positions in such companies;

• non-executive directors may hold up to five executive or statutory auditor positions in other companies listed on regulated markets, financial companies, banks, insurance companies or major companies, up to eight non-executive positions in such companies and, in any case, up to a total of fifteen positions;

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• independent directors, without prejudice to the limits set for non-executive directors, which also apply to independent directors, may hold up to eight positions as independent director in other companies listed on regulated markets, financial companies, banks, insurance companies or major companies;

major companies meaning those where at least two of the following parameters have been exceeded: turnover above Euro 500 million, employees above 500 units, balance sheet assets above Euro 50 million, excluding from the calculation companies in which the Company (or its parent) holds a controlling and/or relevant interest (as set out in art. 177 of the Issuer Regulations).

The directors of Cairo Communication hold no other position in companies listed on regulated markets, financial companies, banks, insurance companies or major companies, except for Stefania Petruccioli, who is director in De Longhi S.p.A. and Interpump Group S.p.A., and Marco Janni, who is chairman of CO.MO.I. SIM S.p.A. and Comoi Group SA, companies that are not part of the Group to which the Issuer belongs.

Given the directors' vast knowledge of the Company and their wealth of experience in the specific areas of operation of the Cairo Communication Group, as well as the personal and professional background of each member of the Board of Directors, the Board of Directors did not deem it necessary to have them attend (induction program), following appointment and during their term of office, initiatives to provide them with adequate knowledge of the area of operation of the Issuer, of company dynamics and evolution, as well as the relevant regulatory framework.

4.3 Role of the Board of Directors (art. 123 bis, paragraph 2, letter d), T.U.F.)

In 2015, the Board of Directors met five times. The Board meetings lasted an average of 2 hours. Six meetings are planned for the current year, two have already been held at 14 March 2016.

To ensure that the Directors be prepared, all the documents and information on the facts taken into consideration by the Board are sent to them via e-mail in reasonable advance (at least two days in advance, a term which, save for urgencies, is usually met) before the date of the meeting. The term was generally met in 2015. In other cases, the Chairman ensured necessary and appropriate analysis at Board meetings. At Board meetings, the items on the agenda were given the necessary time to allow an effective discussion, while the directors were encouraged to give their own contribution.

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The Board of Directors holds the power to (i) purchase, sell or exchange company branches, and companies for amounts in excess of Euro 10 million and (ii) the power to furnish guarantees and endorsements for amounts in excess of Euro 5 million. These powers, or the following powers, cannot be delegated to individual directors:

a) review and approval of company strategic, business or financial plans or those relating to the Cairo Communication Group, and regular monitoring of their implementation;
b) Group's system of corporate governance and structure and, specifically, definition of the nature and level of risk consistent with the strategic objectives of the Issuer;
c) granting or revocation of powers to managing directors;
d) review and approval of (i) extraordinary transactions, and (ii) transactions involving a potential conflict of interest.

The Board of Directors has also identified the significant transactions which may only be reviewed and approved by the Board.

Such transactions have been identified and defined, starting with the term "transaction" which has been taken to mean:

i) disposals of intangible assets or property, plant and equipment, even those with no related cost or payment;
ii) granting of either temporary or permanent rights relating to intangible assets (trademarks, brands, copyrights, databases, etc.);
iii) provision of work or services;
iv) granting or obtaining of loans and guarantees (including letters of patronage);
v) any other action pertaining to property rights.

Significant transactions are those that must be disclosed to the market in accordance with art. 114 of the Consolidated Finance Act, by their nature, procedure or the nature of the

counterparty, or those with a value of over Euro 10 million. The signing of advertising sales contracts, the Company's typical activity, is not deemed a significant transaction if it does not involve cost commitments or other financial commitments beyond the granting of a percentage of the revenue generated by the contract to the media owner.

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With regard to regulations, these transactions are excluded from the powers conferred on the Directors and as such are subject to prior approval by the Board of Directors. If the Board of Directors cannot meet, for reasons of time pressure or other particular circumstances, the Chairman of the Board of Directors of the Company can carry out the transaction pending the approval of the Board of Directors which would then meet at the earliest possible opportunity.

Significant related party transactions - as described below in paragraph 12 "Related party transactions" - are also reserved to the exclusive competence of the Board of Directors of the Company and cannot be delegated.

During the year, the Board:

evaluated the appropriateness of the organizational, administrative and general accounting structure of the company and of its strategically important subsidiaries (based on their contribution to Group profits and revenue, Cairo Editore S.p.A., La7 S.p.A. (former La7 S.r.l.), Cairo Pubblicità S.p.A. and Cairo Publishing S.r.l.), with particular reference to the internal control and risk management system and the management of conflicts of interest; such valuation was undertaken on the basis of information and evidence gathered through investigation performed by the Control and Risk Committee and through contribution by Company Management and the internal audit manager,
evaluated the general management trend, taking particular account of information received from the bodies responsible, in addition to comparing results achieved with forecasts.

At its meeting on 15 May 2015, the Board of Directors carried out an evaluation on the size, composition and role of the Board of Directors itself and of its committees, noting that:

the size of the Board of Directors (ten members, as the bylaws require from five to eleven members) appears adequate, taking into consideration the size and nature of corporate activities;
the composition of the Board of Directors, considering that the three executive directors, with specific experience in company management, one of whom in finance, are supported

by seven non-executive directors, of whom three are lawyers, three are chartered accountants, four of whom independent, is appropriate;

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the role of the Board of Directors and its Committees, as shown in the above table, appears consistent with the size and nature of corporate activities with sufficient delegation of powers granted to the Chairman and to one other executive director.

The Board did not resort to the services of external consultants in the self-evaluation process.

At their Meeting on 29 April 2014, the shareholders resolved to exempt candidates elected to the position of board member from competition restrictions under art. 2390 of the Italian Civil Code for the duration of their term. None of the directors resorted to this exemption and, therefore, the Board was not called to make assessments.

4.4 Executive directors

Given the size of the Group and Parent Company, the main executive and managerial powers are entrusted to the Chairman Urbano Cairo, who is the key person in charge of defining corporate and management strategies (chief executive officer). Such powers do not include those to (i) purchase or relocate company branches or companies for amounts in excess of Euro 10 million and (ii) provide guarantees of every kind to third parties for amounts in excess of Euro 5 million, without prejudice, in any case, to the responsibilities of the Board regarding significant transactions and decisions that cannot be delegated, as identified by the Board and mentioned above, and regarding significant transactions with related parties.

Director Uberto Fornara is entrusted with the research and development of activities regarding the sale of advertising space and/or advertising brokerage (except for initiatives requesting commitments and obligations by the Issuer), management of the development of advertising sales, in accordance with the guidelines approved by the Board or by the Chairman, and management of staff and the sales network involved in advertising sales.

Director Marco Pompignoli is responsible for overseeing and supervising the Group's administration, finance and management control functions, which include the power to manage and coordinate the activities of staff working in these areas and to coordinate the activities of the Issuer's legal and tax advisers.

The Chairman is also the controlling shareholder of Cairo Communication. He does not hold the position of director in any other issuer, therefore excluding cases of interlocking directorate.

The executive directors have provided appropriate and regular information every three months to the Board and to the Statutory Auditors. There is no executive committee.

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4.5 Other executive directors

There are no other executive directors. None of the non-executive directors i) are CEO or executive chairman in a subsidiary of strategic relevance of the Issuer or ii) hold executive positions in the Issuer or in a subsidiary of strategic relevance or in the Parent.

4.6 Independent directors

Marco Janni, Stefania Petruccioli, Roberto Rezzonico and Mauro Sala are independent directors.

As disclosed to the market on 14 May 2014, soon after their appointment, at the meeting of 14 May 2014, the Board of Directors and Board of Statutory Auditors had verified that they met the requirements to be deemed independent directors, pursuant to art.148, paragraph 3, Legislative Decree no. 58 of 24 February 1998, and to the subsequent requirements of the Corporate Governance Code issued by Borsa Italiana S.p.A.

Specifically:

• with regard to the verification of the independence requirements of Directors Marco Janni, Roberto Rezzonico (directors of the company for over nine years out of the last twelve) and of Mauro Sala (statutory auditor of the company for over nine years out of the last twelve), the Board, given the recurrence of the requirements of independence under art. 148, paragraph 3, of the TUF, and non-recurrence of the most typical cases regarding absence of independence listed in application criterion 3.C.1 of the Corporate Governance Code (letters from a) to h), except for sub e) (under which, as a rule, a director of an issuer who has held this position for over nine years out of the last twelve years is deemed not to be independent³ ), given the non-binding nature ⁴ - for the purposes

³ It should be noted, however, that the criterion regarding duration in office for over nine years has been regularly disregarded by other listed companies that have adopted the Corporate Governance Code for Listed Companies. See 2013 Annual Report 2013 - 1st report on application of the Corporate Governance Code, prepared by the Corporate Governance Committee of Borsa Italiana S.p.A.

⁴ In 2011, the company had decided to request an opinion on the matter from Prof. Matteo Rescigno, full professor of commercial law at the University of Milan.

of attributing the requirements of independence – of the application criteria, considering in general terms the absence of objective and unambiguous elements proving the existence of particular relations with the Issuer or with subjects linked with the Issuer (such as the majority shareholder, etc.) and, in particular:

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(i) the absence of commercial, professional or personal relations between Marco Janni, Roberto Rezzonico and Mauro Sala, on the one side, and the Issuer, and companies belonging to the same group and the controlling partner, on the other, and
(ii) the acknowledged professional and moral qualities of the directors in question, renowned professionals with their own businesses,
(iii) the minor impact of remuneration decided by the Shareholders to the Board of Directors, which includes remuneration for the participation of certain directors in the committees as per law and the bylaws, on the overall amount of the fees of these directors, as resulting from the information provided by the persons involved,
(iv) given also the interest of the Company to still avail itself of the directors' specific experience and in-depth knowledge of the Company's inner workings gained during their term in its various bodies,

had confirmed the recurrence of the independence requirement of the foregoing directors;

• with regard to the independence of Stefania Petruccioli, following evaluation of the recurrence of the independence requirements under art. 148, paragraph 3, of the TUF, and non-recurrence of the most typical cases regarding absence of independence listed in application criterion 3.C.1 of the Corporate Governance Code (letters from a) to h), considering in general terms the absence of objective and unambiguous elements proving the existence of particular relations with the Issuer or with subjects linked with the Issuer (such as the majority shareholder, etc.), the Board had confirmed the existence of the independence requirement of this director.

The Board of Statutory Auditors had formally acknowledged such conclusions, having verified the correct application of the criteria adopted by the Board of Directors to evaluate the independence of its members.

At its meeting on 15 May 2015, the Board assessed the existence of the independence requirements for each of the above directors. In particular, after hearing the parties involved, and deeming that in 2014, no elements had emerged such as to change the assessment made with the

decision of 14 May 2014, confirmed – with the parties involved abstaining from the vote - the existence of the independence requirements of directors Marco Janni, Roberto Rezzonico, Mauro Sala and Stefania Petruccioli.

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The Board of Statutory Auditors formally acknowledged and verified the correct application of the criteria adopted by the Board of Directors to evaluate the independence of its members.

The number of independent directors and their qualifications were deemed appropriate for the size of the Board of Directors and the Company's activities, and such as to allow the establishment of the Remuneration, Control and Risk and Related Party Committees (for further information, see § 8 and § 10 and § 12 below).

During the year, the independent directors, in addition to meeting regularly as members of the Related Party Committee, held informal discussions on various occasions without reporting any situation requiring clarification or further discussion.

The Directors who, in the lists for the appointment of the Board, have indicated their eligibility to qualify as independent, have committed to resigning in the event of a subsequent loss of these requirements.

4.7 Lead Independent Director

Given that the Chairman of the Board of Directors is, in actual fact, the main person responsible for the management of the company (chief executive officer) and is also the controlling shareholder of the company, the Board of Directors elected an independent director, Marco Janni, as Lead Independent Director, to whom non-executive directors report, for an increased contribution to the activities and role of the Board. The Lead Independent Director works together with the Chairman to guarantee that the directors receive a complete and timely flow of information. In addition, he has the power to call, whether autonomously or on the request of other directors, appropriate meetings of independent directors for the discussion of issues deemed of being in the interest of the role of the Board of Directors or of the management of the company.

5 Treatment of privileged information

Under the provisions regarding treatment of privileged information, the Company established a register of persons (physical persons, legal entities or associations) who, through their work or professional dealings or the function they carry out on behalf of the Issuer, have regular or

occasional access to privileged information (art. 152-bis), which is constantly updated (art. 152 ter). All relevant persons have been fully informed about the establishment of this register.

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The Company also enacted the regulations which, in replacement of the self-regulation included in the Code of Conduct on Insider Dealing, places strict disclosure obligations on "relevant persons" of listed companies in relation to share trading carried out by them or persons closely linked to them.

In addition, the Company banned "relevant persons", with binding effect, from trading in Company shares or related financial instruments, being purchase, sale, subscription or exchange, either directly or through a third party, during the 15 days ahead of any Board meeting called to approve the financial statements for that period. The exercise of stock options or option rights relating to financial instruments (in any case, currently not in progress) is not included in the ban. The sale of shares derived from stock option plans, including sales carried out as part of the exercise of options, is also exempt. The restrictions, however, do not apply to exceptional situations which are subjectively necessary and appropriately motivated in the interest of the Company.

The Company also has a procedure in place for internal management and the publication of documents and confidential information, particularly price sensitive information governed by the following directives:

a) Confidential information (Information) is taken to mean every piece of information and news which relates to Cairo Communication S.p.A. (the Company) and its subsidiaries, both direct and indirect (the Cairo Group) which is not in the public domain or is by its nature confidential or of exclusive pertinence to the Cairo Group. Even if expressed as a personal opinion, a piece of information which could affect the price of Group company financial instruments if made public (i.e. price sensitive) is deemed Information.
b) The management of Information is the sole responsibility of the Company Chairman. In particular, the communication of Information to Consob, the Communications Regulatory Authority (Agcom), Borsa Italiana S.p.A., the media, press agencies, public relations consultants, financial analysts, journalists and any other administrative or regulatory authorities overseeing the activities of the Cairo Group must be carried out exclusively by the Company Chairman directly or occasionally through representatives chosen by him. All Directors and members of the Board of Statutory Auditors must

show the utmost discretion in relation to Information acquired while carrying out their duties and must respect Company procedures relating to the publication of Information.

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c) Directors are responsible for the secrecy of documentation given to them in advance of meetings of the Company Board of Directors. In any case, Directors must exercise discretion in relation to Information acquired while performing their duties.
d) The Chairman takes all measures necessary to ensure that Management and other Cairo Group employees do not transmit Information to third parties if not by law or regulation, and in respect of market best practices, in order to ensure that discretion is exercised in relation to Information acquired while performing their duties.
e) Should a Director be bound to disclose a piece of Information by the civil or legal authorities, he must communicate this to the Chairman immediately unless otherwise bound by law or the relevant authority.
f) Further to the provisions relating to the publication of Information, in order to transmit any other information to third parties, or to publish an interview to the media that relates partially or completely to the Cairo Group, Company Directors and Statutory Auditors must obtain specific prior approval of the Chairman.

6 Board of Directors' Committees

The Board of Directors has set up three committees within the Board itself – the Remuneration Committee, the Control and Risk Committee and the Related Party Committee (see section 12 below). The Board decided not to form an Appointment Committee, as it was confirmed that the powers reserved by the Code to said Committee should continue to be carried out by the Board in its entirety (see section § 7 below).

7 Appointment Committee

At its meeting of 14 May 2014, the Board of Directors evaluated the block holdings of the company and the absence of issues reported in the past relating to the sphere of competence of the Appointment Committee, managed efficiently and in compliance with the principles of the Corporate Governance Code directly by the Board of Directors, and decided not to form an Appointment Committee, as it was confirmed that the powers reserved by the Code to said Committee should continue to be carried out by the Board in its entirety.

8 Remuneration Committee

On 14 May 2014, the Board of Directors appointed, for a three-year period, until approval of the financial statements at 31 December 2016, the members of the "Remuneration Committee", composed of non-executive directors Antonio Magnocavallo, Chairman, Roberto Rezzonico (independent) and Stefania Petruccioli (independent). Roberto Rezzonico and Stefania Petruccioli have adequate experience in the accounting and financial area.

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The Remuneration Committee has advisory and proposal-making functions for the Board of Directors, specifically:

formulation of proposals to the Board of Directors regarding remuneration to executive directors, of other directors with particular responsibilities and of key management personnel;
to periodically evaluate the adequacy, overall consistency and application of the general policy adopted for remuneration to executive directors, of other directors with particular responsibilities and of key management personnel, using for the latter information furnished by the managing directors, and formulating proposals to the Board of Directors on the matter;
to formulate proposals to the Board of Directors for remuneration to the managing directors and to other directors with particular responsibilities, and to set performance targets related to the variable component of remuneration, by overseeing the application of the decisions adopted by the Board, verifying, in particular, actual achievement of the performance targets;
to periodically evaluate the criteria adopted for remuneration to key management personnel, in addition to overseeing the application of any stock option plans (there are no plans underway to date), on the basis of information provided by managing directors, and to provide the Board of Directors with relevant general recommendations.

To ensure correct performance of its duties, the Committee has the power to access all necessary corporate information, in addition to make use of external consultants, in accordance with the terms established by the Board of Directors. The Committee is assisted by a secretary appointed for such purpose (Marco Bisceglia), who records the minutes of the meetings.

The functioning of the Remuneration Committee is governed by a policy approved by the Board of Directors. The meetings of the Remuneration Committee were generally not attended by the Chairman of the Board of Statutory Auditors or other auditor delegated by the Chairman; these bodies formulated their opinion on proposals put forth by the Remuneration Committee within the Board of Directors. In actual fact, no proposals were put forward to the Board on the remuneration of directors who are members of this Committee.

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The Board of Directors has made financial resources available to the Remuneration Committee for the execution of its functions.

In 2014, the Remuneration Committee met 2 times, for about 1 hour and with all members attending. At least 2 meetings are scheduled this year.

On 14 May 2014, the Board of Directors allocated Euro 20 thousand as annual remuneration to the Remuneration Committee and Euro 2 thousand to its secretary.

9. Directors' Fees

The general policy for directors' fees is illustrated in the Remuneration Report, prepared pursuant to art. 123-ter of the TUF, and will be submitted to the Shareholders at their meeting held to approve the 2015 financial statements, to which reference is made for all the details.

At its meeting on 14 March 2016, the Board of Directors established the general remuneration policy for 2016 (illustrated in Section I of the Remuneration Report) regarding executive directors, other directors with particular responsibilities and key management personnel, which sets out, among other things, the guidelines for the:

a) balancing of the fixed and variable components, which envisage ceilings, with regard to strategic objectives and company risk management policy, and ceilings for variable components,
b) appropriateness of the fixed component for a director's duties, should the performance targets indicated by the Board of Directors not be met and the resulting variable component not be paid,
c) measurability of performance targets and connection of these targets to the creation of value for shareholders in the medium to long term,

Incentivized remuneration criteria have gradually been introduced for some years now for executive directors and key management personnel, in order, fundamentally, to base a sizeable portion of their fees on the achievement of specific performance targets previously set and determined, consistent with the guidelines held in the general remuneration policy adopted by the Board of Directors, as described in the Remuneration Report.

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To date, a medium/long term incentive system (LTI Plan) has yet to be defined and is still being assessed.

The Group has started to study and develop long-term incentivized remuneration criteria; however, given the crisis affecting the advertising segment and, generally speaking, the publishing industry for a few years now, a segment that is the core business of the Group, and the resulting instability - based on Nielsen figures in 2012, 2013, 2014 and 2015, magazine advertising fell by 18.4%, 23.9%, 6.5% and 4.1%, respectively, while TV advertising fell by 15.3%, 10.0%, and 0.5%, then increased by 0.7% in 2015 - the Group has considered, thus far, to defer application of these criteria, owing to the difficulty of setting relevant, attainable goals. The 2016 remuneration policy envisages the inclusion of claw-back clauses, which allow the company to request the return, in whole or in part, of variable components of remuneration paid (or to withhold sums subject to deferral), determined on the basis of data which has subsequently proven to be manifestly misstated.

Directors' fees for the year 2015 are illustrated in Section II, Part II of the Remuneration Report.

Marco Pompignoli is also the Financial Reporting Manager.

No incentive mechanisms have been introduced for the internal audit manager.

There are no share-based incentive plans in place in favour of executive directors and/or key management personnel.

Remuneration to non-executive directors is not based on company performance. They do not receive any share-based incentive plans.

There are no agreements in place between the Company and the directors for any indemnity in the event of resignation or unjust dismissal, or in the event their employment relationship ceases following a takeover bid.

10 Control and Risk Committee

On 14 May 2014, the Board of Directors appointed for a three-year period (until approval of the financial statements at 31 December 2016) the members of the Control and Risk Committee, composed of non-executive directors Roberto Rezzonico (independent), Chairman, Mauro Sala (independent) and Antonio Magnocavallo. The Control and Risk Committee, in accordance with the Corporate Governance Code, is currently formed of non-executive directors, the majority of whom are independent. Roberto Rezzonico and Mauro Sala have adequate experience in the accounting and financial area.

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The role of the Control and Risk Committee is to provide an early opinion to the Board of Directors in order to discharge the internal control and risk management duties assigned by the Code, in order to:

i) define the guidelines of the internal control and risk management system, so that the main risks affecting the Company and its subsidiaries are correctly identified and appropriately measured, managed and monitored, determining the level of compatibility of such risks with management of the company that is consistent with the strategic objectives;
ii) assess, at least annually, the adequacy of the internal control and risk management system with respect to the nature of the Company, its risk profile and its effectiveness;

iii) appoint an executive director to supervise the operation of the internal audit system;

the Committee also

iv) evaluates, together with the Financial Reporting Manager, after hearing the Audit Firm and the statutory auditors, the proper application of accounting policies, and in the case of groups, overall consistency of the consolidated financial statements;
v) expresses an opinion on specific aspects relating to the identification of the main corporate risks;
vi) reviews the periodical reports on the evaluation of the internal control and risk management system, and those of particular relevance prepared by the internal audit manager;
vii) monitors the independence, adequacy, effectiveness and efficiency of the internal audit function;

viii) may request the internal audit function to perform assessments on specific operating areas, providing immediate notice to the Chairman of the Board of Statutory Auditors;

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ix) reports to the Board of Directors, at least every six months, on the date of the approval of the financial statements and of half-year reports, on their activities carried out and on the appropriateness of the internal control and risk management system.

To ensure correct performance of its duties, the Committee has the power to access all necessary corporate information, in addition to make use of external consultants, in accordance with the terms established by the Board of Directors. During the year, the Committee decided not to resort to external consultants, on the one hand, because it already has the tax, legal and accounting skills needed for the due evaluations and, on the other, because it did not report the existence of specific, significant facts that required their services. The Committee is assisted by a secretary appointed for such purpose (Marco Bisceglia), who records the minutes of the meetings.

In 2015, the Control and Risk Committee met four times. Minutes of the meetings, lasting for about 2 hours, were recorded. Five meetings are scheduled this year, two have already been held at 14 March 2016.

The meetings were generally attended, upon invitation, by the Chairman of the Board of Statutory Auditors, by representatives from the Audit Firm, by the Executive Director in charge of the internal control system and by the internal audit manager.

The operation of the Control and Risk Committee is governed by an appropriate regulation approved by the Board of Directors. The Board of Directors has made financial resources available to the Remuneration Committee for the execution of its functions.

During the above activities, and based on the reports received from the internal audit manager, no facts of particular relevance emerged that needed to be reported and the Committee deemed the internal control system as being adequate.

On 14 May 2014, the Board of Directors had allocated Euro 20 thousand as annual remuneration to the Control and Risk Committee and Euro 2 thousand to the secretary.

11. Internal control and risk management system

Purposes and objectives

The internal control and risk management system of the Cairo Communication Group consists of a set of rules, procedures and organizational structures, which, through an appropriate process of identification, measurement, management and monitoring of major risks, ensures that financial information is fair, accurate, reliable and timely.

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The Board of Directors, assisted by the Control and Risk Committee:

has defined, in the frame of the definition of the strategic, business and financial plans, the nature and level of risk consistent with the Issuer's strategic objectives;
has defined the guidelines of the internal control and risk management system, so that the main risks affecting the Company and its subsidiaries are correctly identified and appropriately measured, managed and monitored, determining the level of compatibility of such risks with management of the company that is consistent with the strategic objectives;
has assessed, at least on an annual basis, the adequacy of the internal control and risk management system with respect to the nature of the Company, its risk profile and its effectiveness.

The Control and Risk Committee analyzed, at least on an annual basis, the plan drafted by the person in charge of internal audit, with the opinion of the Board of Statutory Auditors and the director in charge of the control and risk management system;

The Board of Directors, on proposal of the director in charge of the internal control and risk management system and the favorable opinion of the Control and Risk Committee, after hearing the Board of Statutory Auditors, appoints and revokes the internal audit manager, and sees that the manager is adequately resourced to perform duties, and defines the manager's fees consistent with corporate policies.

Over the past financial years, the Group has set the policy lines of the internal control system in order to rationalize the overall system by mapping and classifying subjects involved, organize the main reporting flows within the Group and explicate the responsibilities and areas of activities taking place.

The evaluation of the internal control and risk management system is regularly conducted to verify its ability:

to react to significant situations of risk in a timely manner, ensuring appropriate control mechanisms;

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in terms of corporate processes, to guarantee an appropriate degree of segregation of duties between operating functions and control functions to avoid conflicts of interest in the responsibilities assigned;
in terms of the operating activities and accounting and administrative activities, to guarantee systems and procedures that assure the accurate recording of company and management events, in addition to the provision of reliable and timely information, both internal and external to the Group;
to provide for methods to ensure the timely communication of any significant emerging risks and anomalies in control to the appropriate Group Management, and to enable the identification and timely execution of remedies.

The reference model adopted by the Group for the implementation of its internal control system complies with domestic and international best practices and with the indications set by the laws and regulations Cairo Communication is required to comply with as a company listed on a regulated market, such as in particular law 262/2005 and consequent articles 154-bis and 123 bis of the Consolidated Finance Act and Legislative Decree 195/07 ("Transparency Decree") as well as the Corporate Governance Code of Borsa Italiana, to which Cairo Communication conforms.

The system has been designed and implemented following the guidelines issued by a number of sector bodies regarding the activities performed by the Financial Reporting Manager.

Main characteristics of existing risk management and internal control system in relation to the financial reporting process (pursuant to art. 123 bis, paragraph 2, letter b), T.U.F.)

Stages of the existing system of risk management and internal control system in relation to the financial reporting process

The risk management and internal control system in relation to the Group's financial information rests basically on the application and monitoring of relevant corporate procedures for the purposes of the preparation and disclosure of financial information.

Specifically, the internal control system is split up into the following stages:

a) Identification and evaluation of risks related to financial information;
b) Identification of controls upon identification of risks;
c) Evaluation of controls upon identification of risks.

The evaluation procedures and instruments used by the Group are periodically subject to review processes aimed at the verification of their suitability and function as compared to the corporate reality, which is by its very nature mutable. Therefore, where possible, an information flow has been put in place in order to maintain, update and improve system quality.

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a) Risk identification and evaluation for financial reporting: the identification of both the scope of the entries and their "significant" processes in terms of potential impact on financial reporting, and of the risks consequent to any missed control objectives, comes about by way of a quantitative analysis of the financial statement items and a qualitative evaluation of the processes.

The quantitative analysis, aimed at the identification of the relevant entries, is performed through the application of the concept of "materiality" to the combined items in the trial balance of the Cairo Communication Group. The materiality threshold was determined as a fixed percentage in compliance with the indications in article 2621 of the Italian Civil Code.

Once the significant accounts have been identified through the account-processes combination, the significant processes are then distinguished.

The qualitative analysis, through the evaluation of the significance of the business processes and of their level of complexity, integrates the quantitative analysis, determining the inclusion or the exclusion of the processes in regard to the scope of reference.

For each process identified as significant, there are then also identified specific process risks, which in the event of their occurrence, would compromise the achievement of the objectives connected to the system: that is to say, those of accuracy, reliability, credibility and timeliness of financial reporting.

The financial reporting manager reviews the definition of the scope of reference at least annually and also, each and every time that elements, which might change the analysis performed in a significant manner, are manifested.

b) Identification of the controls corresponding to the identified risks: the identification of the controls necessary for the mitigation of the ascertained risks is performed associating the risks identified to the relative control objectives, meaning the group of objectives that the financial reporting control system intends on achieving in order to ensure a true and correct representation.

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The controls established have been formalized inside a specific matrix ("Matrix of risks and controls").

c) Evaluation of the controls corresponding to the identified risks: the evaluation of the administrative and accounting control system is to be performed at least annually.

The valuation of the suitability of the actual application of the controls is performed through specific verification activities, aimed at guaranteeing the programming and implementation of the identified controls, upon indication and coordination on the part of the financial reporting manager.

Based on the results of the verification work, the financial reporting manager, with the aid of the support staff, defines a remedy plan so as to correct any deficiencies that may impact negatively on the effectiveness of the risk management and internal control system in relation to financial reporting.

At least annually, the financial reporting manager reports to the Control and Risk Committee and the Board of Statutory Auditors and communicates with the company supervisory boards, regarding the methods with which the suitability evaluation and the application of the controls and administrative - accounting procedures have been conducted, then expressing his own evaluation on the suitability of the administrative accounting control system.

Roles and functions

The subjects involved in the internal control and risk management system, each with their own specific role, are:

the Board of Directors, which guides and assesses the adequacy of the system, identifying within the system:

(i) the director in charge of the formation and maintenance of an effective internal control and risk management system (the "director in charge of the internal control and risk management system"), and

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(ii) the Control and Risk Committee, in charge of assisting, through appropriate preparatory work, the assessments and decisions of the Board of Directors regarding the internal control and risk management system, as well as those regarding the approval of periodical financial reports;
1. The internal audit manager, in charge of verifying that the internal control and risk management system is working properly and adequately;
1. other roles and functions with specific tasks regarding internal control and risk management,
1. the Board of Auditors, which monitors the effectiveness of the internal control and risk management system.

Art. 154-bis of the Consolidated Finance Act provides for the presence, in the corporate organization of listed companies, of the "Financial Reporting Manager", appointed by the Board of Directors in concert with the Managing Director. The Manager is responsible for planning, implementing and approving the accounting and administrative control model, and for assessing its application, issuing a certificate on half-year, annual and consolidated financial statements.

The Manager is also responsible for preparing adequate administrative and accounting procedures for the formation of the separate and consolidated financial statements, and for providing subsidiaries, considered as significant entities for the preparation of the Group's consolidated financial reporting, with instructions on how to perform an appropriate evaluation of their accounting control system.

Overall evaluation of the appropriateness of the internal control and risk management system

Based on the information and evidence gathered following preliminary analysis conducted by the Control and Risk Committee, supported by Management and by the internal audit manager, Board of Directors deems the internal control and risk management system to be, as a whole, appropriate for allowing, with reasonable assurance, achievement of the Company's objectives.

The evaluation, as it refers to the overall internal control system, is by nature limited. While well-structured and in operation, the internal control system is designed only to guarantee accomplishment of corporate objectives with "reasonable assurance".

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11.1 Executive director in charge of the internal control and risk management system

Marco Pompignoli, executive director, is responsible for overseeing the operation of the internal control and risk management system. During the year, he was responsible for:

identifying main corporate risks (strategic, operational, financial and compliance), taking account of the nature of the operations carried out by the company and its subsidiaries, to submit them for the review of the Board of Directors,
executing the policies as identified by the Board of Directors, providing for the planning, realization and management of the internal control system, constantly monitoring the overall appropriateness, effectiveness and efficiency,
adapting the system to the dynamics of the Group's operating conditions and to the legal and regulatory framework.

The director in charge of the internal control and risk management system has requested the internal audit manager to perform assessments on the main areas of operations and on compliance with company rules and procedures in the execution of business operations, informing the Chairman of the Control and Risk Committee and the Chairman of the Board of Auditors and reporting to the Control and Risk Committee on the findings.

11.2 Internal audit manager

The role of internal audit manager is carried out by an external professional, Ezio Micheli, appointed at the end of 2007 on the proposal made by the executive director responsible for the internal control system and taking account of the opinion of the Control and Risk Committee, who reports to the Control and Risk Committee and to the Board of Statutory Auditors.

The Board of Directors has assigned the internal audit manager the responsibilities foreseen by the Corporate Governance Code and has defined his remuneration, in line with corporate policy, providing him with the appropriate means to fulfill his duties.

The Board of Directors has verified that this person possesses the necessary professional and independence requirements to perform such function. In particular, he is not in charge of any operating area and is not subordinate to any person in charge of operating areas, including administration and finance.

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The internal audit manager has been allowed direct access to all useful information for the performance of his duties and has reported on his activities to the Control and Risk Committee and to the Board of Statutory Auditors and to the executive director responsible for overseeing the operation of the internal control system.

During the year, the activities of the internal audit manager mainly focused on verifying the updating and implementation process of corporate procedures. He is a member of the Supervisory Board pursuant to Legislative Decree 231/2001, as indicated in section 11.3 below.

The internal audit manager, also assisted by unrelated external consultants, experts in these areas, made available to the Company:

verified on a continuous basis (not having reported specific needs) the operation and adequacy of the internal control and risk management system through an audit plan, based on the structured analysis and ranking of key risks and the reliability of information systems, including the accounting systems;
regularly referred to the Control and Risk Committee, during the meetings of the Committee, also attended by the Chairman of the Board of Statutory Auditors and the director in charge of the internal control and risk management system, providing appropriate information on the tasks performed, on risk management procedures, and compliance with defined plans for risk mitigation, as well as an opinion on the adequacy of the internal control and risk management system;
assessed, as part of the audit plan, the reliability of information systems, including accounting systems.

11.3 Organizational Model pursuant to Legislative Decree 231/2001

On 31 March 2008, the Board of Directors adopted a Model for organization, management and control pursuant to Legislative Decree 231/2001 (Organizational Model), thereby providing itself with a set of principles of conduct and procedures to comply with the requirements of Legislative Decree 231/2001, both in terms of the prevention of crime and illicit acts, and in terms of control measures to ensure implementation of the Model itself. The Model was

updated by the Board of Directors, on a proposal of the Supervisory Board (most recently in May 2015, then in February 2016, following a number of regulatory changes to Legislative Decree no. 231/01), mainly including "bribery among private individuals", environmental crimes and crimes of association, incitement to make false statements, crimes against industry and self-laundering. A similar model was also adopted, and later updated, in keeping with the Organizational Model of Cairo Communication S.p.A., by the subsidiaries Cairo Pubblicità S.p.A., Cairo Editore S.p.A. and La7 S.p.A. (former La7 S.r.l.).

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The Organizational Model adopted is made up of a set of principles, rules and organizational hierarchies relating to the management and control of corporate activities and is presented in an explanatory document which:

identifies the activities in which crimes could be committed;
provides for specific rules directed at planning the formation and performance of corporate decisions relating to crimes to be prevented;
identifies methods for the management of financial resources directed at crime prevention;
provides for the provision of information to the body deputized with oversight of the operation and observation of the models (Supervisory Board);
introduces a disciplinary system directed at punishing failure to respect measures identified by the Organization Model.

The Organizational Model adopted provides for the presence of a corporate body responsible for assuming the functions of a control body (Supervisory Board) with autonomous responsibilities for the supervision, control and initiative related to the Model, composed of three members who must be selected from persons having proven abilities in inspection, management, administration and legal matters, and who must also possess minimum requirements of professionalism and integrity.

Specifically, the Supervisory Board verifies that the company has an appropriate Organizational Model in place and ensures it is effectively carried out, certifying its own effectiveness whilst carrying out its functions, ensuring the progressive update, thus guaranteeing constant process of adjustment to the above-mentioned operating and/or organizational principles.

In 2015, the members of the Supervisory Board of Cairo Communication S.p.A. were Ezio Micheli, internal audit manager, Giacomo Leone and Marco Bisceglia, Chairman.

11.4 Audit Firm

At their meeting on 28 April 2011, on proposal by the Board of Statutory Auditors, the Shareholders conferred the audit assignment for the 2011-2019 nine-year period to KPMG S.p.A., approving the relevant fee.

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11.5 Financial Reporting Manager

The Board of Directors appointed Marco Pompignoli, Chief Financial Officer of the Cairo Communication Group, as the Financial Reporting Manager. He has the appropriate professional requirements (graduate in business administration, previously working for a major audit firm, gaining significant experience in Italy and abroad, and a certified accountant registered in Forlì).

Marco Pompignoli, as board member of the company, is provided with executive and management powers to oversee the administration, finance and management control functions of the Group to which the Issuer belongs.

11.6 Coordination among parties in the internal control and risk management system

Regarding coordination among the various parties involved in the internal control and risk management system (Board of Directors, director in charge of the internal control and risk management system, Control and Risk Committee, internal audit manager, Financial Reporting Manager, Supervisory Body and Board of Statutory Auditors), the meetings of the Control and Risk Committee are generally attended also by the:

Chairman of the Board of Statutory Auditors,
partner or manager of the Audit Firm,
director in charge of the internal control and risk management system, Marco Pompignoli, who is also the Financial Reporting Manager,
the internal audit manager, Ezio Micheli, who is also member of the Supervisory Body.

Furthermore, the Board of Statutory Auditors and the Supervisory Board schedule a specific joint annual meeting also attended by the director in charge of the internal control and risk management system and the partner or manager of the Audit Firm to take stock of activities performed during the year, to plan those for the following year and to jointly discuss any issues of common interest from their respective areas of competence.

In any event, during the year, information is continually exchanged between the Board of Statutory Auditors and the Supervisory Board.

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12 Related party transactions

Consob, through Resolution no. 17221 of 12 March 2010, amended through subsequent Resolution no. 17389 of 23 June 2010, adopted, pursuant to art. 2391-bis of the Italian Civil Code, and to articles 113-ter, 114, 115 and 154-ter of the TUF, the regulations regarding provisions pertaining to related party transactions, to which management bodies of issuers of widely distributed securities must comply (the "Regulation").

At its meeting on 11 November 2010, the Board of Directors of Cairo Communication S.p.A., on the favourable opinion of the independent directors, adopted the procedures for related party transactions (the "Procedures"), for the purpose of guaranteeing "substantial and procedural transparency and fairness of related party transactions" carried out by the Company directly or through its subsidiaries, establishing a Related Party Committee.

Pursuant to the Regulation, Cairo Communication is considered a "small company", since its assets and its revenue shown, shown in the last approved financial statements (31 December 2014), are lower than Euro 500 million, amounting respectively to approximately Euro 312 million and to approximately Euro 240 million. For such companies, the Regulation provides for the possibility to "apply to transactions of greater importance, as a waiver to art. 8, a procedure identified pursuant to art. 7 of the Regulation" (transactions of lesser importance).

The procedures adopted by the Company, available on www.cairocommunication.it in the Corporate Governance section, to which reference is made for complete details, have also identified:

a) the definition of related parties and transactions;
b) roles and responsibilities;
c) transactions of greater importance, being those in which at least one of the ratios of significance (equivalent value relevance ratio, assets and liabilities relevance ratio) set out in the Regulation are higher than the threshold of 5%, or of 2.5% for transactions whose purpose is the disposal of intangible assets of strategic importance;
d) the exemptions provided in the Regulation and opted by the Company, mainly transactions of smaller amounts (Euro 150,000), remuneration plans pursuant to art. 114-bis of the TUF (which comply with the obligations regarding transparency and substantial and procedural

correctness provided by the temporary provisions in force), regular transactions concluded under market-equivalent or standard conditions and the transactions with and between subsidiaries and/or associates;

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e) the procedures regarding the preliminary proceedings and approval of related party transactions and the regulations in cases where the company examines or approves transactions with subsidiaries;
f) the procedures and timing adopted to provide information on the transactions, and the related documentation, to the directors or independent directors who express opinions on related party transactions, as well as to the management and independent advisors, before their approval, during and after their execution.

Related party transactions of greater importance are reserved to the exclusive competence of the Board of Directors and may not be delegated. The execution of such transactions, as well as those of lesser importance, is subject to a non-binding opinion of the Related Party Committee, or of other bodies indicated in the procedures.

In the event one or more transactions are approved, notwithstanding a negative opinion expressed by the Committee and/or other bodies, the Company draws up and makes available to the public at its main registered office within 15 days from the close of each quarter of the financial year, a document containing indication of the counterparty, of the object and counter value of such transactions approved in the quarter of reference, as well as the reasons why that opinion has not been shared. Within the same time, this opinion is made available to the public in attachment to the above document or on its website www.cairocommunication.it.

Regarding transactions of greater importance falling under the competence of the Shareholders, in the event the resolution proposal is approved, notwithstanding contrary advice by the Related Party Committee (or by other bodies), the transaction is not carried out if the majority of unrelated shareholders votes against the transaction, provided the unrelated shareholders attending the Meeting represent at least 10% of the share capital with voting right (whitewash mechanism). For such purpose, in the resolution proposal, the Board adds a provision that specifies that the effectiveness of the transaction is subject to the foregoing majority.

Related party transactions must comply with transparency and substantial and procedural correctness criteria and are executed in the exclusive interest of the Company:

substantial correctness means correctness of the transaction from an economic point of view when, for instance, the transfer price of goods is in line with market prices and,

more in general, when the transaction has not been influenced by the related party relationship, or at least said relationship has not determined the acceptance of conditions that are unjustifiably penalizing for the Company;

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procedural correctness means compliance with procedures aimed at ensuring the substantial correctness of the transaction and, therefore, observance of the rules through which it is at least potentially ensured that related party transactions do not determine any unjustified prejudice to the reasons of the Company and its investors.

At the Board of Directors' meeting called to resolve on such related party transactions, directors who have even a potential or indirect interest in the transaction must provide prompt and exhaustive information in person to the Board on the existence of such interest and on the circumstances thereof, leaving the meeting at the moment of the resolution. Should the directors' presence be needed to maintain the necessary quorum, the Board may decide, upon the unanimous decision of the attendants, for the directors not to leave the meeting.

The Regulation also provides for a series of obligations to inform the public on transactions of greater importance, as well as for those of lesser importance, at least every quarter in the latter case.

The Committee for the approval of related party transactions (hereinafter, the "Related Party Committee"), regardless of the importance, is appointed by the Board of Directors and can be composed of three members:

(i) in the event at least three independent directors have been elected to the Board of Directors, the members of the Committee are all independent directors;
(ii) otherwise than under the case indicated in the above point (i), its members are nonexecutive directors, the majority of whom are independent. In such case, the Committee may coincide with the Control and Risk Committee.

On 14 May 2014, the Board of Directors appointed the members of the Related Party Committee, composed of the three independent directors Marco Janni, Chairman, Stefania Petruccioli, and Mauro Sala, and allocated Euro 20 thousand as annual remuneration to the Related Party Committee. The Committee is assisted by a secretary appointed for such purpose (Marco Bisceglia), to whom the Board of Directors allocated Euro 2 thousand as annual remuneration.

The Committee is required to perform all the tasks indicated in the Regulation and in the procedures. Specifically, its task is to release a motivated opinion on the interest of the

Company (or, if the case, of its subsidiaries) on the execution of related party transactions and on the convenience and substantial correctness of conditions thereto. If required by the nature, extent and characteristics of the transaction, the Related Party Committee may also be assisted by one or more independent experts of its choice, whose fees are paid by the Company, through the acquisition of specific reports and/or fairness and/or legal opinions.

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The Board of Directors may decide on remuneration for special responsibilities pursuant to art. 2389, paragraph 3, of the Italian Civil Code, to the Committee members for each transaction it is required to express an opinion on.

13 Appointment of the Board of Statutory Auditors

Under art. 26 of the company bylaws, the Board of Statutory Auditors is appointed on the basis of lists submitted by the shareholders containing a maximum of five candidates.

Under the bylaws:

members of the Board of Statutory Auditors are appointed on the basis of lists that must be filed with the registered office of the Company within the 25th day before the Shareholders' Meeting called to decide on the appointment of the members of the Board of Statutory Auditors, made available to the public at the registered office, on www.cairocommunication.it and in accordance with the other procedures provided by law and regulations, at least 21 days before the date of the Meeting. Upon expiry of the time limit of 25 days prior to the Meeting, in the event only one list has been filed, or lists submitted by shareholders who are connected, pursuant to applicable provisions, lists may be submitted until the fourth day (as set forth in the bylaws) subsequent to such date. In this event, the foregoing 2.5% threshold (or other minimum amount set by prevailing laws) is reduced by half;
the lists consist of two sections: one for candidates to the position of standing auditor, and the other for candidates to the position of alternate auditor, and where the number of candidates is equal to or higher than three, they must ensure minimum gender representation required by the laws and regulations in force at the time;
lists admitted to the voting are those submitted by shareholders who, either individually or jointly with other shareholders, represent at least 2.5% of the shares entitled to vote in the ordinary meeting, or other minimum amount set by Consob, which was set at an

amount equal to 2.5% by resolution 19499 of 28 January 2016). Ownership of the minimum stake is determined on the basis of the shares recorded in the name of the shareholder on the date the lists are filed with the Company; candidates may appear in one list only, under penalty of ineligibility; candidates holding the position of statutory auditor in 5 (five) other listed companies (excluding their subsidiaries, although listed) or holding a number of positions exceeding the cumulative limit prescribed by law and by Consob, or failing to possess the requirements of integrity and professionalism established by prevailing laws, shall not appear in the lists. Each list shall be accompanied by a) information regarding the identity of the shareholders who have submitted the list, indicating total percentage of shares held, and by prescribed certification on ownership of the stake, which may be submitted also subsequent to filing, provided within the time limit set for publication of the lists; b) a statement of the shareholders other than those who hold, also jointly, a controlling or relative majority interest, declaring they have no relationship of connection, pursuant to applicable provisions; c) detailed information regarding the personal and professional qualifications of the candidates (including gender), and a statement with which each candidate accepts nomination and attests, under own responsibility, that there are no reasons for ineligibility or incompatibility with the position, and confirms possession of the requirements prescribed by law and the bylaws for the respective positions;

the chairman of the Board of Statutory Auditors shall be the candidate indicated on top of the list that has received the second-highest number of votes. The bylaws do not provide for the appointment of more than one minority statutory auditor, nor do they provide for the possibility of drawing a number of alternate auditors from the minority list to replace the minority member greater than the minimum required by Consob;
should two or more lists reach a tie, the prevailing list shall be the list possessing the largest shareholding or, in the event of a tie, the highest number of shareholders;
should only one list be submitted, the three standing auditors and two alternate auditors shall be drawn from this list, in the sequential order in which they appear, in which case the Chairman of the board of statutory auditors shall be the candidate appearing on top of the list;
according to the above procedure, should the composition of the board of statutory auditors fail to comply with gender balance required by law or regulations currently in

force, the necessary replacements shall be made based on the sequential order of listing of candidates;

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should no list be submitted or admitted, the board of statutory auditors and its Chairman shall be appointed by the Shareholders' Meeting by relative majority vote, in compliance with the laws and regulations in force on gender balance.

14 Composition and operation of the Board of Statutory Auditors (pursuant to art. 123 bis, paragraph 2, letter d), T.U.F.)

At their meeting on 29 April 2014 the Shareholders appointed the Board of Statutory Auditors for a three-year period, until the approval of the financial statements at 31 December 2016, on the basis of a single list submitted by the major shareholder, UT Communication S.p.A. approved with the favourable vote of 76.34% of the share capital. The Board of Statutory Auditors comprises three standing auditors, Marco Moroni, Chairman, Maria Pia Maspes and Marco Giuliani, and two alternate auditors, Emilio Fano and Enrico Tamborini, who have certified that they know of no relative cause of ineligibility or incompatibility, and that they meet the requirements for the position under current legislation and the bylaws, specifically, the requirements of independence provided by art. 148, paragraph 3 of the TUF, and the requirements of independence provided by industry regulations if applicable on account of business activities performed.

						Board of Statutory Auditors
Post	Members	Year of birth	Date of first appointment*	From	Until	List (M/m)**	Independence as per Code	***	Number of other posts ****
Chairman	Marco Moroni	1963	05/05/2008	01/01	31/12	M	X	4/4	17
Standing auditor	Marco Giuliani	1959	28/04/2011	01/01	31/12	M	X	4/4	9
Standing auditor	Maria Pia Maspes	1970	30/01/2006	01/01	31/12	M	X	4/4	12
Alternate auditor	Emilio Fano	1954	29/04/2014	01/01	31/12	M	X	n/a	n/a
Alternate auditor	Enrico Tamborini	1967	28/04/2011	01/01	31/12	M	X	n/a	n/a
	Quorum required for the submission of lists at previous appointment: 2.5%
	N. of meetings held in 2015: 4

NOTES:

* Date of first appointment of each statutory auditor means the date on which each statutory auditor was appointed for the first time (ever) in the Board of Statutory Auditors of the Issuer.

** This column indicates M/m depending on whether the statutory auditor was elected by the majority (M) or minority (m) list

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*** This column indicates the participation percentage of statutory auditors to the BoA meetings (n. of times present/n. of meetings held during their term, for instance 6/8; 8/8, etc.).

**** This column indicates number of directorships or statutory auditor positions held, pursuant to art. 148-bis TUF and related implementation provisions contained in Consob's Issuer Regulations. The complete list of appointments is published by Consob on its website pursuant to Art. 144-quinquiesdecies of Consob's Issuer Regulations.

In 2015, four meetings were held, each lasting approximately 2 hours. Five meetings are scheduled for the current year, one has already been held.

The Board of Statutory Auditors assessed the independence of its members following their appointment. For its assessments, it based itself, among other criteria, also on those prescribed by the Corporate Governance Code regarding independence of directors. In any event, auditors who, either or on their own behalf or of third parties, may have an interest in a specific transaction involving the Issuer, shall promptly and fully inform the other auditors and the Chairman of the Board of Directors as to the nature, terms, origin and extent of their interest.

The Board of Statutory Auditors also oversaw the independence of the Audit Firm, verifying the respect of relevant regulatory requirements in terms of the nature and overall service provided other than the audit services provided to the Company and its subsidiaries by the same Audit Firm and the entities forming part of its network.

In the performance of its duties, the Board of Statutory Auditors coordinated its activities with the internal audit manager and with the Control and Risk Committee, also with the attendance of its Chairman or other statutory auditor delegated to the meetings of the Control and Risk Committee.

Given the vast knowledge of the Company accumulated by the statutory auditors and their wealth of experience in the specific areas of operation of the Cairo Communication Group, as well as the specific personal and professional background of each member of the Board of Statutory Auditors, it was not deemed necessary to have them attend (induction program), following appointment and during their term of office, initiatives to provide them with adequate knowledge of the area of operation of the Issuer, of company dynamics and evolution, as well as the relevant regulatory framework.

15 Investor Relations

Cairo Communication has set up an appropriate section in its website, which is easy to find and easily accessible, in which all important company information of interest to shareholders is made available.

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To put a communication flow in place with the general body of shareholders, also taking account of the size of the Company and Group, an appropriate "investor relations" function has been set up, managed by Mario Cargnelutti, who is supported by top management, particularly in relation to dealings with institutional investors.

16 Shareholders' Meetings

The functioning of the Shareholders' Meeting, its main powers, shareholders' rights and terms of their exercise are those prescribed by the applicable provisions of law and regulations.

Multiple-voting shares or increased voting rights are not envisaged.

The By-laws contain no provisions that reserve shareholders the authorization of specific actions taken by the directors. Pursuant to art. 21, paragraph 2 of the bylaws, without prejudice to the competence of the Shareholders at their Extraordinary Meeting, who have the authority to decide on the matter, pursuant to art. 2365 of the Italian Civil Code, the Board of Directors is authorized, inter alia, to adopt resolutions concerning merger, in the cases set forth in articles 2505 and 2505 bis of the Italian Civil Code, capital reduction in the event of shareholder withdrawal, harmonization of the bylaws to mandatory provisions of law, relocation of the registered office to other premises in Italy.

For those entitled to participate to the Meeting voting rights and representation at meetings is governed by the provisions of law and regulations. Art. 12 of the bylaws states as follows: "Shareholders entitled to vote at meetings and their representation is governed by the provisions of law and regulations. In particular, shareholders authorized to cast a vote may send notice by electronic means of the proxies issued pursuant to the prevailing laws, by accessing a specific section on the Company's website according to the procedures to be indicated in the notice of call of shareholders' meetings."

Voting by correspondence, e-voting and/or voting using audiovisual links has not been established.

Given the number of attendants at Company ordinary and extraordinary shareholders' meetings, which has never posed any risk to the rights of expression of any member in relation to matters

discussed, no regulations relating to the orderly and functional operation of the Meetings have been proposed for the approval of the Shareholders.

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Shareholders' Meetings are an opportunity for information regarding the Issuer to be communicated to shareholders, in accordance with the code of practice relating to privileged information. In particular, at Shareholders' Meetings, the Board of Directors reports on activities completed and planned, and ensures that shareholders have appropriate information on all topics required in order to make decisions at the meeting with full knowledge of the facts. All members of the Board of Directors attended the Meeting held on 28 April 2015.

In order to meet this objective, the Board of Directors makes available to shareholders all company information they deem relevant, in a timely manner, in accordance with the code of practice relating to privileged information. For such purpose, a dedicated section of the Company website has been set up where this type of information is displayed, with particular detail on attendance at Shareholders' Meetings, the exercise of voting rights and documentation relating to items on the agenda.

No proposals were made at the Shareholders' Meeting to vote on items on which a proposal had not been made in advance by the Board of Directors.

At the last Shareholders' Meeting, the President (or other member) of the Remuneration Committee was not required to report to the shareholders on the manner of exercising the functions of the Committee, which are appropriately explained in the Remuneration Report and Corporate Governance Report.

In 2015, no significant changes were reported in the composition of the Issuer's corporate structure.

17 Further corporate governance practices

There are no corporate governance practices further to the ones mentioned above applied by the Company, aside from the legal or regulatory requirements.

18 Changes after year end

There were no changes in the Corporate Governance structure after year end.

Treasury shares

Movements in treasury shares are disclosed in Note 19 to the separate financial statements of the Parent Company.

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Stock Options

Cairo Communication has no current stock option plans at this time.

Shares held by directors, statutory auditors and general managers

Shares held directly by Directors, Statutory Auditors and General Managers are illustrated in the Remuneration Report prepared pursuant to art. 123-ter of the TUF.

Other information

Research and development activities

There are no research and development activities to report having a significant effect on the performance of the Company or the Group.

Human resources

By the nature of the activities it carries out, human resources form a critical factor for the success of the Group. The evaluation of staff, the development of their abilities and the recognition of their achievements and responsibilities are the principles which govern personnel management, from the selection phase, which is facilitated by the high degree of the Group's visibility and its ability to attract personnel.

Staff turnover during 2015 and its composition at 31 December 2015 can be analyzed as follows:

Description	01/01/2015	Recruitments	Terminations	Advancements	31/12/2015
Open-ended contracts	712	24	(17)	8	727
Senior managers	25	3	-	2	30
Managers	82	1	(1)	(2)	80
Employees	384	14	(11)	8	395
Journalists and freelance	221	6	(5)		222
Fixed-term contracts	25	116	(87)	(8)	46
Senior managers	0	0	0	0	0
Managers	0	0	0	0	0
Employees	11	66	(53)	(5)	19
Journalists and freelance	14	50	(34)	(3)	27
Grand total	737	140	(104)	0	773

Personnel can also be analyzed by average age, sex, education and seniority:

	Senior	Managers	Employee	Journalists and
	managers		s	freelance

Men (number)	29	50	211	109
Women (number)	1	30	203	140
Average age	50	49	45	47
Seniority	14	15	12	13
Open-ended contracts	30	80	395	222
Fixed-term contracts	-	-	19	27
Graduates	24	34	95	127
Diploma holders	5	47	296	120
Middle school graduates	0	1	22	2

Most of the employees (438) work in the TV segment, followed (225) by the magazine and book publishing segment. The advertising segment employs 74 people and draws on a sales force of approximately 100 agents (direct and indirect) who are coordinated by senior sales managers and staff who, together with their staff, also ensure coordination with the editors and the promotion of special initiatives.

The Group is committed to pursue health and safety objectives at the workplace. There were no accidents in the workplace or charges for occupational diseases during the year.

Environment

The Cairo Communication Group has outsourced its production processes. There are no major environmental aspects which could affect the financial position or results of operations of the company.

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Privacy

Regarding privacy regulations, Cairo Communication and Group companies update the Personal Data Policy Document, which establishes treatment followed, resources subject to security measures, risks, rules (physical and logical measures, and security organizational measures) and the relating training plan.

In previous years, technical and organizational measures and methods had been put in place integrating those already operational where necessary – regarding storage of the identifying details of system administrators and verification of work performed, in order to guarantee the monitoring of their work.

EVENTS AFTER THE REPORTING PERIOD AND BUSINESS OUTLOOK

In 2015, despite the high degree of uncertainty of the economic context in general and specifically of its relevant markets (advertising and publishing), and despite the drop reported by advertising revenue also as a result of the market trend, the Cairo Communication Group:

reported in 4Q15 a strong improvement in the results trend versus the first nine months of the year, achieving gross operating profit (EBITDA) of approximately Euro 6.8 million, exceeding the result achieved in 4Q14 (Euro 6.6 million);
continued its growth strategy by launching "Nuovo TV", the new TV weekly led by Riccardo Signoretti, out on newsstands from 21 September; in the first 22 issues, it posted average sales of approximately 142 thousand copies, highly satisfactory results in line with forecasts; Thanks also to the results achieved by "Nuovo TV", on 26 January 2016, the Group launched "Nuovo e Nuovo TV Cucina", the fortnightly magazine dedicated to good food for every cooking connoisseur, presenting easy, affordable and successful recipes, sold as an option with the two weeklies "Nuovo" and "Nuovo TV", which reported average sales of approximately 165 thousand copies in the first 5 issues;
reported a strong growth in results in the magazine publishing segment which, despite incurring total costs of Euro 1.4 million in September and October to launch the new weekly, achieved gross operating profit (EBITDA) and operating profit (EBIT) of Euro 14.6

million and Euro 13.5 million (up by approximately 6.1% and 7.7% versus 2014), confirming the high circulation levels of the publications, and worked on improving the levels of efficiency reached in containing costs (production, publishing and distribution);

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continued - in a persistently weak advertising market - to work on strengthening the results of the rationalization and cost-curbing measures achieved in the TV publishing segment (La7) in 2013 and 2014, and succeeded in posting, in 2015 too, a positive gross operating profit (EBITDA) of approximately Euro 1.6 million, thanks to the results reached in 4Q15, when gross operating profit (EBITDA), amounting to approximately Euro 4.7 million, grew by about 50% versus the figure achieved in 4Q14, thanks also to the trend in advertising sales on La7 and La7d channels in December, up by more than 10% versus December 2014.

Based on the order book at 14 March 2016 for advertising aired and to be aired on La7 and La7d in 1Q16, amounting to approximately Euro 35.8 million, revenue achieved in 1Q15 (Euro 35.2 million) has already been beaten, and forecasts point to a growth of approximately 4% in the quarter. In 1Q16, based on the order book at 14 March 2016, amounting to Euro 5.1 million, advertising sales on the Group's magazines show an extremely positive trend, up by approximately 15% versus revenue achieved in 1Q15 (Euro 4.4 million).

In 2016, the Cairo Communication Group will continue to:

pursue the development of its traditional segments (magazine publishing and advertising sales), also continuing, in the publishing segment, its growth strategy with the launch of new titles; in these segments, despite the economic and competitive backdrop, given the high quality of the publications and of the media under concession, the Group considers it a feasible target to continue to achieve positive operating results;
work on strengthening the results of the rationalization and cost-curbing measures achieved in 2013-2015 in the TV publishing segment, which is forecast to achieve a positive gross operating profit (EBITDA) in 2016 too.

However, the evolution of the general economic situation could affect the full achievement of these targets.

For the Board of Directors Chairman Urbano Cairo

Dear Shareholders,

at the meeting held on 14 March 2016, the Board of Directors resolved to submit the financial statements as at and for the year ended 31 December 2015 to the approval of the Shareholders and to propose the distribution of a dividend of 0.20 Euro per share, inclusive of tax. Shareholders are invited:

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to approve the financial statements as at and for the year ended 31 December 2015;
to resolve on the proposal to distribute to shareholders a dividend of 0.20 Euro per share, inclusive of tax, with the exception of treasury shares held the evening prior to the record date pursuant to art. 83-terdecies of Legislative Decree 58/1998:
distributing profit for the year of Euro 8,109,548,
drawing the difference from the share premium reserve.

If approved by the Shareholders, the dividend of Euro 0.20 per share will be made payable from 11 May 2016 (record date pursuant to art. 83-terdecies of Legislative Decree 58/1998: 10 May 2016), prior to detachment of coupon n. 10 on 9 May 2016.

For the Board of Directors Chairman Urbano Cairo

Consolidated income statement for the year ended 31 December 2015

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€ thousands	Notes	31 December 2015	31 December 2014
Revenue	1	226,582	240,266
Other revenue and income	2	9,403	11,927
Change in inventory of finished products	3	33	(28)
Raw materials, consumables and supplies	4	(21,864)	(24,589)
Services	5	(113,550)	(113,827)
Use of third-party assets	6	(20,420)	(22,811)
Personnel expense	7	(60,955)	(60,634)
Amortization, depreciation, provisions and impairment losses	8	(8,217)	(5,221)
Other operating costs	9	(1,672)	(2,121)
EBIT		9,340	22,962
Income / (loss) on investments	10	0	(2)
Net financial income	11	692	1,829
Pre-tax profit		10,032	24,789
Income tax	12	1,040	(973)
Profit from continuing operations		11,072	23,816
Loss from discontinued operations	13	(1)	(1)
Profit for the year		11,071	23,815
- Owners of the parent - Non-controlling interests - discontinued operations - Non-controlling interests - continuing operations		11,053 0 18 11,071	23,791 0 24 23,815
Earnings per share (euro) Earnings per share - continuing and discontinued operations - Earnings per share - continuing operations	15 15	0.141 0.141	0.304 0.304

Consolidated statement of comprehensive income for the year ended 31 December 2015

		31 December 2015	31 December 2014
Profit for the year		11,071	23,815
Other non-reclassifiable items of the comprehensive income statement
Actuarial profit (loss) from defined benefit plans	25	(38)	(1,367)
Tax effect		10	376
Total comprehensive income for the year		11,043	22,824
- Owners of the parent		11,025	22,800
- Non-controlling interests - discontinued operations		0	0
- Non-controlling interests - continuing operations		18	24
		11,043	22,824

Consolidated statement of financial position at 31 December 2015

€ thousands Assets	Notes	31 December 2015	31 December 2014
Property, plant and equipment	16	3,080	3,069
Intangible assets	17	60,917	56,871
Investments	18	62	62
Non-current financial assets	18	1,640	1,113
Deferred tax assets	19	4,186	3,983
Total non-current assets		69,885	65,098
Inventories	20	3,141	3,296
Trade receivables	21	78,539	79,957
Receivables from parents	30	3,167	6,539
Other receivables and other current assets	22	5,297	8,430
Cash and cash equivalents	23	125,776	149,061
Total current assets		215,920	247,283
Total assets		285,805	312,381
Equity and liabilities	Notes	31 December 2015	31 December 2014
Share capital Share premium reserve Prior-year earnings (losses) and other reserves Profit for the year Equity attributable to the owners of the parent		4,074 30,495 70,573 11,054 116,196	4,074 41,062 57,384 23,791 126,311
Non-controlling interests share capital and reserves		54	36
Total shareholders' equity	24	116,250	126,347
Non-current financial payables and liabilities	26	15,000	20,000
Post-employment benefits	25	13,315	13,398
Provisions for risks and charges	27	28,658	30,343
Total non-current liabilities		56,973	63,741
Current financial payables and liabilities	28	5,000	5,000
Trade payables	29	82,382	87,884
Payables to parents	30	818	156
Tax liabilities	31	3,560	5,487
Other current liabilities	32	20,822	23,766
Total current liabilities		112,582	122,293
Total liabilities		169,555	186,034
Total equity and liabilities		285,805	312,381

Consolidated statement of cash flows

€ thousands
	31 December 2015	31 December 2014
CASH AND CASH EQUIVALENTS	149,061	172,915
OPERATING ACTIVITIES
Profit for the year	11,071	23,815
Amortization/Depreciation	7,217	3,609
Income / (loss) on investments	0	2
Net financial income	(692)	(1,829)
Income tax	(1,040)	973
Change in post-employment benefits	(280)	1,439
Change in provisions for risks and charges	(1,685)	(4,639)
Cash flow from operating activities before changes in working capital	14,591	23,370
(Increase) decrease in trade and other receivables	4,551	10,047
Increase (decrease) in trade and other payables	(8,445)	(15,098)
(Increase) decrease in inventories	155	808
TOTAL CASH FLOW FROM OPERATING ACTIVITIES	10,852	19,127
Income tax received (paid)	2,944	557
Financial expense paid	(95)	(512)

TOTAL NET CASH FROM OPERATING ACTIVITIES (A)	13,701	19,172
INVESTING ACTIVITIES
(Acquisition) disposal net of PPE and intangible assets	(11,274)	(47,734)
Interest and financial income received	983	2,468
Net increase in other non-current assets	(527)	(622)
NET CASH USED IN INVESTING ACTIVITIES (B)	(10,818)	(45,888)
FINANCING ACTIVITIES
Dividends paid	(21,152)	(21,152)
Re-measurement of defined benefit plans inclusive of tax effect	(28)	(991)
Increase (decrease) in financial payables	(5,000)	25,000
Other changes in equity	11	5
NET CASH USED IN FINANCING ACTIVITIES (C)	(26,169)	2,862
CASH FLOW OF THE YEAR (A)+(B)+(C)	(23,286)	(23,854)
NET CASH AND CASH EQUIVALENTS CLOSING BALANCE	125,775	149,061

Statement of changes in consolidated equity

		Share capital Share premium reserve	Prior-year earnings (losses) and other reserves	Interim dividend	Profit for the year	Equity attributable to owners of the parent	Non controlling interests share capital and reserves	Total
€ thousands
Balance at 31 December 2012	4,074	45,452	2,287	(10,126)	18,663	58,226	4	58,230
Effects from application of amended IAS 19			(94)		94	0		0
Balance at 1 January 2013	4,074	45,452	2,193	(10,126)	18,757	60,350	4	60,354
Allocation of profit			18,757		(18,757)	0		0
Dividend distribution			(21,031)	10,126		(10,905)		(10,905)
Disposal of treasury shares			1,382			1,382		1,382
Actuarial profit (loss) from defined benefit plans			(370)		370	0		0
Other movements			7			7		7
Total comprehensive income for the year					73,824	73,824	8	73,832
Balance at 31 December 2013	4,074	45,452	938	0	74,194	124,658	12	124,670
Allocation of profit			74,194		(74,194)	0		0
Dividend distribution		(4,390)	(16,762)			(21,152)		(21,152)
Actuarial profit (loss) from defined benefit plans			(991)		991	0		0
Other movements			5			5		5
Total comprehensive income for the year					22,800	22,800	24	22,824
Balance at 31 December 2014	4,074	41,062	57,384	0	23,791	126,311	36	126,347
Allocation of profit			23,791		(23,791)	0		0
Dividend distribution		(10,567)	(10,585)			(21,152)		(21,152)
Actuarial profit (loss) from defined benefit plans			(28)		28	0		0
Other movements			11			11		11
Total comprehensive income for the year					11,025	11,025	18	11,043
Balance at 31 December 2015	4,074	30,495	70,573	0	11,053	116,195	54	116,249

Consolidated income statement pursuant to Consob Resolution no. 15519 of 27 July 2006

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€ thousands

	31 December 2015	related parties (*)	% of total	31 December 2014	% of total	% of total
Revenue	226,582	178	0.1%	240,266	165	0.1%
Other revenue and income	9,403	8	0.1%	11,927	51	0.4%
Change in inventory of finished products	33			(28)
Raw materials, consumables and supplies	(21,864)			(24,589)
Services	(113,550)	(2,436)	2.1%	(113,827)	(2,111)	1.9%
Use of third-party assets	(20,420)			(22,811)
Personnel expense	(60,955)			(60,634)
Amortization, depreciation, provisions and impairment losses	(8,217)			(5,221)
Other operating costs	(1,672)			(2,121)
Operating profit	9,340			22,962
Income / (loss) on investments	0			(2)
Net financial income	692			1,829
Pre-tax profit	10,032			24,789
Income tax	1,040			(973)
Profit from continuing operations	11,072			23,816
Loss from discontinued operations	(1)			(1)
Profit for the year	11,071			23,815

(*) Related party transactions are analyzed in Note 34

Consolidated statement of financial position pursuant to Consob Resolution no. 15519 of 27 July

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2006

€ thousands
Assets	31 December 2015	related parties (*)	% of total	31 December 2014	related parties (*)	% of total
Property, plant and equipment	3,080			3,069
Intangible assets	60,917			56,871
Investments	62			62
Non-current financial assets	1,640			1,113
Deferred tax assets	4,186			3,983
Total non-current assets	69,885			65,098
Inventories	3,141			3,296
Trade receivables	78,539	97	0.1%	79,957	4	0.6% 71
Receivables from parents	3,167	3,167	100.0%	6,539	6,539	100.0%
Other receivables and other current assets	5,297	47	0.9%	8,430	47	0.6%
Cash and cash equivalents	125,776			149,061
Total current assets	215,920			247,283
Total assets	285,805			312,381
Equity and liabilities	31 December 2015			31 December 2014
Share capital Share premium reserve Prior-year earnings (losses) Profit for the period	4,074 30,495 70,573 11,054			4,074 41,062 57,384 23,791
Equity attributable to the owners of the parent	116,196			126,311
Non-controlling interests share capital and reserves	54			36
Total shareholders' equity	116,250			126,347
Non-current financial payables and liabilities	15,000			20,000
Post-employment benefits	13,315			13,398
Provisions for risks and charges	28,658			30,343
Total non-current liabilities	56,973			63,741
Current financial payables and liabilities	5,000			5,000
Trade payables	82,382	1,285	1.6%	87,884	1,428	1.6%
Payables to parents	818	818	100.0%	156	156	100.0%
Tax liabilities	3,560			5,487
Other current liabilities	20,822			23,766
Total current liabilities	112,582			122,293
Total liabilities	169,555			186,034
Total equity and liabilities	285,805			312,381

(*) Related party transactions are analyzed in Note 34

Consolidated statement of cash flows pursuant to Consob Resolution no. 15519 of 27 July 2006

€ thousands























			0





			0

NET CASH AND CASH EQUIVALENTS CLOSING BALANCE	125,775	149,061

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2015

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Main activities

Cairo Communication S.p.A. (the Parent) is a joint-stock company listed in the Milan Company Register. The Cairo Communication Group operates as a publisher of magazines and books (Cairo Editore – and its division Editoriale Giorgio Mondadori – and Cairo Publishing), as a TV publisher (La7), as a multimedia advertising broker selling advertising time and space on television, in print media and in stadiums (Cairo Communication and Cairo Pubblicità), as a publisher of electronic content (Il Trovatore), and as a network operator (Cairo Network S.r.l.).

The registered offices are at 56 Via Tucidide, Milan, home also to the administrative offices, the advertising brokerage services and Il Trovatore and Cairo Network. The publishing business is managed at Cairo Editore, at 55 Corso Magenta, Milan. The publishing business of La7 is managed mainly in Rome at the registered offices and the TV studios of La7 S.p.A. (former La7 S.r.l.) at 229 Via della Pineta Sacchetti and 32 Via Novaro, respectively.

Figures are shown in thousands of Euro.

Basis of preparation

Structure, form and content of the consolidated financial statements

The consolidated financial statements at 31 December 2015 have been prepared in accordance with IFRS issued by the International Accounting Standard Board ("IASB") and endorsed by the European Union, as well as with the provisions arising from art. 9 of Legislative Decree no. 38/2005. The term IFRS is used to mean all the international accounting standards ("IAS") and all the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), formerly the Standing Interpretations Committee ("SIC").

The consolidated income statement is presented by nature, highlighting interim operating results and pre-tax results, and in order to allow a better measure of ordinary operating management performance. Furthermore, cost and revenue components deriving from events or transactions which, by their nature or size are considered non-recurring, are also separately identified in the financial statements and the notes in accordance with the definition of non-recurring events and transactions held in Consob Communication No. 6064293 of 28 July 2006.

The economic effect of discontinued operations is shown in a single line of the income statement entitled "Profit/loss from discontinued operations", under IFRS 5.

The consolidated statement of comprehensive income also reflects the "changes arising from transactions with non-owners"- separately showing the relevant tax effects, that is:

-- profit and loss that could be directly recognized in equity (for instance actuarial gains and losses from the measurement of defined benefit plans);

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the effects of the measurements of derivative instruments hedging future cash flows;
the effects of the measurements of available-for-sale financial assets;
the effects arising from any change in accounting standards.

The consolidated statement of comprehensive income presents the items relating to the amounts of the components of other comprehensive income for the period by nature and grouped into those which, in accordance with the provisions of other IAS/IFRS:

will not be subsequently reclassified to profit (loss) for the year;
will be subsequently reclassified to profit (loss) for the year, when certain conditions are met.

The consolidated statement of financial position presents separately assets and liabilities divided in current and non-current, indicating, on two separate lines, "Assets held for sale" and "Liabilities associated with discontinued operations", in accordance with IFRS 5. Specifically, an asset or a liability is classified as current when it satisfies one of the following criteria:

it is expected to be realized or settled or it is expected to be sold or utilized in the normal operating cycle of the company;
it is held principally to be traded;
it is expected to be realized or settled within 12 months of the reporting date.

Otherwise, the asset or liability is classified as non-current.

The consolidated statements of cash flows have been prepared applying the indirect method in which operating performance is adjusted to reflect transactions of a non-monetary nature, for whatever deferral or accrual of previous or future operating receipts or payments and for revenue or cost components connected to cash flows arising from investing or financing activities. Income and expense relating to medium or long-term financial operations and those relating to hedging instruments, and dividends paid are included in financing activities.

The statement of changes in consolidated equity shows the variations in equity relating to:

allocation of profit for the year;
amounts relating to transactions with owners (purchase and sale of treasury shares);

and separately income and expense defined as "changes arising from transactions with non-owners", also shown in the consolidated statement of comprehensive income.

Furthermore in order to comply with Consob Resolution No. 15519 of 27 July 2006 relating to financial statements schedules, specific additional consolidated income statement, consolidated statement of financial position and consolidated statement of cash flows have been added highlighting significant

related party transactions in order not to compromise the overall readability of financial statements schedules.

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The consolidated financial statements are prepared on a going concern basis. The Cairo Communication Group believes that even in the presence of a difficult economic and financial situation, significant uncertainties do not exist (as defined by paragraphs 25 and 26 of IAS 1) on the Company's ability to continue as a going concern, given both the profitability outlook of Group companies and the Company's financial position.

The main accounting policies adopted are unchanged versus those used last year, and are explained below.

Basis and scope of consolidation

The scope of consolidation, based on the full method, includes consolidated subsidiaries (control is defined as the power of the Parent to determine the financial and operational policies of the company in order to derive benefits from its operations) and, based on the single line method, consolidated associates, over which significant influence is exercised.

The consolidated financial statements at 31 December 2015 include the financial statements of the Parent and Cairo Communication S.p.A. and the following direct or indirect subsidiaries and associates:

Company	Head	Share capital	%	Reporting	Business	Consolidation method
	office	at 31/12/15:	of investment	date
Cairo Communication S.p.A.	Milan	4,074		31/12	Advertising	Full
Cairo Editore S.p.A.	Milan	1,043	99.95	31/12	Publishing	Full
Diellesei S.r.l. in liquidation	Milan	10	60	31/12	In liquidation	Full re assets and liabilities (*)
La 7 S.p.A. (former La7 S.r.l.)	Rome	1,020	100	31/12	TV publishing	Full from 30 April
						2013
Cairo Pubblicità S.p.A.	Milan	2,818	100	31/12	Advertising	Full
Cairo Network S.r.l.	Milan	5,500	100	31/12	Network operator	Full
Cairo Publishing S.r.l.	Milan	10	100	31/12	Publishing	Full
Il Trovatore S.r.l.	Milan	25	80	31/12	Internet	Full
Edizioni Anabasi S.r.l.	Milan	10	99.95	31/12	Publishing	Full

(*) the income statement is consolidated on a single line basis in profit/(loss) from discontinued operations

In 2015, there were no changes to the scope of consolidation from the consolidated financial statements for the year ended 31 December 2014.

On 23 February 2016, through deed executed at the office in Milan of notary Luca Barassi, Index no. 16744, the Extraordinary General Meeting of the subsidiary La7 S.r.l. approved its transformation into a joint-stock company; the registered office, corporate object, share capital and the duration remain unchanged.

The financial results of subsidiaries acquired or sold during the year are included in the consolidated income statement from the actual acquisition date until the actual date of sale. Where necessary, adjustments to subsidiary financial statements are made in order to harmonize them with the Group accounting policies.

_______________________________________________________________________________

The full consolidation method has been used for the consolidation of subsidiary financial statements, assuming the total of assets, liabilities, income and expense of individual companies, regardless of the share owned, eliminating the carrying amount of the Parent investment against the subsidiary's equity. Non-controlling interests in the net assets of consolidated subsidiaries are disclosed separately from equity

attributable to owners of the parent. This stake is calculated on the basis of the percentage stake of the fair value of the asset or liability on the original purchase date and subsequent changes in equity after such date.

Unrealized gains and losses, provided they are not minor, deriving from transactions between companies included in the scope of consolidation, are eliminated, as are all significant transactions which give rise to intra-Group receivables and payables, income and expense. These adjustments, like other consolidation adjustments, where applicable, take account of the related deferred tax effect.

Dividends distributed by consolidated companies are eliminated from the income statement and added to prior-year profits if and to the extent they were paid out of such profit.

Business combinations

The acquisition of subsidiaries is recognized using the acquisition method. The acquisition price is calculated by the sum of current values, at the exchange date, of the assets acquired, liabilities assumed, financial instruments issued by the Group in exchange for the control of the acquired company.

The subsidiary's assets, liabilities and identifiable contingent liabilities that meet the conditions of IFRS 3 are recognized at their current value on the acquisition date.

Goodwill arising from the purchase is recognized as an intangible asset and is initially measured at cost, corresponding to that portion of the acquisition price paid by the Group exceeding the carrying amount of the recognized assets, liabilities and identifiable contingent liabilities.

The positive difference between assets and liabilities measured at fair value at the acquisition date and the price paid is recognized in the consolidated income statement as non-recurring income. It may be subject to further adjustment within twelve months from the date of acquisition.

Equity attributable to non-controlling interests can be measured at fair value or in proportion to the net assets recognized for the acquired company, at the acquisition date. The measurement method is chosen based on type of transaction.

Non-controlling interests, investments in inactive subsidiaries and investments in subsidiaries of small value are measured using the cost at the subscription method, reflecting any impairment losses.

Investments

Associates

Associates are those over which the Group can exercise significant influence through participation in decisions regarding financial and operating policies, but holds neither control nor joint control.

The financial results, assets and liabilities of associates are consolidated using the equity method.

_______________________________________________________________________________

Using this method, investments in associates are recognized in the statement of financial position at cost, adjusted for changes subsequent to the acquisition of the net assets of associates, net of any impairment losses on individual investments. Any losses exceeding the Group share therein are not recognized, unless the Group has a commitment relating to loss coverage. The excess of acquisition cost over the Group share of carrying amount of assets, liabilities and identifiable contingent liabilities of the associate at the acquisition date is recognized as goodwill. Every year, goodwill is tested for impairment.

With regard to transactions between Group companies and associates, unrealized profits and losses are eliminated in a proportion equal to the Group investment in the associate, except when unrealized losses are evidence of an impairment loss on the business acquired.

Goodwill

Goodwill arising from the acquisition of a subsidiary corresponds to that portion of the acquisition price paid by the Group that exceeds the Group share of the fair value of the assets, liabilities and identifiable contingent liabilities of a subsidiary, at the acquisition date. Goodwill is recognized as an intangible asset with an indefinite life and is not amortized. It is reviewed annually to identify any impairment loss. Impairment losses are recognized directly in profit and loss and are not subsequently reversed. In the absence of a standard or a specific interpretation on the subject, in the case of the acquisition of a noncontrolling interest in an existing subsidiary, up to 31 December 2009, the difference between the cost of acquisition and the carrying amount of the assets and liabilities acquired is recognized as goodwill. Goodwill arising from acquisitions carried out before transition to IFRS is maintained at the amounts

Translation of foreign currency items

Transactions in foreign currency are initially recognized at the exchange rate in force on the transaction date. Monetary assets and liabilities denominated in foreign currency are translated at the exchange rate in force at year end.

derived from the application of Italian GAAP at that date and is tested for impairment from that date.

Non-monetary items valued at historical cost in foreign currency are converted at the exchange rate ruling on the transaction date. Non-monetary items recognized at fair value in foreign currency are converted at the exchange rate ruling on the fair value measurement date.

If a designated fair value hedging relationship has been set up 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 "Derivative financial instruments".

_______________________________________________________________________________

Revenue and cost recognition

Revenue and cost and income and expense are recognized on an accruals basis, specifically:

Revenue is recognized based on the probability with which the company will enjoy the economic benefits and in the extent to which the amount can be reliably determined. Revenue is stated net of any adjustments.
Advertising revenue is recognized at the moment the advertisement is broadcast or published. Revenue from publications is recognized at the date of publication, net of reasonably estimated returns.
Revenue from the sale of magazine subscriptions is recognized on the basis of the magazines published and distributed during the period.
Pre-publication and launch costs are recognized in profit and loss when incurred.
Interest income and expense are recognized on an accruals basis.
Dividends are recognized when the right of the shareholders to receive the payment is established.
The recharges of costs incurred on behalf of third parties are recognized as a reduction in the cost to which they relate.

Taxes

Taxes for the year correspond to the sum of current and deferred taxes.

Current taxes are based upon taxable income for the year. Taxable income differs from the results shown in the income statement as it excludes both positive and negative entries which would be taxable or deductible in other tax years and excludes components which are not taxable or deductible at any time.

Current taxes are calculated using the rates in force at the reporting date.

Cairo Communication and its subsidiaries Cairo Editore S.p.A., Cairo Pubblicità S.p.A., Diellesei S.r.l. in liquidation, Cairo Publishing S.r.l., La7 S.p.A. and Cairo Network S.r.l. participate in the national tax consolidation scheme of UT Communications S.p.A., in accordance with art. 117/129 of the Consolidated Income Tax Act.

The consolidation scheme, which regulates economic aspects pertaining to the sums deposited or received against the advantages or disadvantages arising from the national tax consolidation scheme, also allows for any increased costs or decreased benefits incurred by the companies, by participating in this procedure, to be repaid by the parent.

UT Communications S.p.A. acts as the tax parent and determines a single taxable base for the group of companies that participate in the national tax consolidation scheme, which thereby benefits from the ability of offsetting taxable profits against taxable losses in one tax return.

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Each company that participates in the national tax consolidation scheme transfers its taxable profit or loss to the tax parent. For any such taxable profit reported by a subsidiary, UT Communications S.p.A. recognizes receivables equal to the IRES payable. Conversely, for any such taxable loss, reported by a subsidiary, UT Communications recognize a payable equal to IRES due on the loss that has been contractually transferred at Group level.

Deferred tax liabilities are generally recognized for all taxable temporary differences, while deferred tax assets are recognized to the extent of the probability that there will be future taxable profits which will allow for the utilization of the deductible temporary differences. Deferred taxes are calculated on the basis of the tax rates that are foreseen will be in force at the moment of realization of the asset or of the liability, based on tax legislation in force at the reporting date. Where relevant, the effects of any changes in tax rate or tax legislation are disclosed in the notes. Deferred tax assets and liabilities are shown at their net value when there is a legal right to offset current tax liabilities against tax receivable assets and when taxes relate to the same taxation authority.

Post-employment benefits

Post-employment benefits, mandatory for all Italian companies under art. 2120 of the Civil Code, are deferred remuneration and are directly related to the employee's length of service in the company, and to the employee's actual remuneration received during their period of service.

For Italian companies with at least 50 employees, post-employment benefits take the form of a defined benefit plan, solely for the amounts accrued prior to 1 January 2007 (and not yet paid at the reporting date), whereas subsequent to such date, they are recognized as a defined contribution plan. For Italian companies with less than 50 employees, post-employment benefits are considered as a defined benefit plan. All defined benefit plans are discounted. The discounting process, based on demographic and financial assumptions, is performed by independent actuaries. Following the Amendment to IAS 19 - Employee Benefits, the recognition of expenses related to work performed and net financial charges are recognized in the income statement, while the recognition of actuarial gains and losses arising from the remeasurement of liabilities and assets are recognized in the statement of comprehensive income.

Non-current assets

Intangible assets

Costs, including ancillary costs incurred for the acquisition of resources with no physical substance, are recognized under intangible assets when the cost is quantifiable and the asset is clearly identifiable and

controlled by the Group, and where the use of the asset will generate probable future benefits to the Group. These are valued at their acquisition or production cost, including related costs – to the extent to which they are considered to have a finite life – and they are amortized to reflect their remaining useful economic lives. The amortization periods of intangible assets of various types are as follows: Concessions, licenses, trademarks and similar 3 to 5 years for application software licenses

_______________________________________________________________________________

rights

Other:

Software	3 to 5 years
Publication titles	20 years
Television rights	Based on their availability period

Publication titles are amortized over a period of 20 years from the date of their acquisition based on their remaining useful lives. This amortization period is regularly reviewed to take account of the financial performance of the subsidiaries that own the title.

Registration rights (with a duration of more than 12 months) for the broadcasting of films, series, soaps, cartoons, classical concerts, short films, and the like, including ancillary charges (dubbing, editing and materials), and contributions to productions purchased under license agreements, are carried under "media rights" and amortized on an annual straight-line basis throughout the contractual term of the rights, as from the year they are available and ready for use. If the rights have used up their airing time, regardless of the amortization already charged, the residual amount is fully charged to the income statement in the period of the last airing.

The remaining useful life and the amortization criteria applied are reviewed on a regular basis and where change is deemed necessary, the amortization rate is restated in accordance with the "prospective" method.

Assets under development include the costs incurred for the acquisition or internal production of intangible assets, to which title has not been fully acquired or for projects to be completed. Assets under development continue to be accounted for in this item up to the time of their economic use, when they are reclassified under the relevant items of intangible assets and amortized.

Financial expenses are capitalized in the carrying amount of the intangible assets acquired, where a significant period of time is needed before they are ready to be used.

Property, plant and equipment

Property, plant and equipment (PPE) are recognized when their cost can be reliably determined and when related future economic benefits can be enjoyed by the Group.

They are recognized at acquisition price or production cost, including directly associated expenses and costs, plus the share of indirect costs which can be reasonably attributed to the asset.

These assets are systematically depreciated on a straight-line basis each year at rates consistent with the remaining useful life of the asset. Depreciation rates applied are as follows

_______________________________________________________________________________

Property	3%
General equipment	20%
Motor vehicles	20%-25%
Plant and equipment	10%
Office equipment and furniture	10%-12%
Electronic equipment	20%

Land is not depreciated.

The above PPE depreciation rates are reduced by 50% during their first year of use, this percentage representing the weighted average of the entry to use of new assets, on an annual basis. Depreciation begins when the asset is ready for use.

The remaining useful lives of assets are reviewed annually and if incremental maintenance or other work has been carried out which changes the remaining useful life of the investment, these are adjusted accordingly.

Incremental and maintenance costs producing a significant and tangible increase in the productive capacity or security of assets, or lengthening their remaining useful life, are capitalized and recognized as an increase in the carrying amount of the asset. Ordinary maintenance costs are taken directly to profit and loss.

Leasehold improvements are recognized as PPE, on the basis of the cost incurred. The depreciation period corresponds to the lower of the remaining useful life of the asset and the term of the contract.

Impairment of assets

At least once a year, the Group reviews the recoverability of the intangible assets with an indefinite useful life, of intangible assets under development, and of investments and publication titles, and whenever there are potential indicators of an impairment loss on PPE and intangible assets with a finite useful life, in order to determine whether such assets may have suffered an impairment loss. When such indications are present, the carrying amount of the asset is reduced to reflect recoverable amount. The recoverable amount of an asset is the greater of its fair value less costs to sell, and its value in use. The fair value of a listed investment is determined according to its market price at the reporting date, in case the Stock Market price is considered to represent the effective value of the investment. In the absence of market values, estimates and valuation methods are applied based on data which is in any case evident on the

market. To determine an asset's value in use, the Group calculates the present value of future estimated cash flows, inclusive of tax, by applying a pre-tax discount rate which reflects the current market valuation, including the time value of money and the specific risks inherent to the asset.

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Excluding goodwill, when the impairment loss on the value of an asset no longer applies or is reduced, the carrying amount of the asset is increased up to the new estimated recoverable amount, and may not exceed the amount which would have been determined had no impairment loss been recognized.

Current assets and liabilities

Inventories

Inventories are measured at the lower of the purchase or production cost, including all directly attributable expenses, net of discounts and allowances, calculated using the weighted average cost method, and estimated realizable value. Estimated realizable value takes into account any production and direct sales costs. Inventories are adjusted for obsolete and slow moving items through a specific write-down provision.

Receivables

Trade and other current assets are recognized at their estimated realizable value.

Financial assets

They are initially recognized at fair value, which basically corresponds to consideration paid and direct expenses associated with their acquisition. Financial assets acquired and sold are recognized at their trading date, when the Group intends to acquire/sell these assets.

At the subsequent reporting dates, the financial assets that the Company has the intention and the ability to hold to maturity (held-to-maturity investments) are recognized at amortized cost, net of any impairment losses, to reflect write-downs, if any.

Investments other than those held to maturity are classified as held for trading or available for sale and are measured at the end of each reporting period at their fair value. When financial assets are held for trading, gains and losses arising from fair value changes are recognized in profit and loss. In the case of availablefor-sale financial assets, gains and losses arising from fair value changes are recognized in comprehensive income. When available-for-sale financial assets are sold, redeemed or transferred, cumulative gains or losses previously recognized in comprehensive income must be reclassified from equity to profit/ (loss) for the year. This reserve is also used if alignment to fair value results in subsequent impairment of the asset until the reserve is used up. Any additional loss exceeding the reserve, should it result in an impairment loss, is taken to profit and loss.

Regarding measurement of available-for-sale assets, the directors have chosen as impairment indicators, the decline in fair value below cost of over 50%, or for a period exceeding 24 months.

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Cash and cash equivalents

This item comprises cash, bank current accounts and deposits on demand, and other short-term highly liquid financial investments which are easily convertible to cash and not subject to the risk of significant value changes.

Cash and cash equivalents are recognized at their nominal amount.

Borrowings, bank loans and overdrafts

Borrowings, interest-bearing bank loans and bank overdrafts are recognized based on the amount cashed net of transaction costs, and subsequently measured at amortized cost using the current interest rate method.

Trade payables

These are recognized at their nominal amount.

Equity

Treasury shares

Treasury shares are measured at historical cost and are recognized as a reduction in equity. The result of the subsequent sale of treasury shares is recognized directly as a change in equity.

Dividends paid

Dividends payable are recognized as a change in equity in the year they are approved by the Shareholders' Meeting or by the Board of Directors in the event of an interim dividend, pursuant to art. 2433 bis of the Italian Civil Code.

Provisions for risk and charges

Provisions for risk and charges are recognized when the Group has a legal or constructive obligation resulting from a past event and for which a probability exists for the fulfillment of that obligation. The provisions reflect the best estimate of costs based on information currently available in order to fulfill the obligation at the reporting date, and are discounted when the effect is significant.

Derivative financial instruments

Hedging transactions, qualified for accounting purposes as "Financial assets held for trading", cover exchange rate risks on foreign currency payables (forward currency purchases coinciding with the maturity of contractual payments).

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The initial valuation of derivatives is performed at fair value at the date of initial recognition. Fair value changes are recognized in profit or loss.

Use of estimates

The preparation of the financial statements and the notes thereto, in application of the IFRS, requires that the Company carry out certain estimates and assumptions which affect the carrying amount of assets and liabilities and disclosures about assets and contingent liabilities at the reporting date. Estimates and assumptions used are based on experience and on other factors considered significant. Actual results could differ from these estimates. Estimates mainly relate to provisions for risks relating to receivables, obsolete inventory, publishing returns, investment measurements, amortization, depreciation, impairment of assets, taxation, provisions for risk and charges, and contingent liabilities.

Estimates and assumptions are reviewed regularly and the effects of each variation therein are recognized in the profit and loss in the period in which the estimate was revised. The effects of such revisions are reflected in the periods on which they have effect, i.e. both in the current period, and in future periods, if relevant. In this context, the persisting uncertainty factors in the short and medium economic term, which make it hard to predict a return to normal market conditions, have led to the need to make assumptions regarding future performance which are influenced by significant uncertainty, and the possibility of achieving results different from those estimated cannot be excluded for the next year, and which could therefore require adjustments to the carrying amount, even significant, although these are obviously neither currently quantifiable nor foreseeable.

The items most susceptible to these uncertainties are the allowance for impairment, inventory writedowns, non-current assets (intangible assets and investments), deferred tax assets, post-employment benefits and the provisions for risk and charges.

A summary follows of all critical measurement processes used and key assumptions made by management regarding the future in the process of applying accounting policies and that could have a significant effect on the amounts recognized in the consolidated financial statements and for which there is a risk that significant adjustments to the carrying amount of assets and liabilities could arise in the next financial period.

Allowance for doubtful accounts

The allowance for doubtful accounts reflects management's estimate regarding the losses on the portfolio of receivables from end customers. The allowance is estimated based on the losses expected by the Group, according to past experience for similar receivables, current and past due dates, losses and receipts arising from the careful monitoring of receivable management and from projections on market and economic conditions.

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The persisting uncertainty factors in the short and medium economic term, along with the resulting credit squeeze, could result in further deterioration of the financial conditions of Group debtors compared to deterioration already considered in the quantification of the recognized allowance for impairment.

Deferred tax assets

Deferred tax assets are recognized to the extent to which it is considered probable that future taxable income will be generated to allow the utilization of deductible temporary differences. The realizable value of deferred tax assets is periodically reviewed according to the future taxable income foreseen in the Group's most recent plans.

Recoverable amount of non-current assets (including goodwill)

Non-current assets include property, plant and equipment, intangible assets (including goodwill), investments and other financial assets. Management periodically reviews the carrying amount of the noncurrent assets held and used, and those of assets held for sale, as and when circumstances require such revision. This is performed by the comparison of the carrying amount of the asset and the greater of the fair value, less costs to sell, and value in use. Fair value is determined according to market prices. In the absence of market value, estimates and valuation models are used based on data available on the market. Value in use is determined based on the estimate of expected cash flows from the use or sale of the asset and is discounted using appropriate discount rates. When the carrying amount of a non-current asset has suffered an impairment loss, the Group recognizes an impairment loss equal to the positive difference between the greater of carrying amount of the asset and its recoverable amount from its use or sale, as determined according to the Group's most recent plans.

For the preparation of the consolidated financial statements at 31 December 2015, and in particular in the performance of impairment tests on intangible assets and property, plant and equipment, the different segments of the Group have taken into account the expected 2016 performance, whose assumptions and results are in line with the information disclosed in the section on "significant events after the reporting period and business outlook" in the Directors' Report. In addition, for the subsequent years of the plan, necessary adjustments have been cautiously made to take account of the deep market changes resulting from the current economic and financial crisis. No significant impairment was required based on such figures in the plan.

Provisions for risks and charges

The provisions for risk and charges relating to contingent liabilities of a legal or fiscal nature are made on the basis of estimates made by the Directors, on the basis of valuations made by the Company's legal and fiscal advisers on the probable charge that can be reasonably expected to fulfill the obligation.

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Risk management

The main fiscal, legal and financial risks to which the Cairo Communication Group is exposed, as well as the policies put in place by Management for their management, are explained in Note 35. Reference is made to the Directors' Report for operational and business risks.

1. Accounting standards, amendments and interpretations effective as from 1 January 2015

The following accounting standards, amendments and interpretations, revised also following IASB's yearly improvement process, were applied for the first time starting from 1 January 2015:

IFRIC 21 – Levies: The interpretation, issued by the IASB in May 2013, provides guidance on when to recognize liabilities for a levy imposed by a government, with the exception of those governed by other standards (i.e. IAS 12 – Income tax). IAS 37 establishes the recognition criteria of liabilities, one of which is the existence of a present obligation on an entity resulting from past events (obligating event). The interpretation clarifies that the obligating event that gives rise to liability for payment of a levy is explained by the relevant legislation that gives rise to its payment. IFRIC 21 is applicable according to the IASB for annual periods beginning on or after 1 January 2014, while, according to the EU, for annual periods beginning on or after 17 June 2014. The application of the interpretation from 1 January 2015 had no effects on the figures of the Annual Report at 31 December 2015.

Improvements to IFRS: 2011-2013 Cycle: On 12 December 2013, the IASB published "Annual Improvements to IFRSs: 2011-2013 Cycle", which acknowledges the amendments to the standards as part of their annual improvement process. According to the IASB, the amendments became effective for financial statements that begin on or after 1 July 2014. According to the EU, entry into force has been postponed to the financial statements beginning on or after 1 January 2015. These amendments are applied prospectively and had no effects on the figures of the Annual Report at 31 December 2015.

The main amendments regard:

• IFRS 1 First-time Adoption of International Financial Reporting Standards – It clarifies that a first-time adopter, as an alternative to the application of a principle currently in force on the date of the first IFRS financial statements, may opt for early application of a new standard intended to replace the principle in force. The option is admitted when the new standard allows early application. The entity is required to apply the same version of the standard in all periods presented in the first IFRS financial statements.

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IFRS 3 Business combinations – The amendments aim to clarify the exclusion from the application scope of IFRS 3 of all types of joint arrangements, not only of joint ventures.
IFRS 13 Fair Value Measurement IFRS 13, paragraph 52 (portfolio exception), in its current version, restricts to financial assets and liabilities included in the application scope of IAS 39 the possibility of fair value measurement on a net basis. The amendment clarifies that the possibility of fair value measurement on a net basis also applies to contracts within the application scope of IAS 39, but that do not meet the definition of financial assets and liabilities in IAS 32, such as contracts to buy and sell non-financial items that can be settled net in cash.
IAS 40 Investment Property The amendment clarifies that IFRS 3 and IAS 40 are not mutually exclusive and that, in order to determine whether the purchase of a property falls within the scope of IFRS 3, it is necessary to refer to the specific indications in IFRS 3; instead, to determine whether the purchase of such property falls within the scope of IAS 40, it is necessary to refer to the specific indications in IAS 40.

2. Accounting standards, amendments and interpretations approved by the EU and applicable from annual periods after 1 January 2015

Amendments to IAS 19 - Employee contributions to defined-benefit plans - The amendment, issued by the IASB in November 2013, introduces simplifications to account for defined-benefit plans that provide for contributions by employees or third parties. Specifically, the amendments to IAS 19 allow recognition of employee or third-party contributions as a reduction of service costs during the period in which services where rendered, if the following conditions are met:

employee or third-party contributions are formally provided for in the terms of the plan;
the contributions are linked to services rendered; and
the amount of the contributions is independent of the number of years of service.

after 1 July 2014. According to the EU, entry into force has been postponed to the financial statements beginning on or after 1 February 2015. These amendments are applied retrospectively, but will have no effects on the figures of the Annual Report at 31 December 2015.

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Improvements to IFRS: 2010-2012 Cycle: On 12 December 2013, the IASB published "Annual Improvements to IFRSs: 2010-2012 Cycle", which acknowledges the amendments to the standards as part of their annual improvement process. According to the IASB, the amendments became effective for financial statements that began on or after 1 July 2014. According to the EU, entry into force has been postponed to the financial statements beginning on or after 1 February 2015. These amendments are applied prospectively.

The main amendments regard:

IFRS 2 Share-based payments Amendments have been made to the definitions of "vesting condition" and "market condition", while further definitions have been added of "performance condition" and "service condition" (previously included in the broad definition of "vesting condition").
IFRS 3 Business combinations- The amendments clarify that a contingent consideration classified as an asset or liability should be measured at fair value at each balance sheet date, regardless of whether the contingent consideration is a financial instrument to which IAS 39 applies or a non-financial asset or liability. Changes in fair value are presented in profit/(loss) for the year.
IFRS 8 Operating segments The amendments require an entity to disclose those factors used by management to identify the entity's reportable segments when operating segments have been aggregated, including a description of the aggregated operating segments and economic indicators considered in determining whether these operating segments have "similar economic characteristics". The amendments also clarify that the reconciliation between total assets of the operating segments and the total assets of the entity is provided only in the event that the total assets of the operating segments are regularly provided to the chief operating decision-maker ("CODM").
IFRS 13 Fair Value Measurement Amendments have been made to the Basis for Conclusions in order to clarify that short-term receivables and payables are still able to be measured on an undiscounted basis where the effect of discounting is immaterial.
IAS 16 Property, plant and equipment and IAS 38 Intangible assets The amendments have eliminated inconsistency in the recognition of accumulated depreciation where the revaluation method of a property, plant or equipment or an intangible asset is applied. The new requirements clarify that the gross carrying amount is adjusted in a manner consistent with the revaluation of

the carrying amount of the asset, and that accumulated depreciation is equal to the difference between gross carrying amount and carrying amount, less subsequent depreciation.

• IAS 24 Related Party Disclosures – following the amendment to IAS 24, the IASB:

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has extended the definition of "related party" to entities that provide within the group key management personnel services (these entities are usually named "management companies");
it has clarified that it is sufficient to provide the total amount of the cost charged by the management company without separately indicating each type of benefit that the management company has paid its employees.

Amendments to IFRS 11 Joint arrangements: The amendments, published by the IASB in May 2014 and approved by the EU in November 2015, provide clarification on the accounting of purchases of interests in a joint operation whose activity constitutes a business. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016; early application is allowed.

Amendments to IAS 16 and IAS 38 Property, plant and equipment and Intangible assets: The amendments, published by the IASB in May 2014 and approved by the EU in December 2015, aim to clarify that depreciation criteria regarding property, plant and equipment, determined in accordance with revenue are not appropriate, as the revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of economic benefits that arise from the asset itself.

The IASB also clarified that revenue is not appropriate to measure the consumption of the economic benefits generated by an intangible asset. This presumption may, however, be overcome in limited circumstances. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016; early application is allowed.

Amendment to IAS 27 Separate financial statements. The amendments to IAS 27, published in August 2014 and approved by the EU in December 2015, will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in the separate financial statements. The amendments will be retrospectively applicable for financial statements beginning on or after 1 January 2016; early application is allowed.

Improvements to IFRS: 2012-2014 Cycle: In September 2014, the IASB published "Annual Improvements to IFRSs: 2012-2014 Cycle", approved by the EU in December 2015, which acknowledges the amendments to the standards as part of their annual improvement process. The

amendments are applied to financial periods beginning on or after 1 January 2016. Early application is allowed.

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The main amendments regard:

IFRS 5 Non-current assets held for sale and discontinued operations The amendment introduces specific guidance to IFRS 5 in case an entity reclassifies an asset (or disposal group) from held for sale to held-for-distribution (or vice versa), or when recognition of an asset heldfor-distribution ceases.
IAS 19 Employee benefits The amendment to IAS 19 clarifies that high quality corporate bonds used to determine the discount rate of post-employment benefits must be issued in the same currency used in the payment of the benefits.
IAS 34 Interim financial reporting - The amendment clarifies the requirements in the event that the disclosures required are presented in the interim financial report but not in the interim financial statements. The amendment requires that the disclosures be incorporated by crossreference between the interim financial statements and wherever they are included within the interim financial report and that the document be available to users of the financial statements on the same terms as the interim financial statements and at the same time.
IFRS 7 Financial instruments: disclosures- The document introduces additional guidance to clarify whether a servicing contract constitutes a continuing involvement in a transferred asset for the purposes of applying these disclosure requirements to the transferred assets.

Amendment to IAS 1 Disclosure initiative: The amendments to IAS 1, published in December 2014 and approved by the EU in December 2015, are applied to financial periods beginning on or after 1 January 2016. Early application is allowed.

The main amendments regard:

Materiality and aggregation: An entity must not reduce the understandability of its financial statements by obscuring useful information with irrelevant information or by aggregating relevant information that has different characteristics or function. Additional subtotals must be reconciled to the subtotal and totals required.
Information to be presented in the statement of financial position and of comprehensive income: specific items of profit or loss, other comprehensive income and the statement of financial position can be disaggregated. Subtotals must: be made up of items recognized and measured in accordance with IFRS, be presented and labeled in order to make the components of the subtotal clear and understandable, and be consistent from period to period.
Statement of other comprehensive income for the year The share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in

aggregate form but separately from other comprehensive income, as a single item, based on whether the items will or will not subsequently be reclassified to profit or loss.

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• Notes – Structure the entity is free to decide the order of presentation in the financial statements, but must consider the effect on the understandability and comparability of its financial statements, emphasizing the most relevant operating segments for the understanding of its financial performance and financial position.

3. Accounting standards, amendments and interpretations yet to be approved by the EU and applicable from annual periods after 1 January 2015

IFRS 15 - Revenue from contracts with customers: The standard, published by the IASB in May 2014, introduces a general model to determine whether, when and to what extent will revenue be recognized. The standard replaces the recognition criteria set out in IAS 18 - Revenue, IAS 11 - Work in progress, IFRIC 13 - Customer Loyalty Programmes, IFRIC 15 - Agreements for the Construction of Real Estate, IFRIC 18 - Transfers of Assets from Customers, and SIC-31 - Revenue: Barter Transactions Involving Advertising Services.

IFRS 15 applies to financial periods beginning on or after 1 January 2018, and early application is allowed. On first-time application, IFRS 15 is applied retrospectively. Certain simplifications are, however, applicable ("practical expedients"), as well as a different approach ("cumulative effect approach") that avoids the restatement of annual periods presented in comparative information; in the latter case, the effects arising from the application of the new standard should be recognized in the initial equity of the first annual period for which IFRS 15 is applied. The Group is still assessing the potential effects of the application of IFRS 15 on the consolidated financial statements.

IFRS 9 – Financial instruments. The standard, published by the IASB in July 2014, supersedes IAS 39 - Financial Instruments: Recognition and Measurement. IFRS 9 introduces new provisions for the classification and measurement of financial instruments, including a new model for expected losses in the calculation of impairment losses on financial assets, and new general provisions for hedge accounting. It also includes provisions for the recognition and derecognition of financial instruments in accordance with the current IAS 39. The new standard will be applicable from 1 January 2018; early application is allowed. As a general rule, under IFRS 9, the standard must be applied prospectively, although certain exceptions are allowed.

Amendment to IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and joint ventures. The amendment issued by the IASB in September 2014 highlights the changes to address an inconsistency in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the changes is that a full gain or loss is

recognized when a transaction involves a business. The changes apply prospectively to financial statements of annual periods beginning on (or after) 1 January 2016. The IASB, however, in December 2015 decided to postpone this date of entry into force, as certain inconsistencies were found with some paragraphs in IAS 28. Following IASB's decision, the European Union has blocked the approval process, awaiting publication of the new document with the new date of entry into force.

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IFRS 16 – Leases: The standard, issued by the IASB in January 2016, proposes material changes to the accounting requirements of leases in the financial statements of the lessee, who is required to recognize assets and liabilities arising from leases in the balance sheet, introducing a single accounting model for operating and finance leases.

Specifically, the lessee is required to recognize liabilities arising from leases at the present amount of future lease payments. The lessee will also be required to record under assets the rights of use of the underlying asset at the same amount assigned to the corresponding liabilities. Following initial recording, the right of use will be amortized over the term of the lease or over the useful life of the asset (if lower). The liability will be gradually paid through payment of the instalments, with recognition of the corresponding interest. The liability is determined by taking account only of the fixed component of the lease instalments and of inflation-based components, if any, not of variable components. Future payments, thus determined, will be discounted according to the contractual rate or the lessee's incremental borrowing rate, over the period when the lease is deemed non-cancellable. The IASB has required the standard to be applied for financial periods beginning on 1 January 2019. Early application is allowed for entities who apply IFRS 15 Revenue from contracts with customers, except for special considerations from EFRAG in the process of endorsement.

Amendment to IAS 12 - Recognition of deferred tax assets for unrealized losses: The amendment, issued by the IASB in January 2016, clarifies how to account for deferred tax assets related to debt instruments measured at fair value.

The amendments will be applied to financial periods beginning on or after 1 January 2017. Early application is allowed.

The Group will adopt these new standards, amendments and interpretations based on their date of application, and will assess the potential impacts following approval by the European Union.

NOTES TO THE CONSOLIDATED INCOME STATEMENT

Regarding the items of the consolidated income statement, following is the analysis of the main items of cost and revenue for the year ended 31 December 2015.

The comparative figures refer to the annual financial report at 31 December 2014.

1. Revenue

The following table shows gross operating revenue, agency discounts and net operating revenue:

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(€ thousands)	31/12/2015	31/12/2014
Gross operating revenue	250,603	266,014
Advertising agency discounts	(24,021)	(25,748)
Net operating revenue	226,582	240,266

Revenue is generated exclusively in Italy and an analysis by geographical area is pointless. An analysis of revenue by business segment is provided in Note 14.

Gross revenue can be analyzed as follows:

Description	31/12/2015	31/12/2014
TV advertising	141,849	155,215
Print media advertising	26,916	27,977
Stadium signage	3,057	2,537
Internet advertising	1,330	1,244
Revenue from concession of programming schedule spaces	1,200	982
Other TV revenue	1,221	2,180
Magazine over-the-counter sales	72,557	73,400
Subscriptions	2,831	2,883
Books and catalogues	971	981
VAT relating to publications	(1,432)	(1,486)
Other	103	100
Total gross operating revenue	250,603	266,014

As explained more in detail in the Directors' Report, in 2015:

it confirmed the excellent circulation results, with revenue at Euro 72.6 million versus Euro 73.4 million in 2014,
Group gross advertising sales from magazines, which reached Euro 26.1 million, dropped by approximately 4% versus Euro 27.2 million in 2014;
gross advertising revenue on La7 and La7d channels amounted to Euro 140.1 million (Euro 152.9 million in 2014).

***

2. Other revenue and income

"Other revenue and income", amounting to Euro 9,403 thousand (Euro 11,927 thousand in 2014), consist of revenue from pulp and paper sales, prior-year income and release of risk provisions also as a result of settlement agreements defined during the year, charging of technical advertising costs and other items of revenue other than operating revenue.

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***

3. Changes in finished goods

The item amounts to Euro 33 thousand (a negative Euro 28 thousand in 2014), arising from the use of the magazine sales during the ordinary course of business relating to Cairo Editore S.p.A. and Cairo Publishing S.r.l.

***

4. Raw materials, consumables and supplies

Raw materials mainly relate to the activities of Cairo Editore, Cairo Publishing and La7 and include the main items:

Description	31/12/2015	31/12/2014
Paper	20,414	21,973
Set design materials	96	160
Equipment and sundry materials	1,166	1,678
Change in inventories of paper, equipment and sundry materials,
TV programmes and the like	188	778
Total raw materials, consumables and supplies	21,864	24,589

The change in inventories, amounting to Euro 188 thousand, refers to:

a negative Euro 168 thousand for the change in inventories of in-house TV programmes of La7 S.p.A. or programmes purchased externally and yet to be aired, rights on films, soaps and the like and related ancillary costs within one year and yet to be aired;
Euro 356 thousand for the change in inventories of paper and other consumables of Cairo Editore S.p.A.

5. Services

As shown in the following chart, this item mainly comprises advertising concessionaire direct costs, external processing, consultancies and collaborations mainly for bordereau, TV costs, promotion costs, organization costs and overheads. and can be analyzed as follows:

Description	31/12/2015	31/12/2014
Direct brokerage costs	13,705	13,874
Technical costs	1,001	857
Administrative costs	5,401	5,384
Consultancies and collaborations	12,619	13,631
External processing	17,231	17,098
Sub-contracted TV programmes	20,502	17,794
Professional and artistic services and other TV consulting	9,517	10,510
Shooting, crew, editing, and outdoor TV activities	1,103	1,904
News and sport information services and TV news agency	1,713	1,994
TV broadcasting services	12,458	11,806
TV artwork	511	523
Outdoor TV links	923	612
Advertising and launch promotion costs	1,041	-
Advertising and promotion	6,040	6,655
Organizational costs and overheads	9,785	11,185
Total services	113,550	113,827

"Advertising and launch costs" refers to the advertising and promotional costs incurred for the new magazine "Nuovo TV". Including the pre-publication and study phase, these costs totaled approximately Euro 1,406 thousand.

"Direct brokerage costs" also includes Euro 2,357 thousand of Torino Football Club S.p.A., a subsidiary of U.T. Communications S.p.A., under the advertising concession agreement with Cairo Pubblicità S.p.A. as explained in Note 34 to related-party transactions.

***

6. Use of third-party assets

The item amounts to Euro 20,420 thousand (Euro 22,811 thousand at 31 December 2014) and mainly includes costs for journalistic, sport and TV programme rights, lease payments for property, office equipment and royalties for copyrights.

Description	31/12/2015	31/12/2014
Lease payments for property	3,445	3,660
Rental of TV studios	545	660
Rental fees for TV studio equipment	825	1,454
TV programme rights	7,302	8,464
Sport rights	93	209
Journalistic rights	2,958	2,553
Copyrights (SIAE, IMAIE, SCF, AFI)	3,772	3,933
Royalty expense and sundry rights	695	851
Other costs for use of third-party assets	785	1,027
Total costs for use of third-party assets	20,420	22,811
7. Personnel expense The item can be analyzed as follows:
Description	31/12/2015	31/12/2014
Wages and salaries	44,590	43,613
Social security charges	14,942	15,068

Wages and salaries	44,590	43,613
Social security charges	14,942	15,068
Post-employment benefits	1,200	1,087
Other expense	223	866
Total	60,955	60,634

***

8. Amortization, depreciation, provisions and impairment losses

This item can be analyzed as follows:

Description	31/12/2015	31/12/2014
Amortization of intangible assets	6,716	3,155
Depreciation of property, plant and equipment	502	452
Allowance for impairment	837	1,344
Provisions for risk and charges	162	270
Total amortization, depreciation, provisions and	8,217	5,221
impairment losses

The increase in "amortization and depreciation" is attributable to the amortization of television rights acquired by La7 effective from 1 May 2013.

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Mention should be made that the acquisition of La7 had been accounted for under IFRS 3, applying the so-called "acquisition method", taking into account the future income capacity of La7 at the acquisition date.

This approach had resulted in the full write-down of non-current assets at the date of acquisition of La7, consisting primarily of TV broadcasting rights, and specific technical equipment, whose value was deemed unrecoverable in view of the income prospects of La7 at the acquisition date. It should be noted that, as a result of impairments made in the allocation of the purchase price of the investment in La7 S.r.l., in the consolidated financial statements, with respect to the separate financial statements of La7 S.p.A. (former La7 S.r.l.), lower levels of depreciation of "property, plant and equipment" - Euro 2,210 thousand - and amortization of "intangible assets" - Euro 7,004 thousand - were recognized in 2015.

***

9. Other operating costs

The item can be analyzed as follows:

Description	31/12/2015	31/12/2014
Deductible and non-deductible taxes during the year	194	219
Prior-year expenses	536	1,053
Other	942	849
Total other operating costs	1,672	2,121

***

10. Income / (loss) on investments

In 2015, the figure came to 0 (a negative Euro 2 thousand in 2014)

***

11. Net financial income

This item refers to financial income totaling Euro 1,003 thousand (Euro 2,468 thousand at 31 December 2014), net of financial expense of Euro 311 thousand (Euro 639 thousand at 31 December 2014), analyzed as follows:

Description	31/12/2015	31/12/2014
Interest income on bank and postal accounts	754	2,452
Other	249	16
Total financial income	1,003	2,468
Bank interest expense	(71)	(113)
Financial charges from IAS post-employment benefits	(196)	(352)
Other financial expense	(44)	(174)
Total financial expense	(311)	(639)
Net financial income	692	1,829

Financial income includes interest on fixed-term deposits in current accounts and on treasury bank accounts used to employ liquidity.

***

12. Income tax

This item can be analyzed as follows:

Description	31/12/2015	31/12/2014
IRES for the year	(1,776)	(2,010)
IRAP for the year	1,000	2,013
Deferred tax income and expenses	(264)	970
Total current and deferred income tax	(1,040)	973

In accordance with relevant IFRS, the deferred tax income of a number of Cairo Communication Group companies relates mainly to the accrual of provision pertaining to the year, but having deferred tax deductibility (allowance for impairment and provisions for risks and charges).

On 30 December 2015, the 2016 Stability Law was published in the State Gazette; the Law changes the IRES corporate income tax rate, effective from financial years following the year ending on 31 December 2016. The IRES tax rate will be reduced from the current 27.5% to 24%; as a result of the reduction, all of the items under deferred tax assets in the 2015 financial statements arising after the 2016 financial statements were valuated using the new rate. The adjustment had a negative impact of Euro 273 thousand on the income statement.

The tax charge for the period considers the benefit arising from the tax loss of La7 S.p.A. (former La7 S.r.l.).

The reconciliation of the effective and theoretical tax charge can be analyzed as follows:

	31/12/2015	31/12/2014
Pre-tax profit	10,032	24,789
Theoretical income tax charge (27.5%)	2,759	6,817
Tax effects from the consolidation and the purchase price allocation of La7	(2,736)	(6,169)
Tax effects of other permanent differences	(2,063)	(1,688)
IRAP	1,000	2,013
Current and deferred income tax for the year	(1,040)	973

For a clearer understanding of the reconciliation of the effective and theoretical tax charge, IRAP has not been taken into account as this is not based on pre-tax profit, and this would generate a distorting effect between one year and the other. However, the theoretical tax charge has been calculated using the current IRES tax rate of 27.5%.

***

13. Profit / (loss) from discontinued operations

This includes the result of Diellesei S.r.l. in liquidation, which can be analyzed as follows:

Description	31/12/2015	31/12/2014

Other revenue and income	-	-
Cost of services	(1)	(1)
Amortization, depreciation, provisions and impairment losses	-	-
EBIT	(1)	(1)
Net financial income / (expense)	-	-
Pre-tax profit	(1)	(1)
Income tax	-	-
Loss from discontinued operations	(1)	(1)

With regard to the financial situation of the subsidiary in liquidation, cash absorbed by the liquidation proceedings of Diellesei in 2015 amounted to Euro 67 thousand (Euro 2 thousand in 2014).

***

14. Segment reporting

For a clearer understanding of the Group's economic performance, the analysis is focused on the results achieved during the year by each business segment, which has been identified, in compliance with IFRS 8 – Operating segments, based on internal reporting which is regularly examined by the directors.

The Group is organized in business units, each in turn structured around specific products and services, and has five reportable business segments:

magazine publishing, the Group operates as a publisher of magazines and books through its subsidiaries Cairo Editore - which incorporated Editoriale Giorgio Mondadori in 2009 and

publishes weeklies "Settimanale DIPIU'", "DIPIU' TV", "Diva e Donna", "TV Mia" and supplements "Settimanale DIPIU' e DIPIU'TV Cucina e Stellare", "Settimanale Nuovo", "F", "Settimanale Giallo", "Nuovo TV" and monthlies "For Men Magazine", "Natural Style", "Bell'Italia", "Bell'Europa", "In Viaggio", "Airone", "Gardenia", "Arte" and "Antiquariato" and Cairo Publishing, publisher of books;

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advertising, the segment managed by Cairo Communication and Cairo Pubblicità, which work together in advertising sales in print media for Cairo Editore and Editoriale Genesis ("Prima Comunicazione"), on TV for La7 and La7d, and Turner Broadcasting (Cartoon Network, Boomerang, CNN), on the Internet and for the sale of stadium advertising spaces at the "Olimpico" football pitch in Turin for Torino FC;
TV publishing (La7), as mentioned earlier, since 1 May 2013 following the acquisition of La7 S.r.l., the Group has operated as a TV publisher of La7 and La7d broadcasters respectively on channel 7 and channel 29 on the digital terrestrial platform;
network operator (Cairo Network) in 2014, the subsidiary Cairo Network took part in the tender procedure opened by the Ministry of Economic Development for the assignment of rights to use TV frequencies for digital terrestrial broadcasting systems, submitting its binding bid and winning the rights to use a lot of frequencies ("mux") for a period of 20 years. With the acquisition and realization of the mux, the Cairo Communication Group will start operations as a network operator.
Il Trovatore, which manages its own search engine and provides technological services mainly within the Group.

No combinations were made for the definition of reportable business segments

2015	Magazine Publishing	Adver tising	TV publishing	Trovatore	Network operator	Intra group	Total
(€ thousands)			(La7)		(Cairo Network)	and unallocated
Gross operating revenue	95,037	168,588	102,098	893	-	(116,013)	250,603
Advertising agency discounts	-	(24,021)	-	-	-	-	(24,021)
Net operating revenue	95,037	144,567	102,098	893	-	(116,013)	226,582
Change in inventory	33	-	-	-	-	-	33
Other income	1,803	1,151	6,349	2	98	-	9,403
Total revenue	96,873	145,718	108,447	895	98	(116,013)	236,018
Production cost	(62,640)	(136,368)	(73,684)	(684)	(143)	116,013	(157,505)
Personnel expense	(19,615)	(8,015)	(33,191)	(77)	(57)	-	(60,955)
Gross operating profit (EBITDA)	14,618	1,335	1,572	134	(102)	-	17,557
Amortization, depreciation, provisions	(1,139)	(632)	(6,445)	-	(1)	-	(8,217)
and impairment losses
EBIT	13,479	703	(4,873)	134	(103)	-	9,340
Income (loss) on investments	-	-	-	-	-	-	-
Net financial income	(16)	73	631	4	-	-	692
Pre-tax profit	13,463	776	(4,242)	138	(103)	-	10,032
Income tax	(4,658)	(726)	6,447	(51)	28	-	1,040
Profit from continuing operations	8,805	50	2,205	87	(75)	-	11,072
attributable to the owners of the parent
Profit / (loss) from discontinued	-	-	-	-	-	(1)	(1)
operations
Profit	8,805	50	2,205	87	(75)	(1)	11,071
Non-controlling interests	-	-	-	18	-	-	18
		Adver	TV	Trovatore	Network	Intra	Total

2014	Magazine Publishing	Adver tising	TV publishing	Trovatore	Network operator	Intra group	Total
(€ thousands)			(La7)		(Cairo Network)	and unallocated
Gross operating revenue	96,708	181,332	110,913	834	-	(123,773)	266,014
Advertising agency discounts	-	(25,748)	-		-	-	(25,748)
Net operating revenue	96,708	155,584	110,913	834	-	(123,773)	240,266
Change in inventory	(28)	-	-		-	-	(28)
Other income	1,321	919	9,323	62	2	-	11,627
Total revenue	98,001	156,503	120,236	896	2	(123,773)	251,865
Production cost	(65,098)	(144,026)	(77,016)	(673)	(8)	123,773	(163,048)
Personnel expense	(19,120)	(7,251)	(34,221)	(42)	-	-	(60,634)
Gross operating profit (EBITDA)	13,783	5,226	8,999	181	(6)	-	28,183
Amortization, depreciation, provisions	(1,261)	(1,181)	(2,778)	-	(1)	-	(5,221)
and impairment losses
EBIT	12,522	4,045	6,221	181	(7)	-	22,962
Income / (loss) on investments	-	(2)	-	-	-	-	(2)
Net financial income	17	390	1,423	(1)	-	-	1,829
Pre-tax profit	12,539	4,433	7,644	180	(7)	-	24,789
Income tax	(4,502)	(1,795)	5,385	(61)	-	-	(973)
Profit from continuing operations	8,037	2,638	13,029	119	(7)	-	23,816
attributable to the owners of the
parent
Profit / (loss) from discontinued	-	-	-	-	-	(1)	(1)
operations
Profit	8,037	2,638	13,029	119	(7)	(1)	23,815
Non-controlling interests	-	-	-	24	-	-	24

A client in the publishing segment (the publications distributor) accounts for approximately 74% of net consolidated operating revenue.

Management monitors the operating results of business units separately in order to decide on the allocation of resources and the evaluation of results. Transfer prices between business sectors are established based on market conditions applicable in transactions with third parties.

_______________________________________________________________________________

Segment statement of financial position figures, specifically, total assets for each reportable segment, do not represent amounts regularly provided to the chief operating decision-maker. This detail, formerly prescribed also without such condition, is not provided in these explanatory notes in accordance with the amendment of IFRS 8 – Operating segments, effective as from 1 January 2010.

***

15. Earnings per share

Earnings per share are calculated dividing the financial results of the Group by the weighted average of outstanding shares, excluding the weighted average of treasury shares. Specifically:

Description	31/12/2015	31/12/2014

Euro/000:
Profit from continuing operations	11,072	23,816
Profit / (loss) from discontinued operations	(1)	(1)
Profit for the year	11,071	23,815
Weighted average number of shares outstanding	78,343,400	78,343,400
Weighted average number of treasury shares	(779)	(779)
Weighted average number of shares to calculate earnings per share	78,342,621	78,342,621
€ thousands
Earnings per share attributable to continuing operations	0.141	0.304
Earnings / (loss) per share attributable to discontinued operations	(0.000)	(0.000)
Net earnings per share	0.141	0.304

Diluted earnings per share are not calculated as there are no shares with a potential dilutive effect.

NOTES TO THE STATEMENT OF FINANCIAL POSITION

Asset and liabilities by category are analyzed in the following notes.

16. Property, plant and equipment

The movements in PPE can be analyzed as follows:

Description	Property	Plant and equipment	Other assets	Assets under development	Total
Carrying amount at 31/12/2014	1,281	628	1,160	-	3,069
Additions	-	170	342	-	512
Amortization/Depreciation	(42)	(149)	(311)	-	(502)
Carrying amount at 31/12/2015	1,240	649	1,191	-	3,080

_______________________________________________________________________________

In 2015, due to the impairment of tangible assets made in 2013 in the allocation of the purchase price of the investment in La7 S.r.l. described in Note 8, lower depreciation was recognized on "property, plant and equipment" in the amount of Euro 2,210 thousand (Euro 2,794 thousand in 2014).

***

17. Intangible assets

The movements in intangible assets can be analyzed as follows:

Description	Television rights	Concessions, licenses and trademarks	Goodwill	Public ation titles	Assets under developm ent	Total
Carrying amount at 31/12/2014	8,529	1,128	7,198	1,012	39,004	56,871
Additions	11,455	735	-	-	(1,427)	10,763
Amortization/Depreciation	(5,658)	(794)	-	(264)	-	(6,716)
Carrying amount at 31/12/2015	14,326	1,069	7,198	748	37,577	60,918

In 2015, due to the impairment of intangible assets made in 2013 in the allocation of the purchase price of the investment in La7 S.r.l. described in Note 8, lower depreciation was recognized on "intangible assets" in the amount of Euro 7,004 thousand (Euro 15,442 thousand in 2014).

Television rights

This item includes the investments made by La7 S.p.A. in registration rights (with a duration of over 12 months) for the broadcasting of films, series and soaps.

_______________________________________________________________________________

Concessions, licenses and trademarks

At 31 December 2015, this item mainly regarded software.

Goodwill

This item refers to the excess of the purchase price over the percentage attributable to the Group of the fair value of assets, liabilities and identifiable contingent liabilities of a number of subsidiaries at their date of acquisition, net of related accumulated amortization at 30 September 2004, as the Group chose to adopt the exemption provided under IFRS 1 not to apply IFRS 3 retrospectively to transactions which took place prior to the date of transition to IFRS.

The movements in this item for each of the cash generating units (CGU), which the Group has identified for the business segments in which it operates, are described below:

Cash Generating Unit	31/12/14	Additions	Disposals	Impairment	31/12/15
				losses
Publishing	4,746	-	-	-	4,746
Advertising	2,289	-	-	-	2,289
Trovatore	163	-	-	-	163
Total	7,198	-	-	-	7,198

At 31 December 2015, goodwill underwent impairment testing as required by IAS 36. This test, carried out at least annually, was performed at the level of the cash generating units (CGUs) to which goodwill is allocated. The realizable value of goodwill was determined by estimating value in use calculated as the present value of the prospective cash flows from operations derived from the most recent company budgets and three-year plans.

The main assumptions made for the calculation of value in use are summarized as follows:

Cash Generating Unit	Growth rate of terminal values: 2015	Discount rate 2015	Growth rate of terminal values: 2014	Discount rate 2014
Publishing	1%	10.5%	1%	10.5%
Advertising	1%	10.5%	1%	10.5%
Trovatore	1%	10.5%	1%	10.5%

No evidence arose to indicate that the activities carried out by the CGUs subject to impairment testing could have suffered an impairment loss. Furthermore, the Group has developed a sensitivity analysis of the realizable values allocated to the three CGUs using the discount rate as the key parameter, the results show that the recoverability of goodwill is not particularly sensitive to changes in this parameter.

_______________________________________________________________________________

No significant evidence of potential impairment arose from this analysis.

The estimates and the budget figures used for the determination of the recoverable amount of goodwill have been determined by Group management on the basis of both past experience and on the expectations of the development in the markets in which the Group operates, also taking account of the specific general economic environment. Management believes that the use of these estimates will have no significant impact in determining the carrying amount of goodwill, especially in the publishing and advertising sector, of which is already covered by the expected cash flows of 2016.

Titles

Titles include the following:

Description	31/12/14	Additions	Amortization	31/12/15
Bell'Italia	648	-	(170)	478
Bell'Europa	364	-	(94)	270
Total	1,012	-	(264)	748

The time period deemed appropriate for the valuation of the remaining useful life of these titles has been set at 20 years. The carrying amount of "Bell'Italia" and "Bell'Europa" underwent impairment testing to evaluate any impairment loss on realizable value, as defined by their value in use being cash flows based on the expected results of the titles. No evidence of impairment was identified. The main assumptions used in the calculation of value in use are the same as illustrated in the previous paragraph.

Assets under development

"Assets under development", amounting to Euro 37.6 million, refers primarily to the rights to use TV frequencies for digital terrestrial broadcasting systems (Euro 31.6 million, in addition to ancillary charges of Euro 3.4 million, which include financial charges of Euro 0.7 million), acquired in 2014 by the Group company Cairo Network S.r.l. These rights - for a period of 20 years – refer to the 2-SFN multiplex on channels 25 and 59 ("mux").

The amortization of the rights to use the frequencies will start once the mux will be ready for use. The network plan is expected to be completed in 2016. Accordingly, on 31 December 2015, the

abovementioned rights underwent impairment testing as required by IAS 36 for intangible assets not subject to amortization. The results did not show any cases of potential impairment.

_______________________________________________________________________________

"Assets under development" also includes TV rights for Euro 2.6 million to be exploited in future years.

*.*.

18. Investments and non-current assets

The movement in this item can be analyzed as follows:

Description (€ thousands)	Carrying amount at 31/12/2014	Change in scope of consolidation	Write-ups	Impairment losses	Carrying amount at 31/12/2015
		-	-	-
Auditel S.r.l.	46	-	-	-	46
Other	16	-	-	-	16
Total other investments	62	-	-	-	62

Other non-current financial assets amounted to Euro 1,640 thousand at 31 December 2015 (Euro 1,113 thousand at 31 December 2014), Euro 1,344 thousand of which refer to the fair value of financial instruments to hedge exchange risks (forward currency purchases coinciding with schedules of contractual payments due) used by La7 S.p.A. (former La7 S.r.l.) to purchase TV rights from film companies.

The residual amount of other financial assets of Euro 296 thousand (Euro 370 thousand at 31 December 2014) refers mainly to loans to La7 S.p.A. (former La7 S.r.l.) employees.

***

19. Deferred tax assets

These refer to the recognition, in the financial statements at 31 December 2015, of deferred tax assets on the temporary differences between the carrying amounts of recognized assets and liabilities and their tax amounts, as follows.

	31/12/2015		31/12/2014
	Amount of temporary differences	Tax effect	Amount of temporary differences	Tax effect
Deferred tax assets
Taxed allowance for impairment	7,449	1,870	6,893	1,896
Tax losses carried forward			-	-
Taxed and returned provisions for risk and charges	2,035	566	996	310
Taxed provision for inventory write-down	518	146	518	163
Directors' fees	586	159	633	174
Consolidation entries for write-off of intra-group trade relations	1,569	493	1,830	575
Different accounting treatment of post-employment benefits	2,408	592	2,276	626
Other temporary differences	1,373	402	882	284
Total deferred tax assets	15,938	4,228	14,028	4,028
Deferred tax liabilities
Different accounting treatment of land depreciation	(143)	(42)	(143)	(45)
Total deferred tax liabilities	(143)	(42)	(143)	(45)
Net deferred tax assets	15,795	4,186	13,885	3,983

Deferred tax assets are recognized to the extent they are considered recoverable depending on the presence of future taxable income in which temporary differences will be reversed. Management periodically reviews the estimates underlying the recoverability of these amounts.

.*.*.*

20. Inventories

Inventory movements arise entirely in the publishing companies and can be analyzed as follows:

Description	31/12/15	31/12/14	Change
Raw materials, consumables and supplies	2,516	2,873	(357)
Work-in-progress and bordereau	189	171	18
Finished products and books	436	252	184
Total	3,141	3,296	(155)

Inventories are stated net of the provision for inventory write-down of Euro 659 thousand (Euro 1,032 thousand at 31 December 2014).

• Raw materials

Raw materials relate mainly to paper and are recognized at the lower of purchase or production cost and their estimated realizable value, based on market performance at year end.

_______________________________________________________________________________

• Work-in-progress

Work-in-progress comprises purchase or production costs incurred for publications to be invoiced by Cairo Editore S.p.A. This item also includes bordereau for services yet to be used, available for future publications, and work in progress on forthcoming editions.

• Finished products

The item includes:

Euro 136 thousand (Euro 121 thousand at 31 December 2014) related to inventories of books of Cairo Publishing S.r.l., measured at the lower of cost and estimated realizable value;
Euro 300 thousand (Euro 131 thousand at 31 December 2014) related to the inventories of La7 S.r.l. of TV programmes produced and awaiting to be aired at 31 December 2015, and to rights on films, soaps, cartoons and documentaries, acquired for a period of less than 12 months, whose available right has not exhausted and for which airing time during the next financial year is available.

***

21. Trade receivables

Trade receivables can be analyzed as follows

Description	31/12/15	31/12/14	Change
Trade receivables	87,735	89,926	(2,191)
Allowance for impairment	(9,196)	(9,969)	773
Total trade receivables	78,539	79,957	(1,418)

Trade receivables are stated net of the allowance for impairment that has been determined taking account of both specific collection risks and a general risk of non-collectability based on the ordinary trend of company operations. This allowance also takes into account the allocation to the Group's media clients, in particular third-party clients, of a percentage of losses on receivables, equal to the percentage of revenue allocated, pursuant to advertising space sales contracts signed between the two parties.

The ageing of trade receivables by due date at 31 December 2015 versus 31 December 2014 is as follows:

31 December 2015	Current	Past due	Past due	Past due	Past due	Total
		between 30	between 61	between 91	over 180
		and 60 days	and 90 days	and 180 days	days
Trade receivables	74,784	1,640	348	1,680	9,083	87,735
Allowance for impairment	(2,165)	(374)	(558)	(400)	(5,899)	(9,196)
Trade receivables	72,619	1,266	190	1,280	3,184	78,539

31 December 2014	Current	Past due	Past due	Past due	Past due	Total
		between 30	between 61	between 91	over 180
		and 60 days	and 90 days	and 180 days	days
Trade receivables	75,369	1,845	674	1,697	10,341	89,926
Allowance for impairment	(2,300)	(254)	(219)	(255)	(6,942)	(9,969)
Trade receivables	73,069	1,591	455	1,442	3,399	79,957

In terms of concentration, the top 10 customers represent approximately 11% (12% in 2014) of total advertising sales, while the top 100 customers represent approximately 50% (54% in 2014).

The publishing segment presents a limited exposure to credit risk as publishing revenue is substantially generated by one sole party – the Group - while for distribution revenue, the distribution contract, which accounts for about 74% of net consolidated operating revenue, provides for an advance payment equal to a significant percentage of the estimated sales of each magazine.

In 2015, the allowance for impairment increased with accruals of Euro 837 thousand from provisions for the year. Use over the period, amounting to Euro 1,610 thousand, resulted in a net decrease of Euro 773 thousand.

Trade receivables include due from Torino Football Club S.p.A.: Euro 66 thousand to Cairo Pubblicità for contractual relations as described in Note 34, and Euro 30 thousand to Cairo Communication for administrative services provided and for various recharged expenses.

***

22. Other receivables and other current assets

The item can be analyzed as follows:

Description 31/12/15 31/12/14 Change IRAP credit 951 1,267 (316) Tax receivables 813 1,496 (683) VAT credit 1,127 1,528 (401) Total tax assets 2,891 4,291 (1,400) Prepayments and accrued income 1,506 1,364 142 Advances to suppliers 305 2,054 (1,749) Other receivables 595 721 (126) Total other receivables and other current assets 5,297 8,430 (3,133)

_______________________________________________________________________________

***

23. Cash and cash equivalents

The item can be analyzed as follows:

Description	31/12/15	31/12/14	Change
Bank accounts	125,745	149,042	(23,297)
Cash	31	19	12
Total cash and cash equivalents	125,776	149,061	(23,285)

The consolidated net financial position at 31 December 2015, versus the situation at 31 December 2014, can be summarized as follows:

Description	31/12/15	31/12/14	Change
Cash and cash equivalents	125,776	149,061	(23,285)
Bank loans	(20,000)	(25,000)	5,000
Total cash and cash equivalents	105,776	124,061	(18,285)

As shown in the consolidated cash flow statement, the change in the net financial position versus 31 December 2014 is mainly due to the distribution of dividends approved by the Shareholders' Meeting on 28 April 2015 (0.27 Euro per share, for a total of Euro 21.2 million), and to investments in tangible and intangible assets, mainly in television rights.

***

_______________________________________________________________________________

24. Equity

At 31 December 2015, consolidated equity was Euro 116,250 thousand, including profit for the year. The statement of reconciliation of the Parent's equity and profit and Group equity and profit is set out in the Directors' Report.

At their Meeting on 28 April 2015, the shareholders approved the distribution of a dividend of 0.27 Euro per share, inclusive of tax. The dividend, amounting to Euro 21.2 million, was distributed with detachment date on 11 May 2015 (payable on 13 May 2015).

The share capital at 31 December 2015 was Euro 4,074 thousand, subscribed and fully paid up, comprising n. 78,343,400 ordinary shares to which no nominal amount is attributed.

In accordance with the bylaws, the shares are registered, indivisible and freely transferable. The requirements of representation, legitimization, circulation of the company investment required for securities traded on regulated markets continue to apply. Each share has the right to a proportion of the profit which has been approved for distribution and to a portion of equity on liquidation and also has the right to vote, without limits other than those as defined by the Law. No securities carrying special controlling rights have been issued. No financial instruments have been issued attributing the right to subscribe to newly-issued shares. No share incentive plans are foreseen involving share capital increases, even on a freely allocated basis.

The reconciliation between the number of shares outstanding at 31 December 2015 and those at 31 December 2014 is as follows:

	31/12/2014	Purchase of	Sale of treasury	31/12/2015
		treasury shares	shares
Ordinary shares issued	78,343,400		- -	78,343,400
Less: treasury shares	(779)		- -	(779)
Ordinary shares outstanding	78,342,621		- -	78,342,621

***

25. Post-employment benefits

This item reflects the accruals made for all employees at the reporting date on the basis of the projected unit credit method, using actuarial valuations. The main assumptions used in this valuation are as follows:

_______________________________________________________________________________

</x<50></x<50></x<50></x<50>

COMPANY	Cairo Communication	Cairo Pubblicità	Cairo Editore	LA7
TYPE OF VALUATION	POST-EMP. BENEFITS	POST-EMP. BENEFITS	POST-EMP. BENEFITS	POST-EMP. BENEFITS	Suppl. indemnity
DATE OF VALUATION	31/12/2015	31/12/2015	31/12/2015	31/12/2015	31/12/2015

Mortality table	Sim/f 1998	Sim/f 1998	Sim/f 1998	RG48	Sim/f 1998
Reduction of mortality table	20.00%	20.00%	20.00%	0.00%	20.00%

Advance request rate EXECUTIVE	1.00%	0.50%	0.50%	3.00%	-
Advance request rate MANAGER	2.00%	0.50%	2.00%	3.00%	-
Advance request rate EMPLOYEE	2.00%	0.50%	2.00%	3.00%	-
Advance request rate JOURNALIST	not present	not present	2.00%	3.00%

Salary increase rate EXECUTIVE	5.00%	2.50%	0.00%	1.81%	-
Salary increase rate MANAGER	4.00%	2.50%	0.00%	1.81%	-
Salary increase rate EMPLOYEE	4.00%	2.50%	0.00%	1.81%	-
Salary increase rate JOURNALIST	not present	not present	0.00%	1.81%
Fee increase rate AGENT	-	-	-	-	4%

Future inflation rate	1.81%	1.81%	1.81%	1.81%	2.00%
Discount rate	1.81%	1.81%	1.81%	1.81%	4.00%

Resignation rate EXECUTIVE	2.00%	0.50%	0.00%	x<40 4%; 41 <x<50 0<="" 2.5%;="" above="" td="">	-	-
Resignation rate MANAGER	2.00%	0.50%	5.00%	x<40 4%; 41 <x<50 0<="" 2.5%;="" above="" td="">	-	-
Resignation rate EMPLOYEE	7.00%	2.50%	6.50%	x<40 4%; 41 <x<50 0<="" 2.5%;="" above="" td="">	-	-
Resignation rate JOURNALIST	not present	not present	5.00%	x<40 4%; 41 <x<50 0<="" 2.5%;="" above="" td="">
Resignation rate AGENT	-	-	-	-	15%

The composition and movements of this item is broken down as follows:

	31/12/2015	31/12/2014
Opening balance	13,398	11,832
Provisions	200	116
Interest expense	196	352
Profit (loss) from actuarial valuations	38	1,376
Utilization/other movements	(517)	(278)
Closing balance	13,315	13,398

The average headcount over the two years can be analyzed as follows:

Description	31/12/2015	31/12/2014	Average
Senior managers	30	24	27
Managers	80	83	81
Employees	414	396	405
Journalists and freelance	249	234	242
Grand total	773	737	755

26. Non-current financial liabilities

The item includes the non-current portion (Euro 15 million) of the bank loan initially of Euro 25 million, granted by Unicredit S.p.A. in July 2014 to Cairo Network for the purchase of rights to use TV frequencies, as explained in the Directors' Report.

_______________________________________________________________________________

The loan:

expires on 31 December 2019. Repayment is made in 20 quarterly instalments of Euro 1,250 thousand, starting from 31 March 2015; early repayment is allowed;
is secured by a guarantee issued by the parent Cairo Communication;
calls for the payment of an interest rate equal to the 3-month Euribor plus 0.95 basis points (renegotiated as from July 2015) and certain constraints (negative pledges) and commitments (covenants), typical of these transactions.

Specifically:

under the financial covenants, to be checked annually, at Group level (consolidated financial statements), the debt cover (the net debt/EBITDA ratio) should be less than or equal to 1.75 and the leverage (the net debt/equity ratio) less than or equal to 1;
the commitment covenants on Cairo Network mainly include, until full repayment of the loan and subject to the prior consent of the bank, the commitment (i) not to distribute nor approve the distribution of dividends and/or reserves, (ii) not to take on new financial debt (excluding loans received by the shareholders and the new debt related to the sale of receivables for working capital needs or the issue of new insurance and bank sureties to cover ordinary needs (iii) not to grant guarantees to third parties in the interest of Group companies or loans to Group companies, (iv) not to dispose of company assets and/or investments, (v) not to implement extraordinary corporate transactions, (vi) not to create or allow the creation of liens, pledges or mortgages on own assets.

Breach of the commitment and/or financial covenants may result in termination of the loan agreement, pursuant to Article 1456 of the Italian Civil Code. Early repayment is provided for in the event of a change of control of Cairo Network. At 31 December 2015, the covenants had been met.

***

27. Provisions for risks and charges

The provisions for risk and charges include:

Description	31/12/2014	Increases	Utilizations	31/12/2015
Pension and similar provision
	1,325	12	(19)	1,318
Provision for publishing returns	391	420	(391)	420
Provision for liquidation	64	-	(1)	63
Provisions for future risks and charges under the purchase price allocation of La7 S.r.l.	18,724	-	(818)	17,906
Provision for other risks and charges	9,838	150	(1,037)	8,951
Grand total	30,342	582	(2,266)	28,658

The item "Provision for other risks and charges", amounting to Euro 8,951 thousand, mainly includes provisions for risks and charges of La7 for pending litigation with social security institutions, leased staff and employees. The item also includes funds for future expenses set aside to cover the risk arising from claims for damages originated during the production and airing of TV programmes.

The provision for "pension and similar provision" was accrued by Cairo Pubblicità S.p.A. for the agents' termination benefits as prescribed by law and contracts, subject to actuarial valuations based on the assumptions illustrated in Note 25.

The "provision for publishing returns" relates to the operations of the subsidiary Cairo Publishing S.r.l.; the relating net provisions are deducted from revenue from book sales.

The provision for "liquidation charges" refers to provisions made to cover the liquidation charges of Diellesei S.r.l. in liquidation, the relevant provisions are recognized in profit/ (loss) from discontinued operations.

Mention should be made that in 2013, in the purchase price allocation of La7 S.r.l., a negative fair value had been given, setting aside appropriate "provisions for future risks and charges recognized in the purchase price allocation of La7 S.r.l.", to:

a) a number of contracts whose unavoidable costs of meeting contractual obligations exceed the economic benefits expected to be received;
b) specific risk situations related to (i) existing or performed contracts and (ii) pending litigation.

28. Current loans and borrowings

The item includes the current portion (Euro 5 million of the bank loan of initial Euro 25 million, granted by Unicredit S.p.A. in July 2014 to Cairo Network, as explained in Note 26 above.

***

29. Trade payables

Trade payables amounted to Euro 82,382 thousand, decreasing by Euro 5,502 thousand versus 31 December 2014, and refer entirely to the current year.

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Trade payables include Euro 1,231 thousand due to the associate Torino Football Club S.p.A. for amounts accrued under the advertising concession contract signed with Cairo Pubblicità S.p.A.

***

30. Receivables from and payables to the Parent

Receivables from and payables to the parent of Euro 3,167 thousand and Euro 818 thousand, respectively, refer mainly to the parent UT Communications S.p.A. and arise from the national tax consolidation scheme, under art. 117/129 of the TUIR (Consolidated income tax act), which Cairo Communication S.p.A. and its subsidiaries Cairo Editore S.p.A., Cairo Pubblicità S.p.A., Diellesei S.r.l. in liquidation, Cairo Publishing S.r.l., La7 S.p.A. and Cairo Network S.r.l. have agreed to participate in.

***

31. Tax liabilities

They include:

Description	31/12/2015	31/12/2014	Change
Withholding taxes on employees	2,140	2,107	33
Withholding taxes on contract workers	472	654	(182)
VAT payables	-	1,111	(1,111)
IRAP payables	741	1,564	(823)
Other	207	51	156
Total tax liabilities	3,560	5,487	(1,927)

***

32. Other current liabilities

The item can be analyzed as follows:

Description	31/12/2015	31/12/2014	Change
Social security charges payables	4,643	4,826	(183)
Advances on subscriptions	1,724	1,777	(53)
Due to personnel (holidays, bonuses, etc.)	10,901	11,510	(391)
Accrued expenses and deferred income	323	768	(445)
Other liabilities	3,231	4,885	(1,654)
Total other current liabilities	20,822	23,766	(2,944)

Social security charges payables relate entirely to the current year. The Group normally pays social security charges and withholding taxes in accordance with legally defined due dates.

_______________________________________________________________________________

Advances relate to the portion of subscription payments received from customers to whom magazines have not yet been issued, as well as prepayments for specially commissioned future editions.

***

33. Commitments and risks

The agreements reached in the purchase of the entire share capital of La7 S.r.l. also included a multi-year agreement between La7 and Telecom Italia Media Broadcasting S.r.l. (TIMB) for the supply of transmission capacity that provides, among other things, the issue by Cairo Communication of a parent company guarantee to cover the payment obligations undertaken by La7, for a maximum amount of Euro 6,558 thousand (including VAT) per year.

***

As explained in the notes to the consolidated financial statements at 31 December 2014, the contract signed on 6 March 2013 with Telecom Italia Media for the acquisition of the entire share capital of La7 provided for:

the buyer's commitment, for a period of 24 months (lock-up) from the date of finalization of the acquisition, not to sell, assign, transfer, dispose of in any way, in whole or in part, the investment in La7, or the business unit owning La7;
Cairo Communication's commitment, for a period of 24 months from the date of finalization of the acquisition, to use the financial resources arising from the contribution received from Telecom Italia Media in the exclusive interest and for the restructuring of La7, and the related prohibition to engage in certain transactions specified in the contract, including of an extraordinary kind, aimed at depriving La7 of the resources from the contribution to the benefit of third parties or related parties, or to make new investments.

Both commitments expired on 30 April 2015.

In 2014, the subsidiary Cairo Network took part in the tender procedure opened by the Ministry of Economic Development for the assignment of rights to use TV frequencies for digital terrestrial broadcasting systems, submitting its binding bid and winning the rights to use a lot of frequencies ("mux") for a period of 20 years. In January 2015, Cairo Network and EI Towers S.p.A. ("EIT") therefore entered into the agreements for the realization and subsequent long-term technical management in full service mode (hospitality, service and maintenance, use of broadcasting infrastructure, etc.) of the mux. The agreements provide, among other things, for:

a transitional phase, which will see the realization and start-up of the mux and the initial operations, which will run from the date the agreements were signed to 31 December 2017, and an operational phase of the mux lasting 17 years (from 2018 to 2034);

_______________________________________________________________________________

the right to free withdrawal of Cairo Network starting from 1 January 2025;
guaranteed coverage at full performance of at least 94% of the population, in line with national muxs with greater coverage;
consideration to EIT:
o during the transitional phase (2015-2017), amounting to a total of Euro 11.5 million for the full three-year period;
o at full performance (starting from 2018), amounting to Euro 16.3 million per year.

These amounts include compensation for the availability of the transmitters;

an annual consideration from EIT to Cairo Network, starting from 2018, ranging between Euro 0 up to Euro 4 million, in the event that the available bandwidth on the mux is not fully used by Cairo Network.

Deeming that the New Plan evaded the Council of State's ruling (given that it confirmed assignment to the national traditional broadcasters of numbers 0-9 in the first block of LCN numbering), Telenorba filed an appeal for compliance with ruling n. 4660/12. The appeal was upheld by the Council of State (ruling no. 6021 of 16 December 2013), which declared the New Numbering Plan void (pursuant to Resolution 237/2013) for numbers from 8 to 9, and appointed a special commissioner tasked with verifying the correct assignment of numbers from 8 to 9 within 90 days from the beginning of the proceedings, which started on 24 February 2014. However, since the partial annulment of the previous Plan initially included number 7, on initiation of the procedure, the special commissioner - inappropriately in the opinion of La7 - also referred to number 7, which instead, under the Ruling, is not subject to verification by the Commissioner. AGCOM has in the meantime re-extended the previous Plan (based on current assignments), as also suggested in the State Council's ruling, in order to avoid a regulatory void.

_______________________________________________________________________________

Following orders no. 5041, 5127 and 5859 of 2014 and n. 27 of 2015, under which the Council of State has given the Commissioner certain regulations to discharge the task, the Commissioner adopted a new outline provision (no. 7 of 2015), accompanied by an explanatory report.

With such orders, deeming his task completed, the Commissioner stated that Lcn numbers 7, 8 and 9 established by AGCOM in the first plan of 2010 (Resolution no. 366/2010/CONS) should be confirmed. Specifically, the Commissioner determined that: a) in light of user preferences and habits at the time of the switch-off, numbers 7, 8 and 9 were to be assigned to a national broadcaster; b) in March 2010, seven national private commercial analogue broadcasters and three public channels were in operation (including La7); c) 9 broadcasters had a generalist schedule (including La7).

Through concurrent ruling no. 1836 of 2016, the joint session of the Court of Cassation overturned ruling no. 6021 of 2013 of the Council of State (which, as explained, had annulled AGCOM's 2013 Plan and had appointed the Commissioner), owing to violation of the outer limits of administrative jurisdiction.

In any case, in the opinion of La7 and its legal advisers, further assessments on number 7 are unlikely to be made, nor will the allocation of this number to La7 be revoked."

As the result of a VAT audit performed on Cairo Communication S.p.A., in its report, the Guardia di Finanza (the Italian Tax Police) identified some findings for 2002 and subsequent years (2003, 2004, 2005 and 2006) relating to the application if any of VAT on dealing rights charged to media centres, which were subsequently included in the final audit reports, which the Company has challenged.

_______________________________________________________________________________

For the periods 2002, 2003, 2004 and 2005, the Provincial Tax Commission of Milan has ruled in favour of the Company's appeals. The Agenzia delle Entrate (Italian Tax Authorities) has filed an appeal with the Regional Tax Commission of Milan against these decisions. In April 2010, the Regional Tax Commission of Milan ruled in favour of the Agency's appeal regarding 2002, and in October 2011 also regarding the years 2003, 2004 and 2005, on questionable grounds. Cairo Communication has already appealed to the Court of Cassation against the judgment regarding 2002, for which the tax claim amounts to Euro 41 thousand in addition to penalties of Euro 51 thousand, and the judgment regarding the subsequent years 2003, 2004 and 2005, for which the tax claim totals Euro 247 thousand, in addition to penalties of Euro 272 thousand and interest.

The Company has filed an appeal for 2006; the discussion hearing was held on 23 May 2014 and, following the ruling filed on 31 March 2015, the Provincial Tax Commission of Milan acknowledged the Company's appeal. The Agency has filed an appeal with the Regional Tax Commission of Milan (for 2006, the tax claim is Euro 63 thousand, in addition to penalties of Euro 79 thousand and interest).

In relation to the tax claim contained in these reports, based also on the advice of its tax consultants, the Directors believe there are fundamental reasons and rights to oppose the relevant findings.

In its hearing on 18 October 2010, the Provincial Tax Commission of Milan acknowledged the appeal filed by Cairo Editore S.p.A. regarding the assessment notice for tax year 2004. The Italian Tax Authorities have filed an appeal with the Regional Tax Commission of Milan against the ruling. In its hearing on 27 May 2013, the Regional Tax Commission of Milan rejected the Agency's Appeal. On 16 June 2014, the Agency filed an appeal with the Supreme Court, and on 25 July 2014, the Company notified its response to the counterparty.

out of the property covered by the preliminary contract; the Court referred the case to the Court of Appeal of Milan, in a different formation, which will be called to review the issue of compensation for damage only on the point above; the request for compensation by Italiana Assicurazioni regarding the plea granted by the Court of Cassation amounts to approximately Euro 319 thousand, plus interest and monetary revaluation. With the notice served on 25 May 2015, Reale Immobili (as transferee of the company) and Italiana Assicurazioni continued proceedings, following the ruling of the Court of Cassation, before the Court of Appeal of Milan. At the hearing on 29 October 2015, the Board postponed the hearing for closing arguments on 14 July 2016.

_______________________________________________________________________________

Guarantees given by third parties to the Cairo Communication Group amounted to Euro 2,862 thousand and are attributable to guarantees issued by banks.

It is also noted that:

The consolidated financial statements at 31 December 2015 do not include any receivables or payables with a residual term exceeding five years.
The consolidated financial statements at 31 December 2015 reflect the capitalization of financial charges of Euro 652 thousand (Euro 386 thousand in 2014), entered under assets under development of intangible assets and regarding the investments made by Cairo Network S.r.l.

***

34. Related party transactions

Transactions between the parent and its consolidated subsidiaries, which are its related parties, have been eliminated from the consolidated financial statements and are therefore not shown in this note.

The Group holds relations with the parent (UT Communications S.p.A.) and with the latter's subsidiaries at conditions deemed normal in their respective relevant markets, taking into account the nature of services offered. Below is a summary of the statement of financial position and income statement balances deriving from the transactions made in 2015 with these related parties. The identification and disclosure regarding related parties were made in accordance with the IAS 24 Revised. Based on this Standard, related parties were identified as the parents, subsidiaries, associates and affiliates of the Group, as shown in the list attached to this Annual Report ("List of investments of the Group at 31 December 2015"). The Ultimate Parent of the Group is U.T. Communications S.p.A.

The effects of these relations on the consolidated statement of financial position of the Cairo Communication Group at 31 December 2015 are as follows:

Income and expense (Euro/000)	Operating revenue	Operating costs	Financial income	Financial charges
Parent
UT Communications S.p.A.	-	-	-	-
Associates
Torino FC S.p.A.	186	2,436	-	-
Total	186	2,436	-	-

In 2015, the relations and transactions with the parent U.T. Communications and with its subsidiaries can be analyzed as follows:

Receivables and financial assets (Euro/000)	Trade receivables	Other receivables and current assets	Receivables tax consolidation scheme	Other current financial assets
Parent
UT Communications S.p.A.		-	3,167	-
Associates
Torino FC S.p.A.	97	-	-	-
MP Service S.r.l.	-	47	-	-
	97	47	3,167	-

Payables and financial liabilities (Euro/000)	Trade payables	Other payables and current liabilities	Payables tax consolidation scheme	Other current financial liabilities
Parent
UT Communications S.p.A.	-	-	818	-
Associates			-
Torino FC S.p.A.	1,285	-	-	-
Total	1,285	-	818	-

In 2015, the relations and transactions with the parent U.T. Communications and with its subsidiaries can be analyzed as follows:

the concession contract between Cairo Pubblicità and Torino FC S.p.A. (a subsidiary of U.T. Communications) for the sale of advertising space at the Olimpico football pitch and promotional sponsorship packages. This contract resulted in the payment in 2015 of Euro 2,357 thousand to the concession holder against total revenue of Euro 2,728 thousand net of agency discounts. Cairo Pubblicità earned further commissions of Euro 78 thousand. As part of the advertising contract, Cairo Pubblicità also purchased football tickets worth Euro 79 thousand and recharged Torino F.C. pertaining costs of Euro 8 thousand;
the agreement between Cairo Communication S.p.A. and Torino F.C. for the provision of administrative services such as bookkeeping, which provides for an annual consideration of Euro 100 thousand;
as already mentioned, Cairo Communication and its subsidiaries Cairo Editore S.p.A., Cairo Pubblicità S.p.A., Diellesei S.r.l. in liquidation, Cairo Publishing S.r.l., La7 S.p.A. (former La7 S.r.l.) and Cairo Network S.r.l. participate in the national tax consolidation scheme of UT Communications S.p.A. The consolidation scheme, which governs the financial aspects of amounts paid or received in return for the advantages or disadvantages resulting from the tax consolidation, specifically provides that any greater charges or minor benefits that may accrue to the Company resulting from participation in the scheme, be suitably remunerated by the parent. In relation to this, the consolidated financial statements at 31 December 2015 include receivables from and payables to the parent UT Communications S.p.A. of Euro 3,108 thousand and Euro 818 thousand respectively.

_______________________________________________________________________________

In 2015, Studio Magnocavallo e Associati, of which lawyer Antonio Magnocavallo Director of the Parent, is a partner, and earned fees for professional services provided to companies of the Cairo Communication Group for approximately Euro 214 thousand.

Fees paid to directors in 2015 are analyzed in Note 36 "Board of Directors' and Board of Statutory Auditors' fees".

During the year, no transactions were carried out with members of the Board of Directors, general managers and/or with key management personnel, members of the Board of Statutory Auditors, and the financial reporting manager, further than the fees paid and already shown in this Note.

The procedures adopted by the Group for related party transactions, to ensure transparency and substantial and procedural fairness, made by the Company either directly or through its subsidiaries, are illustrated in the Directors' Report in the section on the "Report on Corporate governance".

***

35. Risk management

Liquidity risk

The Cairo Communication Group is not exposed to liquidity risk, in that on one hand, significant financial resources are held with a net available positive financial position of Euro 105.8 million while, on the other hand, the Group attempts to ensure that an appropriate ability to generate cash is maintained, even under the current market conditions.

An analysis of the company's equity structure shows both liquidity, or the ability to maintain financial stability in the short term, and solidity, or the ability to maintain financial stability in the medium/long term.

It is Group policy to invest available cash in on-demand or very short-term bank deposits, properly spreading the investments, essentially in banking products, with the prime objective of maintaining a ready liquidity of the said investments. The investment products are selected on the basis of their credit rating, their reliability and the quality of services rendered.

Currency and interest rate risks

The Cairo Communication Group is not exposed to interest rate and currency risk,

in that on one hand, the net financial position shows a positive figure, whilst on the other hand operations are carried out exclusively in Italy, and revenue is generated entirely in the country and main costs are incurred in Euro.

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The interest rate risk only affects the net yield on available cash.

Movements in the cash flows and the liquidity of Group companies are centrally monitored and managed by Group Treasury in order to guarantee effective and efficient management of financial resources.

Given the limited exposure to both interest rate and FOREX risk, the Group limited use of financial hedging instruments, to hedge currency risk on the acquisition of TV rights from film studios.

Credit risk

The persisting uncertainty factors in the short and medium term, along with the resulting credit squeeze, may of course impact negatively the quality of credit and general payment terms.

…

36. Board of Directors' and Board of Statutory Auditors' fees

The following information refers to the 2015 fees paid to Directors, Statutory Auditors, General Managers and key management personnel, also in subsidiaries, analyzed in detail in the Remuneration Report, prepared pursuant to art. 123 ter of the TUF:

Name	Position	Term of office	Term expiry date	Fees *	Benefits in kind	Bonuses and other incentives	Other fees**
Urbano R. Cairo	Chairman of the Board	Jan-Dec 2015 31/12/2016		500	16	-	510
Uberto Fornara	CEO	Jan-Dec 2015 31/12/2016		240	5	-	510
Maria Laura Cairo	Director	Jan-Dec 2015 31/12/2016		20	-	-	-
Stefania Petruccioli	Director	Jan-Dec 2015 31/12/2016		32	-	-	-
Roberto Cairo	Director	Jan-Dec 2015 31/12/2016		20	-	-	-
Marco Janni	Director	Jan-Dec 2015 31/12/2016		28	-	-	-
Antonio Magnocavallo	Director	Jan-Dec 2015 31/12/2016		34	-	-	-
Marco Pompignoli	Director	Jan-Dec 2015 31/12/2016		350	5	-	300
Roberto Rezzonico	Director	Jan-Dec 2015 31/12/2016		34	-	-	-
Mauro Sala		Director Jan-Dec 2015 31/12/2016		32	-	-	-
Key management personnel	N/A	Jan-Dec 2015	N/A	-	15	-	1,242
Marco Moroni	Chairman Board of Statutory Auditors	Jan-Dec 2015	31/12/2016	30	-	-	25
Mariapia Maspes	Standing auditor	Jan-Dec 2015	31/12/2016	20	-	-	17
Marco Giuliani	Standing auditor	Jan-Dec 2015	31/12/2016	20	-	-	-

* Other fees, in addition to fees for the role of director (Euro 20 thousand), refer to:

• Urbano Cairo: fees pursuant to art. 2389, paragraph 3, Italian Civil Code (Euro 480 thousand);

• Uberto Fornara: fees pursuant to art. 2389, paragraph 3, Italian Civil Code (Euro 220 thousand);

• Marco Janni: fees for attendance in meetings of the Related Party Committee (Euro 8 thousand);

• Antonio Magnocavallo: fees for attendance in meetings of the Remuneration Committee and the Control and Risk Committee (Euro 14 thousand);

• Marco Pompignoli: fees pursuant to art. 2389, paragraph 3, Italian Civil Code (Euro 330 thousand);

• Roberto Rezzonico: fees for attendance in meetings of the Remuneration Committee and Control and Risk Committee (Euro 14 thousand);

• Mauro Sala: fees for attendance in meetings of the Risk and Control Committee and the Related Party Committee (Euro 12 thousand) ** Other fees refer to:

• Urbano Cairo: fees for his duties performed for Cairo Editore (Euro 500 thousand) and other companies of the Group (Euro 10 thousand).

• Uberto Fornara: gross fees as senior manager payable by Cairo Communication (Euro 300 thousand), remuneration from the noncompete agreement (Euro 100 thousand), fees for his duties performed for Cairo Pubblicità (Euro 100 thousand) and other companies of the Group (Euro 10 thousand).

• Marco Pompignoli: gross fees as senior manager payable by Cairo Communication (Euro 200 thousand), and fees for his duties performed for Cairo Pubblicità (Euro 90 thousand) and other companies of the Group (Euro 10 thousand).

• Key management personnel: gross fixed annual Group fees for a total of Euro 1,010 thousand (comprising gross remuneration as manager) and variable incentive components amounting to Euro 232 thousand.

Moreover, under Consob Communication no. DEM/11012984 of 24 February 2011, point 2.3, letters (a) and (f), it should be noted that:

there are no agreements in place between the Parent and the directors for any indemnity in the event of resignation or unjust dismissal, or in the event their employment relationship ceases following a takeover bid;

_______________________________________________________________________________

there are agreements in place between the Parent and Uberto Fornara, subject to non-competition commitments for 18 months following termination of his management relationship with the Parent, for payment during his relationship of a gross annual fee of Euro 100 thousand. In the event of termination of employment before payment, as remuneration for the non-competition agreement, as of May 2014, of the total sum of Euro 450 thousand, to be considered a minimum consideration of the agreement, the Company will pay the manager the difference between such minimum amount and the amount paid until then as remuneration for the agreement.

Moreover, there are no succession plans regarding executive directors.

At 31 December 2015, key management personnel of the Cairo Communication Group was composed of:

Giuseppe Ferrauto (Director, General Manager and manager of Cairo Editore);
Giuliano Cesari (executive director and General Manager of Cairo Pubblicità) and manager of Cairo Communication;
Marco Ghigliani (CEO, General Manager and manager of La7).

To date, Cairo Communication has no stock option plans in place.

37. Transactions deriving from atypical and/or unusual or non-recurring transactions

Pursuant to Consob Communication of 28 July 2006 n. DEM/6064296, it should be noted that in 2015 the Cairo Communication Group did not engage in any atypical and/or unusual transactions as defined by the above Communication.

For the Board of Directors Chairman Urbano R. Cairo

Cairo Communication S.p.A. Consolidated Financial Statements at 31 December 2015 – Appendices

APPENDIX 1 CAIRO COMMUNICATION GROUP COMPANIES

The following table lists all Cairo Communication Group companies, showing the company name, registered office, quota capital, and shares held, whether directly or indirectly, by the Parent Cairo Communication S.p.A. and by each subsidiary, the consolidation method.

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Company	Head	Share capital	%	Reporting	Business	Consolidation method
	office	at 31/12/14:	of investment	date
Cairo Communication S.p.A.	Milan	4,074		31/12	Advertising	Full
Cairo Editore S.p.A.	Milan	1,043	99.95	31/12	Publishing	Full
Diellesei S.r.l. in liquidation	Milan	10	60	31/12	In liquidation	Full re assets and liabilities (*)
La7 S.p.A. (former La 7 S.r.l.)	Rome	1,020	100	31/12	TV publishing	Full
Cairo Pubblicità S.p.A.	Milan	2,818	100	31/12	Advertising	Full
Cairo Publishing S.r.l.	Milan	10	100	31/12	Publishing	Full
Il Trovatore S.r.l.	Milan	25	80	31/12	Internet	Full
Cairo Network S.r.l.	Milan	5,500	100	31/12	Network operator	Full
Edizioni Anabasi S.r.l.	Milan	10	99.95	31/12	Publishing	Full

(*) the income statement is consolidated on a single line basis in profit/(loss) from discontinued operations

APPENDIX

Information pursuant to Article 149-duodecies of Consob's Issuer Regulations

The following summary, prepared pursuant to art. 149-xii of Consob's Issuer Regulations, shows the fees for the current period for auditing services and for non-audit services provided by the Audit Firm.

Euro/000	Services provided by	Fees for the year

Audit
Parent - Cairo Communication S.p.A.
	KPMG S.p.A.	75
Subsidiaries
- Cairo Pubblicità S.p.A.	KPMG S.p.A.	35
- Cairo Editore S.p.A.	KPMG S.p.A.	60
- La7 S.p.A. (former La7 S.r.l.)	KPMG S.p.A.	75
- Cairo Network S.r.l.	KPMG S.p.A.	17

Report of the Board of Statutory Auditors to the Shareholders' Meeting of Cairo Communication S.p.A., pursuant to art. 153 of Legislative Decree 58/1998 and to art. 2429 of the Italian Civil Code

Shareholders,

pursuant to art. 153, par. 1, of Legislative Decree n. 58 of 24 February 1998, and to art. 2429 of the Italian Civil Code, we hereby inform you that during the year ended 31 December 2015, we performed the oversight duties prescribed by law (art. 148 et seq of the above-mentioned Legislative Decree), taking into account the standards of conduct recommended by the Italian Association of Public Accountants and Accounting Professionals, and the relevant instructions provided by CONSOB communications concerning corporate control and the activities of the Board of Statutory Auditors.

The above being stated, these are the results of the prescribed oversight duties performed during the year:

we attended the Shareholders' Meetings and those of the Board of Directors held during the year, receiving from the Directors, in accordance with their obligations to report to the Board of Statutory Auditors, under art. 150, par. 1, of Legislative Decree n. 58/1998, timely and appropriate information on the overall business performance and outlook, and the most relevant transactions, in terms of size and nature, made by the Company and its subsidiaries;
to the extent of our responsibilities, we gathered information on compliance with the law and bylaws, and oversaw compliance with the principles of proper governance and appropriateness of the Company's organizational structure, through direct observation, through information gathered from the managers of the departments involved, through regular exchange of information with the Audit Firm tasked with the statutory audit of the separate and consolidated financial statements, and by attending the meetings of the Control and Risk Committee, the Related Party Committee (through the Chairman), and the meetings with the Supervisory Body with all members of the Board attending;
we oversaw the operation and effectiveness of the internal control systems and the adequacy of the administrative-accounting system and, specifically, its reliability to

properly illustrate operational events;

pursuant to art. 19 of Legislative Decree n. 39/2010, which has assigned the Board of Statutory Auditors the role of "Internal Control and Audit Committee", we conducted oversight duties provided therein on: a) the disclosure of financial information; b) effectiveness of the internal control, internal audit and risk management systems; c) the statutory audit of the separate and consolidated financial statements; d) independence of the Audit Firm, through direct observation, information gathered from the managers of the departments involved, and by analyzing the results of the work performed by the Audit Firm. In such context, we took note of the quarterly audits performed by the Audit Firm to ensure that the accounts were kept on a regular basis; we received from the Audit Firm the Reports prescribed by art. 14 and by art. 19, par. 3, of Legislative Decree n 39/2010, as well as the "Annual confirmation of independence", pursuant to art. 17, par. 9, lett. a) of the above Decree; we analyzed, again pursuant to art. 17, par. 9, lett. a) of the above Decree, the risks regarding the independence of the Audit Firm and the measures it adopted to constrain such risks;
we controlled the proper operation of the audit system on Group companies and the appropriateness of instructions given to them, pursuant also to art. 114, par. 2, of Legislative Decree n. 58/1998;
we took note of the preparation of the Remuneration Report, pursuant to art. 123 ter of Legislative Decree n. 58 of 24 February 1998, and to art. 84 quater of CONSOB Regulations 11971/1999 ("Issuer Regulations"), with no particular issues to report;
we controlled the actual implementation of corporate governance rules provided by the Corporate Governance Code for Listed Companies issued by Borsa Italiana S.p.A., as adopted by the Company;
we oversaw compliance of the internal procedure referred to related-party transactions with the principles contained in the Regulations approved by CONSOB through resolution n. 17221 of 12 March 2010 and subsequent amendments, and compliance with the above Regulations, pursuant to art. 4, par. 6;
we verified compliance with the laws and regulations on the preparation and layout of the separate and consolidated financial statements, as well as the documents attached thereto. Specifically, the separate and consolidated financial statements are accompanied by the prescribed statements of conformity signed by the Chairman of the Board of Directors and by the Financial Reporting Manager, pursuant to art. 81-

ter of CONSOB Regulations n. 11971 of 14 May 1999 and subsequent amendments and supplements;

• we verified that the Directors' Report for 2015 complies with the laws and regulations, consistent with the resolutions adopted by the Board of Directors and with the facts illustrated in the separate and consolidated financial statements. The half-year report and quarterly reports were published in accordance with the law and regulations currently in force and required no comments from the Board of Statutory Auditors.

The specific indications to provide with this Report are listed below, in accordance with the provisions of CONSOB Communication n. DEM/1025564 of 6 April 2001 and subsequent amendments:

We gathered information on the transactions of major equity and financial relevance made during the period, also through subsidiaries, to verify that they were made in compliance with the law and bylaws and that they were neither imprudent or such as to jeopardize the integrity of corporate assets.

We certify, therefore, that to the best of our knowledge, the above transactions were based on principles of proper governance and that the issues regarding potential or possible conflicts of interest were carefully assessed.

The procedures adopted by the Company for related party transactions are illustrated in section 12 "Related party transactions" of the "Report on corporate governance and ownership structure" contained in the Directors' Report for the financial statements and consolidated financial statements for the year ended 31 December 2015.

The characteristics of intra-group and related-party transactions put in place in 2015, the parties involved and the relating financial effects are appropriately presented and explained in a specific section in the notes to the financial statements and consolidated financial statements, to which reference is made. In this regard, the Board, in the course of its work, did not identify any atypical and/or unusual transactions made during the year with third and/or related parties.

Pursuant to art. 4, par. 6 of the CONSOB Regulations approved by the above resolution n. 17221/2010 of 12 March 2010 and subsequent amendments and supplements, which governs the decision-making process and the mandatory information regarding Related-Party Transactions (the "Procedures"), we oversaw:

i) compliance of the procedures adopted by the Company with the principles contained in the above regulations and their observance;
ii) fairness and correspondence of intra-group and related-party transactions with the interests of the Company.
1. In our view, the information provided by the Directors in their Report, pursuant to art. 2428 of the Italian Civil Code (Directors' Report), regarding atypical and/or unusual transactions and ordinary transactions, under the previous point, is to be considered exhaustive and complete.
1. KPMG S.p.A., the Audit Firm tasked with performing statutory audit, with which we held regular meetings during the year, today (5 April 2016) issued the Reports under art. 14 of Legislative Decree n. 39/2010, certifying that the separate and consolidated financial statements for the year ended 31 December 2015 are drawn up clearly and give a true and fair view of assets, liabilities, financial position, results of operations and other components of comprehensive income, changes in equity and cash flows of the Company and the Group, and certifying that the Directors' Report and the disclosures under art. 123-bis, par. 4, of Legislative Decree n. 58/1998 are consistent with the separate financial statements of the Company and with the consolidated financial statements of the Group. These reports do not contain any issues of note or explanatory comments.
1. In 2015, the Board received no complaints, pursuant to art. 2408 of the Italian Civil Code.
1. In 2015, the Board received no complaints from third parties.
1. In 2015, the Company did not assign KPMG S.p.A. additional non-recurring tasks.
1. There are no reports of tasks assigned to subjects that are part of the "network" of the Audit Firm KPMG S.p.A.
1. In 2015, the Board issued its opinion as prescribed by law on the determination of compensation to managers holding strategic responsibilities, as established by the Board of Directors on the proposal of the Remuneration Committee.
1. In 2015, the Board of Directors met five times, the Control and Risk Committee four times and the Board of Statutory Auditors four times. The Remuneration Committee met twice in 2015, while the Related Party Committee met only once.
1. The Board of Statutory Auditors acquired knowledge and oversaw compliance with the law and bylaws and observance of the principles of proper governance, ensuring that actions decided and taken by the Directors complied with the law and bylaws, and were made in a perspective of profitability, and that they were neither imprudent nor reckless, or in potential conflict of interest or in contrast with the resolutions adopted by the Shareholders' Meeting, or such as to jeopardize the integrity of corporate assets.
1. With regard to the adequacy of the organizational structure of the Company and of the Group, the oversight duties of the Board of Statutory Auditors were performed by acquiring knowledge of the organizational structure through information gathered from each area, through meetings with the managers of the various departments and with the Audit Firm as part of a regular exchange of data and information.
1. The Board acquired knowledge and oversaw the adequacy and effectiveness of the internal control system, pursuant also to art. 19 of Legislative Decree 39/2010, through regular meetings with the Director in charge of the internal control system and with the internal audit manager, and through the presence of the Chairman of the Board of Statutory Auditors at the meetings of the Control and Risk Committee, the Remuneration Committee, the Related Party Committee, and of all the members of the Board at the meetings with the Model 231/2001 Supervisory Body.
1. The Board also oversaw the adequacy and reliability of the administrativeaccounting system to properly illustrate operational events, through direct observation, through information received by the managers of the departments involved, by examining company documents and by analyzing the results of the work performed by the Audit Firm.
1. The Board controlled the operation of the control system over subsidiaries and the adequacy of the instructions given to the subsidiaries by the Company, pursuant to art. 114, par. 2, of Legislative Decree n. 58/98, in order for the Group companies to provide the required information to comply with statutory disclosure obligations. No exceptions were reported in this regard.
1. During the regular meetings held by the Board of Statutory Auditors with the Audit Firm, pursuant to art. 150, par. 3, of Legislative Decree n. 58/1998, no relevant issues emerged that need to be mentioned in this Report.
1. The Board also controlled the actual implementation of corporate governance rules provided by the Corporate Governance Code for Listed Companies issued by Borsa Italiana S.p.A., as adopted by the Company.
1. With regard to the oversight duties performed as mentioned above, there were no omissions, reprehensible facts or irregularities reportable to the competent authorities and/or the supervisory boards, or worthy of mention in this Report.
1. Finally, the Board of Statutory Auditors performed its own assessments on compliance with the rules of law regarding the preparation of the draft separate financial statements and consolidated financial statements of the Group for the year ended 31 December 2015, of the relating explanatory notes and the Directors' Report attached thereto, either directly, assisted by department managers or through information received from the Audit Firm.

Specifically, it is acknowledged that the separate and consolidated financial statements of Cairo Communication S.p.A. for the year ended 31 December 2015 were prepared in accordance with the "International Financial Reporting Standards" (IFRS) issued by the International Accounting Standards Board (IASB) and approved by the European Union, and in accordance with the provisions issued in implementation of art. 9 of Legislative Decree n. 38/2005.

Based on the foregoing considerations, with regard to the oversight duties performed during the year, the Board of Statutory Auditors has no remarks to make, pursuant to art. 153 of Legislative Decree n. 158/1998, to the extent of its responsibilities, on the separate and consolidated financial statements, and on the explanatory notes and Directors' Report, agreeing with the proposal of the Board of Directors to allocate profit for the year, and with the proposal to distribute dividends, contained in the Directors' Report to the IAS/IFRS separate financial statements of Cairo Communication S.p.A.

Milan, 5 April 2016

Board of Statutory Auditors

Marco Moroni (Chairman)

Marco Giuliani

Maria Pia Maspes

The following pages provide a list of the positions of administration and supervision held by

the members of the Board of Statutory Auditors in other companies as at the issue date of

the Report (Annex pursuant to art. 144 quinquiedecies of the Issuer Regulations).

ANNEX TO THE REPORT OF THE BOARD OF STATUTORY AUDITORS OF CAIRO COMMUNICATION SPA DRAWN UP PURSUANT TO ART. 153 OF LEGISLATIVE DECREE 58/98

List of positions held in Companies as per Book V, Title V, Chapters V, VI and VII of the Italian Civil Code as at the issue date of the Report (art. 144-quinquiesdecies Consob Regulations 11971/99)

N.	Company Name	Position
	Marco Moroni (Chairman of the Board of Statutory Auditors)
1	Aromatagroup Srl	Sole Auditor	31/12/2017
2	Asscom Spa	Standing Auditor	31/12/2016
3	Betfair Italia Srl	Standing Auditor	30/04/2018
4	Cairo Communication Spa	Chairman of the Board of Statutory Auditors	31/12/2016
5	Cairo Editore Spa	Chairman of the Board of Statutory Auditors	31/12/2016
6	Cairo Pubblicità Spa	Chairman of the Board of Statutory Auditors	31/12/2015
7	Caseificio del Cigno Spa	Standing Auditor	31/12/2017
8	Elettrodelta Spa in liquidation	Standing Auditor	31/12/2017
9	Fratelli Giacomel Spa	Standing Auditor	31/12/2016
10	Giacomel Group Srl	Standing Auditor	31/12/2016
11	La7 Spa	Chairman of the Board of Statutory Auditors	31/12/2018
12	Locauto Rent Spa	Standing Auditor	31/12/2015
13	Locauto Spa	Standing Auditor	31/12/2015
14	Ostello Bello Spa	Chairman of the Board of Statutory Auditors	31/12/2017
15	Publicitas International Spa	Standing Auditor	31/12/2015
16	Revicom Srl	Chairman of the Board of Directors	Until revocation
17	SCF Consorzio Fonografici	Standing Auditor	31/12/2016
18	Sony Music Entertainment Italy Spa	Standing Auditor	31/03/2016
19	Ut Communications Spa	Chairman of the Board of Statutory Auditors	31/12/2016
	Number of positions held in issuing companies	1
	Total number of positions held	19

N.	Company Name	Position	Until approval of the financial statements
	Maria Pia Maspes (Standing Auditor)
1	Cairo Communication Spa	Standing Auditor	31/12/2016
2	Cairo Pubblicità Spa	Standing Auditor	31/12/2015
3	Cairo Editore Spa	Standing Auditor	31/12/2016
4	UT Communications Spa	Standing Auditor	31/12/2016
5	Torino FC Spa	Standing Auditor	31/12/2016
6	La7 Spa	Standing Auditor	31/12/2018
7	G.B.H Spa	Standing Auditor	31/12/2015
8	Alto Partners SGR Spa	Standing Auditor	31/12/2018
9	Italholding Spa	Standing Auditor	31/12/2015
10	Eurofly services	Standing Auditor	31/12/2016
11	Kelly service Spa	Standing Auditor	31/12/2017
12	Aliserio Srl	Standing Auditor	31/12/2017
	Number of positions held in issuing companies		1
	Total number of positions held		12

N.	Company Name	Position	Until approval of the financial statements
Marco Giuliani (Standing Auditor)
1	Space 2 Spa	Standing Auditor	31/12/2017
2	Banca Mediolanum Spa	Standing Auditor	31/12/2017
3	Mediolanum Gestione Fondi Sgr P.A.	Standing Auditor	31/12/2017
4	Banca Esperia Spa	Standing Auditor	31/12/2017
5	2I Rete Gas Spa	Standing Auditor	31/12/2017
6	Yara Italia Spa	Standing Auditor	31/12/2017
7	Huntsman P&A Srl	Standing Auditor	31/12/2017
8	Rothschild Spa	Standing Auditor	31/03/2016
9	Hotel Splendido Srl	Standing Auditor	31/12/2016
10	Cairo Communication Spa	Standing Auditor	31/12/2016
	Number of positions held in issuing companies		3

Total number of positions held 10

CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ARTICLE 81 TER OF CONSOB REGULATION 11971 OF 14 MAY 1999 AND SUBSEQUENT MODIFICATIONS AND AMENDMENTS

_______________________________________________________________________________

1. The undersigned Urbano Roberto Cairo, as Chairman of the Board of Directors, and Marco Pompignoli, as Financial Reporting Manager of Cairo Communication S.p.A., also in accordance with art. 154 bis, paragraphs 3 and 4 of Legislative Decree n. 58 of 24 February 1998, certify:

• the adequacy of the characteristics of the Parent and

• the effective application of administrative and accounting procedures for the preparation of the 2015 consolidated financial statements.

2. We also certify that

2.1 the consolidated financial statements at 31 December 2015:

a) have been prepared in compliance with International Financial Reporting Standards endorsed by the European Union, pursuant to EEC Regulation 1606/2002 of the European Parliament and Council, of 19 July 2002,
b) are consistent with the accounting records and books of the Company,
c) give a true and fair view of the financial position and results of operations of the Issuer and the companies included in the scope of consolidation;

2.2 the Directors' Report contains a reliable analysis on performance and operating results, as well as on the position of the Issuer and on the companies included in the scope of consolidation, together with a description of the principal risks and uncertainties to which they are exposed.

Milan, 14 March 2016

Chairman

For the Board of Directors Financial Reporting Manager

………………………………….. ………………………………………….

(Urbano Roberto Cairo) (Marco Pompignoli)

Cairo Communication S.p.A. Separate financial statements at 31 December 2015

Income statement for the year ended 31 December 2015

________________________________________________________________________

Euro/000	Notes
		31 December 2015	31 December 2014
Net revenue	1	106,025,913	116,595,201
Other revenue and income	2	528,543	350,373
Services	3	(100,853,928)	(107,830,984)
Use of third-party assets	3	(711,556)	(714,694)
Personnel expense	4	(3,044,745)	(2,989,997)
Amortization, depreciation, provisions and impairment losses	5	(259,309)	(290,445)
Other operating costs	3	(81,193)	(90,540)
EBIT		1,603,725	5,028,914
Net financial income	6	22,961	364,664
Income (loss) on investments	7	7,218,278	7,083,773
Pre-tax profit		8,844,964	12,477,351
Tax	8	(734,780)	(1,890,829)
Profit from continuing operations		8,110,184	10,586,522
Loss from discontinued operations	9	(636)	(656)
Profit for the year		8,109,548	10,585,866

Statement of comprehensive income for the year ended 31 December 2015

	31 December 2015	31 December 2014
Profit for the year	8,109,548	10,585,866
Other non-reclassifiable items of the comprehensive income statement
Actuarial profit (loss) from defined benefit plans	28,005	(135,039)
Tax effect	(7,701)	37,136
Total comprehensive income	8,129,852	10,487,962

Statement of financial position

Euro/000 Assets	Notes	31 December 2015	31 December 2014

Property, plant and equipment	10	367,582	457,417
Intangible assets	11	295,678	319,656
Investments	12	23,026,549	23,123,637
Other non-current financial assets	13	8,962,612	1,662,633
Deferred tax assets	14	344,076	424,421
Total non-current assets		32,996,497	25,987,764
Trade receivables	15	72,208	320,475
Receivables from parents	23	949,306	796,941
Receivables from subsidiaries	16	53,226,550	65,474,755
Other receivables and other current assets	17	1,022,321	1,148,087
Cash and cash equivalents	18	9,038,635	25,768,486
Total current assets		64,309,020	93,508,744
Total assets		97,305,517	119,496,508
Equity and liabilities		31 December 2015	31 December 2014
Share capital	19	4,073,857	4,073,857
Share premium reserve	19	30,495,449	41,062,091
Retained earnings Other reserves	19 19	416,471 1,056,508	396,167 1,056,508
Treasury shares	19	(2,352)	(2,352)
Profit for the year	19	8,109,548	10,585,866
Total shareholders' equity		44,149,481	57,172,137
Post-employment benefits	20	1,287,783	1,220,793
Provisions for risks and charges	21	164,187	264,181
Total non-current liabilities		1,451,970	1,484,974

Trade payables	22	2,147,608	2,147,470
Payables to subsidiaries	24	47,325,890	55,516,346
Tax liabilities	25	338,855	1,291,289
Other current liabilities	26	1,891,713	1,884,292
Total current liabilities		51,704,066	60,839,397
Total liabilities		53,156,036	62,324,371
Total equity and liabilities		97,305,517	119,496,508

Statement of Cash flows

ro/000)

(Euro/000)	2015	2014
CASH AND CASH EQUIVALENTS	25,768	35,690
OPERATING ACTIVITIES
Profit	8,110	10,586
Amortization, depreciation, provisions and impairment losses	259	290
Impairment losses on investments	247	201
Net financial income	(7,488)	(7,649)
Income tax	735	1,891
Change in post-employment benefits	46	213
Change in provisions for risks and charges	(100)	(73)
Cash flow from operating activities before changes in working capital	1,808	5,458
(Increase) decrease in trade and other receivables	6,376	17,308
Increase (decrease) in trade and other payables	(8,183)	(4,414)
TOTAL CASH FLOW FROM OPERATING ACTIVITIES	2	18,352
Income tax paid	(1,759)	(905)
Financial expense paid
	(48)	(141)
TOTAL NET CASH FROM OPERATING ACTIVITIES (A)	(1,805)	17,306
INVESTING ACTIVITIES
(Acquisition) net disposals of PPE and intangible assets	(145)	(162)
Interest and financial income received	92	506
Dividends received	13,711	1,039
Net increase in other non-current assets	(7,450)	(7,361)
NET CASH USED IN INVESTING ACTIVITIES (B)	6,208	(5,978)
FINANCING ACTIVITIES
Re-measurement of defined benefit plans inclusive of tax effect	20	(98)
Dividends paid	(21,152)	(21,152)
NET CASH USED IN FINANCING ACTIVITIES (C)	(21,132)	(21,250)
NET CASH FLOW OF THE YEAR (A) + (B) + (C)	(16,730)	(9,922)
NET CASH AND CASH EQUIVALENTS CLOSING BALANCE	9,039	25,768

Statement of changes in equity

Balance at 31 December 2012	4,074	44,154	494	1,057	(1,346)	(10,126)	21,062	59,369
Allocation of profit			21,062				(21,062)	0
Dividend distribution			(21,031)			10,126		(10,905)
Actuarial profit (loss) from defined benefit plans			(70)				70	0
Disposal of treasury shares			39		1,344			1,383
Total comprehensive profit for the year							17,991	17,991
Balance at 31 December 2013	4,074	44,154	494	1,057	(2)	0	18,061	67,837
Allocation of profit			18,061				(18,061)	0
Dividend distribution		(3,092)	(18,060)					(21,152)
Actuarial profit (loss) from defined benefit plans			(98)				98	0
Total comprehensive profit for the year							10,488	10,488
Balance at 31 December 2014	4,074	41,062	397	1,057	(2)	0	10,586	57,173
Allocation of profit			10,586				(10,586)	0
Dividend distribution		(10,567)	(10,585)					(21,152)
Actuarial profit (loss) from defined benefit plans			20				(20)	0
Total comprehensive profit for the year							8,130	8,130
Balance at 31 December 2015	4,074	30,495	417	1,057	(2)	0	8,110	44,151

Income statement pursuant to Consob Resolution no. 15519 of 27 July 2006

________________________________________________________________________

	31 December 2015	Related parties	% of total	31 December 2014	Related parties	% of total
Euro/000		(*)			(*)
Net revenue	106,025,913	105,991,134	100.0%	116,595,201	116,562,327	100.0%
Other revenue and income	528,543	236,480	44.7%	350,373	230,804	65.9%
Services	(100,853,928)	(94,867,559)	94.1%	(107,830,984)	(101,938,194)	94.5%
Use of third-party assets	(711,556)			(714,694)
Personnel expense	(3,044,745)			(2,989,997)
Amortization, depreciation, provisions and impairment losses	(259,309)			(290,445)
Other operating costs	(81,193)			(90,540)
EBIT	1,603,725			5,028,914
Net financial income	22,961	398	1.7%	364,664	983	0.3%
Income (loss) on investments	7,218,278	7,218,278	100.0%	7,083,773	7,083,773	100.0%
Pre-tax profit	8,844,964			12,477,351
Tax	(734,780)			(1,890,829)
Profit from continuing operations	8,110,184			10,586,522
Loss from discontinued operations	(636)			(656)
Profit for the year	8,109,548			10,585,866

(*) Related party transactions are analyzed in Note 28

Statement of financial position pursuant to Consob Resolution no. 15519 of 27 July 2006

________________________________________________________________________

() () Property, plant and equipment 367,582 457,417 Intangible assets 295,678 319,656 Investments 23,026,549 23,026,549 100.0% 23,123,637 23,12 3,637 100.0% Receivables from subsidiaries - 0 Non-current financial assets 8,962,612 1,662,633 Deferred tax assets 344,076 424,421 Total non-current assets 32,996,497 25,987,764 Trade receivables 72,208 30,500 42.2% 320,475 30 3,750 94.8% Receivables from parents 949,306 949,306 100.0% 796,941 796 ,941 100.0% Receivables from subsidiaries 53,226,550 53,226,550 100.0% 65,474,755 65,47 4,755 100.0% Other receivables and other current assets 1,022,32 1 1,148,087 Cash and cash equivalents 9,038,635 25,768,486 Total current assets 64,309,020 93,508,744 Total assets 97,305,517 119,496,508 Equity and liabilities 31 December 2014 31 December 2014 Share capital 4,073,857 4,073,857 Share premium reserve 30,495,449 41,062,091 Retained earnings 416,471 396,167 Other reserves 1,056,508 1,056,508 Treasury shares (2,352) (2,352) Interim dividend 0 0 Profit for the year 8,109,548 10,585,866 Total shareholders' equity 44,149,481 57,172,137 Post-employment benefits 1,287,783 1,220,793 Provisions for risks and charges 164,187 128,938 78.5% 264,181 128, 602 48.7% Total non-current liabilities 1,451,970 1,484,974 Trade payables 2,147,608 16,554 0.8% 2,147,470 1 6,554 0.8% Payables to subsidiaries 47,325,890 47,325,890 100.0% 55,516,346 55,51 6,346 100.0% Tax liabilities 338,855 1,291,289 Other current liabilities 1,891,713 1,884,292 Total current liabilities 51,704,066 60,839,397 Total liabilities 53,156,036 62,324,371	Euro/000 Assets	31 December 2015	Related parties	% of total	31 December 2014	Related parties	% of total


































Total equity and liabilities 97,305,517 119,496,508

(*) Related party transactions are analyzed in Note 28

Statement of cash flows pursuant to Consob Resolution no. 15519 of 27 July 2006

(Euro/000)	31 December 2015	related parties	31 December 2014	related parties
CASH AND CASH EQUIVALENTS	25,768		35,690
OPERATING ACTIVITIES
Profit	8,110	18,579	10,586	21,940
Amortization, depreciation, provisions and impairment losses	259		290
Impairment losses on investments	247	247	201	201
Net financial income	(7,488)	(7,465)	(7,649)	(7,284)
Income tax	735		1,891
Change in post-employment benefits	46		213
Change in provisions for risks and charges	(100)	(0)	(73)	(1)
Cash flow from operating activities before changes in working capital	1,808	11,360	5,458	14,856
(Increase) decrease in trade and other receivables	6,376	6,123	17,308	10,791
Increase (decrease) in trade and other payables	(8,183)	(8,190)	(4,414)	(2,737)
TOTAL CASH FLOW FROM OPERATING ACTIVITIES	2	9,293	18,352	22,910

Income tax paid	(1,759)		(905)
Financial expense paid	(48)		(141)
TOTAL NET CASH FROM OPERATING ACTIVITIES (A)	(1,805)	9,293	17,306	22,910
INVESTING ACTIVITIES
(Acquisition) net disposals of PPE and intangible assets	(145)		(162)
Interest and financial income received	92		506
Dividends received	13,711	13,711	1,039	1,039
Net increase in other non-current assets	(7,450)		(7,361)
NET CASH USED IN INVESTING ACTIVITIES (B)	6,208	13,711	(5,978)	1,039
FINANCING ACTIVITIES
(Acquisition) disposal of treasury shares	0		0
Re-measurement of defined benefit plans inclusive of tax effect	20		(98)
Dividends paid	(21,152)		(21,152)
NET CASH USED IN FINANCING ACTIVITIES (C)	(21,132)	0	(21,250)	0

CASH FLOW OF THE PERIOD (A)+(B)+(C)	(16,730)	23,004	(9,922)	23,949
NET CASH AND CASH EQUIVALENTS CLOSING BALANCE	9,039		25,768

NOTES TO THE SEPARATE FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2015

________________________________________________________________________

Main activities

Cairo Communication S.p.A. is a joint-stock company listed in the Milan Company Register.

The Cairo Communication Group operates as a publisher of magazines and books (Cairo Editore – and its division Editoriale Giorgio Mondadori – and Cairo Publishing), as a TV publisher (La7), as a multimedia advertising broker selling advertising time and space on television, in print media and in stadiums (Cairo Communication and Cairo Pubblicità), as a publisher of electronic content (Il Trovatore), and as a network operator (Cairo Network S.r.l.).

The income statement and the statement of financial position are presented in euro, while the statement of cash flows, the statement of changes in equity and the amounts in these notes are presented in thousands of euro.

As the Parent, Cairo Communication S.p.A. has also prepared the consolidated financial statements of the Cairo Communication Group at 31 December 2015.

Basis of preparation

Structure, form and content of the financial statements

The separate financial statements of Cairo Communication S.p.A. at 31 December 2015 have been prepared in accordance with IFRS issued by the International Accounting Standard Board ("IASB") and endorsed by the European Union, as well as with the provisions arising from art. 9 of Legislative Decree no. 38/2005. The term IFRS is used to mean all the international accounting standards ("IAS"), and all the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), formerly the Standing Interpretations Committee ("SIC").

For completeness of information, the following annexes are supplied as an integral part of these Notes:

Annex 1: List of investments in subsidiaries and associates;
Annex 2 and 3: Summary figures of the draft financial statements of subsidiaries at 31 December 2015;
Annex 4 and 5: Summary figures of the most recently approved financial statements of subsidiaries.

The main accounting policies adopted are unchanged from those used for the previous year, and are shown below.

________________________________________________________________________

The separate financial statements are prepared on a going concern basis. The Company believes that even in the presence of a difficult economic and financial situation, significant uncertainties do not exist (as defined by paragraphs 25 and 26 of IAS 1) as to the Company's ability to continue as a going concern, also given both the profitability outlook of the Company and the Group and of its financial position.

Financial statements schedules

The income statement is presented by nature, highlighting interim operating results and pre-tax results, and, in order to allow a better measure of ordinary operating management performance. Furthermore, cost and revenue components deriving from events or transactions which, by their nature or size, are considered non-recurring, are also separately identified in the financial statements and the notes. These transactions also fall under the definition of non-recurring events and transactions as per Consob Communication No. 6064293 of 28 July 2006.

The economic effect of discontinued operations is shown in a single line of the income statement entitled "Profit/loss from discontinued operations" under IFRS 5.

The statement of comprehensive income also reflects the "changes arising from transactions with non-owners"- separately showing the relevant tax effects, that is:

profit and loss that could be directly recognized in equity (for instance, actuarial losses from the measurement of defined benefit plans);
the effects of the measurement of derivative instruments hedging future cash flows;
the effects of the measurement of "available-for-sale financial assets";
the effects arising from any change in accounting standards.

The statement of comprehensive income presents the items relating to the amounts of the components of other comprehensive income for the period by nature and grouped into those which, in accordance with the provisions of other IAS/IFRS:

will not be subsequently reclassified to profit (loss) for the year;
will be subsequently reclassified to profit (loss) for the year, when certain conditions are met.

The statement of financial position presents separately assets and liabilities divided in current and non-current, indicating, on two separate lines, "Assets intended for sale" and "Liabilities associated with discontinued operations", in accordance with IFRS 5. Specifically, an asset or a liability is classified as current when it satisfies one of the following criteria:

it is expected to be realized or settled or it is expected to be sold or utilized in the normal operating cycle of the company;
it is held principally to be traded;
it is expected to be realized or settled within 12 months of the reporting date.

Otherwise, the asset or liability is classified as non-current.

The statement of cash flows has been prepared applying the indirect method in which operating performance is adjusted to reflect transactions of a non-monetary nature, for whatever deferral or accrual of previous or future operating receipts or payments and for revenue or cost components connected to cash flows arising from investing or financing activities. Income and expense relating to medium or long-term financial operations and those relating to hedging instruments and dividends paid are included in financing activities.

________________________________________________________________________

The statement of changes in equity shows the variations in equity relating to:

allocation of profit for the year;
amounts relating to transactions with owners (purchase and sale of treasury shares);

and separately income and expense defined as "changes arising from transactions with non-owners", also shown in the statement of comprehensive income.

For each significant item detailed in the above-mentioned schedules, reference is made to the following notes in which relevant information is provided, with details also on composition and variations on the previous year.

Furthermore, in order to comply with Consob Resolution No. 15519 of 27 July 2006 relating to financial statements schedules, specific additional statement of comprehensive income and statement of financial position have been prepared, showing material balances or related party transactions separately for each item.

Revenue and cost recognition

Revenue and cost and income and expense are recognized on an accruals basis, specifically:

• Revenue is recognized on the probability with which the company will enjoy the economic benefits and in the extent to which the amount can be reliably determined. Revenue is stated net of any adjustments.

• Advertising revenue is recognized at the moment the advertisement is broadcast or published or provision of services offered.

Cost is recognized using the same criteria for revenue recognition and on an accruals basis.
Interest income and expense are recognized on an accruals basis.

• Dividends are recognized only as from when the shareholders' right to the dividend payment has been established, and only when resulting from a profit distribution following the acquisition of the investment; in the case, however, of a profit distribution prior to the acquisition of their relevant shares, such dividends are treated as a reduction in the cost of the relevant investment.

• The recharges of costs incurred on behalf of third parties are recognized as a reduction in the cost to which they relate.

________________________________________________________________________

• Financial income and expense are recognized in the income statement on a maturity basis, as a function of time, using the effective interest method.

Taxes

Taxes for the year correspond to the sum of current and deferred taxes.

Cairo Communication and its subsidiaries Cairo Editore S.p.A., Cairo Pubblicità S.p.A., Diellesei S.r.l. in liquidation, La7 S.p.A. (former La7 S.r.l.), Cairo Network S.r.l. (former Cairo Sport S.r.l.) and Cairo Publishing participate in the national tax consolidation scheme of UT Communications S.p.A., in accordance with art. 117/129 of the Consolidated Income Tax Act.

The consolidation scheme, which regulates economic aspects pertaining to the sums deposited or calculated against the advantages or disadvantages arising from the national tax consolidation scheme, also allows for any increased costs or decreased benefits incurred by the Companies, by participating in this procedure, to be repaid by the Parent U.T. Communications S.p.A.

UT Communications S.p.A. acts as the tax parent and determines a single taxable base for the group of companies that adheres to the national tax consolidation scheme, which thereby benefits from the ability of offsetting taxable profits against taxable losses in one tax return.

Each company that participates in the national tax consolidation scheme transfers its taxable profit or loss to the tax parent. For any such taxable profit reported by a subsidiary, UT Communications S.p.A. recognizes receivables equal to the IRES payable. Conversely, for any such taxable loss, reported by a subsidiary, UT Communications S.p.A. recognize a payable equal to IRES due on the loss that has been contractually transferred at Group level.

Deferred tax liabilities are generally recognized for all taxable temporary differences, while deferred tax assets are recognized to the extent of the probability that there will be future taxable profits which will allow for the utilization of the deductible temporary differences. Deferred taxes are calculated on the basis of the tax rates that are foreseen will be in force at the moment of realization of the asset or settlement of the liability, based on tax legislation in force at the reporting date. Where relevant, the effects of any changes in tax rate or tax legislation after the reporting date are disclosed in the notes. Deferred tax assets and liabilities are reported at their net value when there is a legal

right to offset current tax liabilities and assets and when the taxes relate to the same taxation authority.

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Post-employment benefits

The Company has less than 50 employees. The discounting process, based on demographic and financial assumptions, is performed by independent actuaries.

In accordance with IAS 19 - Employee Benefits, the recognition of expenses related to work performed and net financial charges are recognized in the income statement, while actuarial gains and losses arising from the re-measurement of liabilities and assets are recognized in the statement of comprehensive income.

Non-current assets

Intangible assets

Costs, including accessory costs incurred for the acquisition of resources with no physical substance are recognized among intangible assets when the cost is quantifiable and the asset is clearly identifiable and controlled by the Company, and where the use of the asset will generate probable future benefits.

These are valued at their acquisition or production cost, including related costs – to the extent to which they are considered to have a finite life – and they are amortized to reflect their remaining useful economic lives.

The amortization periods of intangible assets of various types are as follows:

Concessions, licenses, trademarks and similar rights 3 to 5 years

Software 3 to 5 years

Property, plant and equipment

Property, plant and equipment (PPE) are recognized when their cost can be reliably determined and when related future economic benefits can be enjoyed by the Company.

They are recognized at acquisition price or production cost, including directly associated expenses and costs, plus the share of indirect costs which can be reasonably attributed to the asset.

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These assets are systematically depreciated on a straight-line basis each year at rates consistent with the economic and technical useful life of the asset. Depreciation rates applied are as follows:

Property	3%
General equipment	20%
Motor vehicles	20%-25%
Plant and machinery	10%
Office equipment and furniture	10%-12%
Electronic equipment	20%

Incremental maintenance and other costs producing a significant and tangible increase in the productive capacity or security of assets, or lengthening its remaining useful life, are capitalized and recognized as an increase in the carrying amount of the assets. Ordinary maintenance costs are taken directly to profit and loss.

Impairment of assets

At least once a year, the company reviews the recoverability of its investments and whenever there are potential indicators of an impairment loss on PPE and intangible assets with a finite useful life, in order to determine whether such assets may have suffered an impairment loss. When such indications are present, the carrying amount of the asset is reduced to reflect recoverable amount. The recoverable amount of an asset is the greater of its fair value less costs to sell, and its value in use. The fair value of a listed investment is determined according to its market price. To determine an

asset's value in use, the Company calculates the present value of future estimated cash flows, inclusive of tax, by applying a pre-tax discount rate which reflects the current market valuation of the time value of money and the specific risks inherent to the asset.

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Excluding goodwill, when the impairment loss of an asset no longer applies or is reduced, the carrying amount of the asset is increased up to the new estimated recoverable amount, which may not exceed the amount which would have been determined had no impairment loss been recognized.

Investments

Subsidiaries and associates

Investments in subsidiaries and associates are recognized at purchase or subscription cost and adjusted for any impairment loss.

Any excess in value between the purchase price at the time of acquisition and the company's share of equity at current values is therefore included in the carrying amount of the investment.

Investments in subsidiaries and associates are subject to impairment testing at least once a year, or more frequently if deemed necessary. Whenever there is evidence that such investments have incurred an impairment loss, the impairment loss is recognized in profit and loss. Should the company's share of losses in an investment exceed the carrying amount of the investment, and the company is obliged to reflect those losses, the value of the investment is written off and the share of any such losses is shown as a provision in liabilities. Whenever an impairment loss is reduced or ceases to exist, the loss is reversed up to the original carrying amount through profit and loss.

Receivables from subsidiaries and associates

Non-interest bearing loans granted to subsidiaries and associates are classified under non-current financial assets.

Current assets and liabilities

Receivables

Trade and other current assets are recognized at their estimated realizable value.

Financial assets

Investments other than those held to maturity are classified as held for trading or available for sale and are measured at the end of each reporting period at their fair value. When financial assets are held for trading, gains and losses arising from fair value changes are recognized in profit and loss. In the case of available-for-sale financial assets, gains and losses arising from fair value changes are recognized in comprehensive income. When available-for-sale financial assets are sold, redeemed or transferred, cumulative gains or losses previously recognized in comprehensive income must be reclassified from equity to profit/ (loss) for the year. This reserve is also used if alignment to fair value results in subsequent impairment of the asset until the reserve is used up. Any additional loss exceeding the reserve, should it result in an impairment loss, is taken to profit and loss.

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Regarding measurement of available-for-sale assets, the directors have chosen as impairment indicators the reduction in fair value below cost of over 50%, or for a period exceeding 24 months.

Cash and cash equivalents

They are recognized at their nominal amount.

Borrowings, bank loans and overdrafts

Trade payables

They are recognized at their nominal amount.

Provisions for risks and charges

Provisions for risks and charges are recognized when the company has a legal or constructive obligation resulting from a past event and for which a probability exists for the fulfillment of that obligation. The provisions reflect the best estimate based on information currently available to the Directors of the costs required to fulfill the obligation at the reporting date, and are discounted when the effect is significant.

Treasury shares

Treasury shares are recognized as a reduction in equity. The effects of any subsequent transactions are also recognized directly in equity.

Dividends paid

Dividends payable are recorded as a movement in equity in the year they are approved by the Shareholders' Meeting or by the Board of Directors in the event of interim dividend.

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Use of estimates

The preparation of the financial statements and the notes thereto, in application of the IFRS, requires that the Company carry out certain estimates and assumptions which affect the carrying amount of assets and liabilities and disclosures about assets and contingent liabilities at the reporting date. Estimates and assumptions used are based on experience and on other factors considered significant. Actual results could differ from these estimates. Estimates mainly relate to provisions for risks relating to receivables, investment measurement, depreciation, amortization, impairment of assets, taxation, provisions for risks and charges, and contingent liabilities.

Estimates and assumptions are reviewed regularly and the effects of each variation therein are recognized in profit and loss in the period in which the estimate was revised. The effects of such revisions are reflected in the periods on which they have effect, i.e. both in the current period, and in future periods, if relevant. In this context, the persisting uncertainty factors in the short and medium economic term, which make it hard to predict a return to normal market conditions, have led to the need to make assumptions regarding future performance which are influenced by significant uncertainty, and the possibility of achieving results different from those estimated cannot be excluded for the next year, which could therefore require adjustments to the carrying amount, even significant, although these are obviously neither currently quantifiable nor foreseeable.

The items most susceptible to these uncertainties are the allowance for impairment, inventory writedowns, non-current assets (intangible assets, property, plant and equipment and investments), postemployment benefits and deferred tax assets.

Allowance for doubtful accounts

The allowance for doubtful accounts reflects Management's estimate regarding the losses on portfolio of receivables from end customers. The allowance is estimated based on the losses expected by the Company, based upon past experience for similar receivable, current and past due dates, losses and receipts arising from the careful monitoring of receivables management and from projections on market and economic conditions.

Deferred tax assets

Deferred tax assets are recorded to the extent to which it is considered probable that future taxable income will be generated to allow the utilization of different deductible temporary differences. The realizable value of deferred tax assets is periodically reviewed according to the future taxable income foreseen in the Company's most recent plans.

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Recoverable amount of non-current assets

Non-current assets include investments, property, plant and equipment, intangible assets, deferred tax assets and other financial assets. Management periodically reviews the carrying amount of the non- current assets held and used, and those of assets held for sale, as and when circumstances require such revision. This is performed using the estimated cash flows expected from the use or sale of the asset and suitable discount rates to calculate present value. When the carrying amount of a non-current asset has suffered an impairment loss, the Company recognizes an impairment loss equal to the positive difference between the greater of the carrying amount of the asset and its recoverable amount from its use or sale, as determined according to the Company's most recent plans.

For the preparation of the financial statements at 31 December 2015, and in particular in the performance of impairment tests on intangible and assets and property, plant and equipment, the different sectors of the Cairo Communication Group have taken into account the expected 2016 performance, whose assumptions and results are in line with the information disclosed in the section on "significant events after the reporting period and business outlook" in the Director's Report. In addition, for the subsequent years of the plan, necessary adjustments have been cautiously made to take account of the deep market changes resulting from the current economic and financial crisis. No significant impairment was required based on such figures in the plan.

Provisions for risks and charges

The provisions for risks and charges relating to contingent liabilities of a legal or fiscal nature are made on the basis of estimates made by the Directors on the basis of valuations made by the Company's legal counsels and fiscal advisers on the probable charge that can be reasonably expected to fulfill the obligation.

Risk management

The main fiscal, legal and financial risks to which Cairo Communication S.p.A. is exposed, as well as the policies put in place by Management for their management, are explained in Note 27 and Note 29. Reference is made to the Directors' Report regarding operational and business risks.

1. Accounting standards, amendments and interpretations effective as from 1 January 2015

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The following accounting standards, amendments and interpretations, revised also following IASB's yearly improvement process, were applied for the first time starting from 1 January 2015:

IFRIC 21 – Levies - The interpretation, issued by the IASB in May 2013, provides guidance on when to recognize liabilities for a levy imposed by a government, with the exception of those governed by other standards (i.e. IAS 12 – Income tax). IAS 37 establishes the recognition criteria of liabilities, one of which is the existence of a present obligation on an entity resulting from past events (obligating event). The interpretation clarifies that the obligating event that gives rise to liability for payment of a levy is explained by the relevant legislation that gives rise to its payment. IFRIC 21 is applicable according to the IASB for annual periods beginning on or after 1 January 2014, while, according to the EU, for annual periods beginning on or after 17 June 2014. The application of the interpretation from 1 January 2015 had no effects on the figures of the Annual Report at 31 December 2015.

Improvements to IFRS: 2011-2013 Cycle: On 12 December 2013, the IASB published "Annual Improvements to IFRSs: 2011-2013 Cycle", which acknowledges the amendments to the standards as part of their annual improvement process. According to the IASB, the amendments became effective for financial statements beginning on or after 1 July 2014. According to the EU, entry into force has been postponed to the financial statements beginning on or after 1 January 2015. These amendments are applied prospectively and had no effects on the figures of the Annual Report at 31 December 2015.

The main amendments regard:

IFRS 1 First-time Adoption of International Financial Reporting Standards It clarifies that a first-time adopter, as an alternative to the application of a principle currently in force on the date of the first IFRS financial statements, may opt for early application of a new standard intended to replace the principle in force. The option is admitted when the new standard allows early application. The entity is required to apply the same version of the standard in all periods presented in the first IFRS financial statements.
IFRS 3 Business combinations – The amendments aim to clarify the exclusion from the application scope of IFRS 3 of all types of joint arrangements, not only of joint ventures.
IFRS 13 Fair Value Measurement IFRS 13, paragraph 52 (portfolio exception), in its current version, restricts to financial assets and liabilities included in the application scope of IAS 39 the possibility of fair value measurement on a net basis. The amendment clarifies that the possibility of fair value measurement on a net basis also applies to contracts within

the application scope of IAS 39, but that do not meet the definition of financial assets and liabilities in IAS 32, such as contracts to buy and sell non-financial items that can be settled net in cash.

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• IAS 40 – Investment Property - The amendment clarifies that IFRS 3 and IAS 40 are not mutually exclusive and that, in order to determine whether the purchase of a property falls within the scope of IFRS 3, it is necessary to refer to the specific indications in IFRS 3; instead, to determine whether the purchase of such property falls within the scope of IAS 40, it is necessary to refer to the specific indications in IAS 40.

2. Accounting standards, amendments and interpretations approved by the EU and applicable from annual periods after 1 January 2015

Amendments to IAS 19 - Employee contributions to defined-benefit plans - The amendment, issued by the IASB in November 2013, introduces simplifications to account for definedbenefit plans that provide for contributions by employees or third parties. Specifically, the amendments to IAS 19 allow recognition of employee or third-party contributions as a reduction of service costs during the period in which services where rendered, if the following conditions are met:

employee or third-party contributions are formally provided for in the terms of the plan;
the contributions are linked to services rendered; and
the amount of the contributions is independent of the number of years of service.

In all other cases, the recognition of these contributions will be more complex, as they will be allocated to each period of the plan through the actuarial calculation of the relating liabilities. According to the IASB, the amendments became effective for financial statements that began on or after 1 July 2014. According to the EU, entry into force has been postponed to the financial statements beginning on or after 1 February 2015. These amendments are applied retrospectively, but will have no effects on the figures of the Annual Report at 31 December 2015.

The main amendments regard:

• IFRS 2 Share-based payments – Amendments have been made to the definitions of "vesting condition" and "market condition", while further definitions have been added of "performance condition" and "service condition" (previously included in the broad definition of "vesting condition").

IFRS 3 Business combinations- The amendments clarify that a contingent consideration classified as an asset or liability should be measured at fair value at each balance sheet date, regardless of whether the contingent consideration is a financial instrument to which IAS 39 applies or a non-financial asset or liability. Changes in fair value are presented in profit/(loss) for the year.
IFRS 8 Operating segments The amendments require an entity to disclose those factors used by management to identify the entity's reportable segments when operating segments have been aggregated, including a description of the aggregated operating segments and economic indicators considered in determining whether these operating segments have "similar economic characteristics". The amendments also clarify that the reconciliation between total assets of the operating segments and the total assets of the entity is provided only in the event that the total assets of the operating segments are regularly provided to the chief operating decision-maker ("CODM").
IFRS 13 Fair Value Measurement Amendments have been made to the Basis for Conclusions in order to clarify that short-term receivables and payables are still able to be measured on an undiscounted basis where the effect of discounting is immaterial.
IAS 16 Property, plant and equipment and IAS 38 Intangible assets The amendments have eliminated inconsistency in the recognition of accumulated depreciation where the revaluation method of a property, plant or equipment or an intangible asset is applied. The new requirements clarify that the gross carrying amount is adjusted in a manner consistent with the revaluation of the carrying amount of the asset, and that accumulated depreciation is equal to the difference between gross carrying amount and carrying amount, less subsequent depreciation.
IAS 24 Related Party Disclosures following the amendment to IAS 24, the IASB:
has extended the definition of "related party" to entities that provide within the group key management personnel services (these entities are usually named "management companies");
it has clarified that it is sufficient to provide the total amount of the cost charged by the management company without separately indicating each type of benefit that the management company has paid its employees.

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Improvements to IFRS: 2012-2014 Cycle. In September 2014, the IASB published "Annual Improvements to IFRSs: 2012-2014 Cycle", approved by the EU in December 2015, which acknowledges the amendments to the standards as part of their annual improvement process. The amendments are applied to financial periods beginning on or after 1 January 2016. Early application is allowed.

The main amendments regard:

IFRS 5 Non-current assets held for sale and discontinued operations The amendment introduces specific guidance to IFRS 5 in case an entity reclassifies an asset (or disposal group) from held for sale to held-for-distribution (or vice versa), or when recognition of an asset held-for-distribution ceases.
IAS 19 Employee benefits The amendment to IAS 19 clarifies that high quality corporate bonds used to determine the discount rate of post-employment benefits must be issued in the same currency used in the payment of the benefits.

• IAS 34 Interim financial reporting - The amendment clarifies the requirements in the event that the disclosures required are presented in the interim financial report but not in the interim financial statements. The amendment requires that the disclosures be incorporated by cross-reference between the interim financial statements and wherever they are included within the interim financial report and that the document be available to users of the financial statements on the same terms as the interim financial statements and at the same time.

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• IFRS 7 Financial instruments: disclosures- The document introduces additional guidance to clarify whether a servicing contract constitutes a continuing involvement in a transferred asset for the purposes of applying these disclosure requirements to the transferred assets.

The main amendments regard:

Materiality and aggregation: An entity must not reduce the understandability of its financial statements by obscuring useful information with irrelevant information or by aggregating relevant information that has different characteristics or function. Additional subtotals must be reconciled to the subtotal and totals required.
Information to be presented in the statement of financial position and of comprehensive income: specific items of profit or loss, other comprehensive income and the statement of financial position can be disaggregated. Subtotals must: be made up of items recognized and measured in accordance with IFRS, be presented and labeled in order to make the components of the subtotal clear and understandable, and be consistent from period to period.
Statement of other comprehensive income for the year The share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate form but separately from other comprehensive income, as a single item, based on whether the items will or will not subsequently be reclassified to profit or loss.
Notes Structure the entity is free to decide the order of presentation in the financial statements, but must consider the effect on the understandability and comparability of its financial statements, emphasizing the most relevant operating segments for the understanding of its financial performance and financial position.

3. Accounting standards, amendments and interpretations yet to be approved by the EU and applicable from annual periods after 1 January 2015

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IFRS 15 - Revenue from contracts with customers - The standard, published by the IASB in May 2014, introduces a general model to determine whether, when and to what extent will revenue be recognized. The standard replaces the recognition criteria set out in IAS 18 - Revenue, IAS 11 - Work in progress, IFRIC 13 - Customer Loyalty Programmes, IFRIC 15 - Agreements for the Construction of Real Estate, IFRIC 18 - Transfers of Assets from Customers, and SIC-31 - Revenue: Barter Transactions Involving Advertising Services.

Specifically, the lessee is required to recognize liabilities arising from leases at the present value of future lease payments. The lessee will also be required to record under assets the rights of use of the underlying asset at the same value assigned to the corresponding liabilities. Following initial recording, the right of use will be amortized over the term of the lease or over the useful life of the asset (if lower). The liability will be gradually paid through payment of the instalments, with recognition of the corresponding interest. The liability is determined by

taking account only of the fixed component of the lease instalments and of inflation-based components, if any, not of variable components. Future payments, thus determined, will be discounted according to the contractual rate or the lessee's incremental borrowing rate, over the period when the lease is deemed non-cancellable. The IASB has required the standard to be applied for financial periods beginning on 1 January 2019. Early application is allowed for entities who apply IFRS 15 Revenue from contracts with customers, except for special considerations from EFRAG in the process of endorsement.

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The amendments will be applied to financial periods beginning on or after 1 January 2017. Early application is allowed.

Cairo Communication will adopt these new standards, amendments and interpretations based on their date of application, and will assess the potential impacts following approval by the European Union.

NOTES TO THE INCOME STATEMENT

1. Revenue

Net operating revenue amounted to Euro 106,026 thousand (Euro 116,595 thousand in 2014). Its composition, versus 2014, is shown below:

Revenue (€ thousands)	31/12/15	31/12/14

Print media advertising space sales	35	32
Cairo Pubblicità TV sub-concession	101,050	111,592
Cairo Pubblicità print media sub-concession	728	716
Cairo Pubblicità Web sub-concession	611	653
Group services	3,502	3,502
Other revenue from associates	100	100
Total	106,026	116,595

Revenue is generated exclusively in Italy and an analysis by geographical area is pointless.

In 2015, Cairo Communication continued to operate on the TV advertising sales market (La7, La7d and theme channels Cartoon Network, Boomerang, and CNN) and on the Internet through its subsidiary Cairo Pubblicità, which operates on a sub-concession basis, invoicing advertising spaces directly to its clients and returning to the sub-grantor Cairo Communication a share of revenue generated by resources managed on a sub-concession basis.

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In 2015, net operating revenue included the sub-concession fees billed to the subsidiary Cairo Pubblicità S.p.A. for:

TV advertising sales, amounting to Euro 101,050 thousand,
Internet advertising sales, amounting to Euro 611 thousand.
print media advertising sales on "Prima Comunicazione" and "Uomini e comunicazione" of Editoriale Genesis S.r.l., amounting to Euro 728 thousand,

Apart from providing advertising services, Cairo Communication also provides services in administration, auditing, financial analysis, debt management and collection and marketing, to other Group companies. Such services are subject to contracts which are revised annually. Sales to Group companies deriving from these activities during the year were as follows:

Group services (€ thousands)	31/12/15	31/12/14
Cairo Pubblicità S.p.A.	3,000	3,000
Il Trovatore S.r.l.	22	22
Cairo Editore S.p.A.	480	480
Total	3,502	3,502

Other revenue from associates (Euro 100 thousand) relates to administrative services provided to Torino FC S.p.A., a related party in that it is ultimately controlled by U.T. Communications S.p.A.

2. Other revenue and income

Other revenue and income amounted to Euro 529 thousand (Euro 350 thousand in 2014). These mainly referred to charge-backs of costs to Group companies and contingent assets.

3. Services, use of third-party assets and other operating costs

Net operating revenue amounted to Euro 100,854 thousand (Euro 107,831 thousand in 2014). Its composition, versus 2014, is shown below:

Cost of services	31/12/15	31/12/14
(€ thousands)
Publishers' fees	757	770
TV publishing fees	96,037	103,300
Web publishing fees	556	581
Consultancies and collaborations	550	306
Cairo Communication Board of Directors' fees	1,293	1,257
Cairo Communication Board of Statutory Auditors' fees	71	71
Other administration and general expenses	1,590	1,546
Total	100,854	107,831

The decrease in "TV publishers' fees" is ascribable to the decrease in advertising revenue. In 2015, the item included Euro 94,284 thousand related to publishers' fees to La7 S.p.A. (former La7 S.r.l.) for advertising sales on La7 and La7d . Publishers' fees granted to La7 S.p.A. (former La7 S.r.l.) for web advertising sales in 2015 amounted to Euro 476 thousand.

Use of third-party assets amounted to Euro 712 thousand (Euro 715 thousand in 2014) and refers mainly to lease payments for property and office equipment.

Other operating costs amounted to Euro 81 thousand (Euro 91 thousand in 2014) and refer to prioryear expense of Euro 34 thousand and other costs of Euro 47 thousand.

4. Personnel expense

This item can be analyzed as follows:

Personnel expense (€ thousands)	31/12/15	31/12/14
Wages and salaries	2,154	2,117
Social security charges	804	795
Post-employment benefits	87	78
Total	3,045	2,990

5. Amortization, depreciation, provisions and impairment losses

These can be analyzed as follows:

Amortization, depreciation, provisions and impairment losses (€ thousands)	31/12/15	31/12/14
Amortization of intangible assets	111	92
Depreciation of property, plant and equipment	148	148
Additions to provisions for risks	-	50
Total	259	290

6. Net financial income

Net financial income amounted to Euro 23 thousand (Euro 365 thousand in 2014) and is broken down as follows:

Net financial income (€ thousands)	31/12/15	31/12/14
Interest income on bank accounts	92	505
Interest income from Cairo Publishing	-	1
Total financial income	92	506
Interest and other financial expense	(69)	(141)
Total financial expense	(69)	(141)
Net financial income	23	365

.*.*.

7. Income/ (loss) on investments

This item includes:

dividends during the year from the subsidiary Cairo Editore, amounting to Euro 7,465 thousand (in 2014, Euro 1,039 thousand for dividends from Cairo Pubblicità and Euro 6,246 thousand for dividends from Cairo Editore);
adjustment of the investment held in Cairo Publishing S.r.l., amounting to a negative Euro 247 thousand (a negative Euro 200 thousand in 2014).

.*.*

8. Income tax

Income tax for the year amounted to Euro 735 thousand (Euro 1,891 thousand in 2014). In accordance with the relevant accounting standards, the deferred tax assets, relating mainly to the accrual of provisions whose fiscal deductibility is deferred, were recognized.

	31/12/15	31/12/14
Income tax
(€ thousands)
Current tax
IRES	629	1,507
IRAP	119	326
Deferred tax assets	73	107
Deferred tax liabilities	(86)	(49)

Total The reconciliation of the effective and theoretical tax charge can be analyzed as follows:	735 31/12/15	1,891 31/12/14

Pre-tax profit	8,845	12,477
Theoretical income tax charge (27.5%)	2,432	3,431
Tax effects of dividends received	(1,950)	(1,903)
Tax effects of other permanent differences	103	37

Tax effect on deferred tax assets following IRES rate change (from
2017) IRAP	31 119	- 326

For a clearer understanding of the reconciliation of effective and theoretical tax charge, IRAP has not been taken into account as this is not based on pre-tax profit, and this would generate a distorting effect between one year and the other. Therefore, the theoretical income tax charge has been calculated using the IRES rate in force at 31 December 2015, equal to 27.5%.

*.*.*

9. Loss from discontinued operations

At 31 December 2015, this included the allocation of Euro 1 thousand for the loss of the year incurred by the subsidiary Diellesei S.r.l. in liquidation. At 31 December 2014, the item amounted to Euro 1 thousand.

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NOTES TO THE STATEMENT OF FINANCIAL POSITION

10. Property, plant and equipment

At 31 December 2015, this item amounted to Euro 368 thousand, with a net decrease of Euro 89 thousand versus 31 December 2014. Movements can be broken down as follows:

Description	Historical cost	Revaluatio n	Accumulated depreciation	Carrying amount 31/12/2014	Net change	Carrying amount 31/12/2015
Motor vehicles	472	0	(425)	47	(31)	16
Furniture and fittings	391	0	(241)	150	(11)	139
Communication	77	0	(74)	3	(2)	1
equipment
Electronic office	1,305	0	(1,090)	215	(29)	186
equipment
General equipment	124	0	(124)	-	2	2
Mobile phones	36	0	(24)	12	3	15
Leasehold	278	0	(248)	30	(21)	9
improvements
Total other assets	2,683	0	(2,226)	457	(89)	368

The net change in the year is broken down as follows:

Description	Additions	Change in accumulated depreciation from disposals	Depreciation	Net change
Motor vehicles	-	-	(31)	(31)
Furniture and fittings	-	-	(11)	(11)
Communication equipment	-	-	(2)	(2)
Electronic office equipment	49	-	(78)	(29)
General equipment	3	-	(1)	2
Mobile phones	7	-	(4)	3
Leasehold improvements	-	-	(21)	(21)
Grand total	59		(148)	(89)

Property, plant and equipment have not been subject to revaluation.

The item also includes leasehold improvements depreciated over the term of the lease.

.*.*.

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11. Intangible assets

Intangible assets amounted to Euro 296 thousand at 31 December 2015, decreasing by a net Euro 24 thousand versus 31 December 2014. Their movements during the year are as follows:

Description (€ thousands)	Historical cost	Accumulated depreciation	Carrying amount at 31/12/2014	Net change	Carrying amount at 31/12/2015
Software, licenses and	2,763	(2,490)	273	6	279
trademarks
Total concessions, licenses and	2,763	(2,490)	273	6	279
trademarks
Website design costs	169	(169)	-	-	-
Assets under development	47	-	47	(30)	17
Total other	216	(169)	47	(30)	17
Total intangible assets	2,979	(2,659)	320	(24)	296

The net change in the year is broken down as follows:

Description (€ thousands)	Additions	Reclassifications	Amortization	Net change
Software	51	66	(111)	6
Total concessions, licenses and trademarks
Assets under development	36	(66)	-	(30)
Total intangible assets	87	-	(111)	(24)

Expenses incurred for procedures and software programs are amortized over 3 and 5 financial years.

.*.*.

12. Investments

• Investments in subsidiaries

At 31 December 2015, investments amounted to Euro 23,027 thousand (Euro 23,124 thousand at 31 December 2014).

Description (€ thousands)	Carrying amount at 31/12/2014	Impairment losses	Value increases (decreases)	Carrying amount at 31/12/2015
Diellesei S.r.l. in liquidation	0	-	-	0
Cairo Network S.r.l. (former Cairo Sport S.r.l.)	5,520	-	-	5,520
La7 S.p.A. (former La7 S.r.l.)	4,039	-	-	4,039
Il Trovatore S.r.l.	357	-	-	357
Cairo Editore S.p.A.	6,273	-	-	6,273
Cairo Publishing S.r.l.	1,595	(247)	150	1,498
Cairo Pubblicità S.p.A.	5,340	-	-	5,340
Total investments	23,124	(247)	150	23,027

In 2015:

the liquidation of the subsidiary Diellesei continued, generating a loss of Euro 1 thousand. The net deficit of the company is covered by the provision for investment risks at 31 December 2015,
Cairo Communication waived, in the reserve for losses accrued or to be accrued, interestbearing loans of Euro 150 thousand provided to the subsidiary Cairo Publishing S.r.l.; a write-down of the carrying value of the investment was recognized in 2015 for a total of Euro 247 thousand, equal to the loss for the year of the subsidiary.

Annex 2 shows the information required by paragraph V of art. 2427 of the Italian Civil Code. Information at 31 December 2015 is drawn from the draft financial statements approved by the Board of Directors of each direct and/or indirect subsidiary.

For more detailed information, a comparison between carrying amount and the amount derived from the application of the equity method is provided for each investment in the following table.

Description	Equity	Ownershi	Equity method (*)	Carrying amount	Difference
(€ thousands)	31/12/2015 (*)	p
		%	(a)	(b)	(a-b)
Cairo Editore S.p.A.	10,295	99.95%	23,707	6,273	17,434
La 7 S.r.l.	104,899	100%	78,944	4,039	74,905
Il Trovatore S.r.l.	271	80%	381	357	24
Cairo Pubblicità S.p.A.	2,250	100%	4,578	5,340	(762)
Diellesei S.r.l. in liquidation	(129)	60%	(129)	(129)	-
Cairo Publishing S.r.l.	(46)	100%	(46)	1,498	1,544
Cairo Network S.r.l.	5,440	100%	5,440	5,520	(80)

(*) Amounts determined under IAS/IFRS

The carrying amount of the investments in Cairo Publishing S.r.l. , Cairo Pubblicità S.p.A. and Cairo Network S.r.l, is higher than the amount obtained using the equity method, respectively by Euro 1,544 thousand, Euro 762 thousand and Euro 80 thousand.

The carrying amounts of investments have undergone impairment tests to measure any potential indication of impairment of their realizable values, as defined by value in use, that is, the present value of their cash flow, estimated according to the expected results of the investments based on the most recent budgets and business plans. The use of these estimates is believed to support the carrying amount of the investment.

The main assumptions for the calculation of value in use are as follows:

three-year budget period,
a growth rate of 1% to extrapolate the cash flows beyond the current budget period,
a weighted average cost of capital (wacc) of 10.5% considered consistent with the company's industry.

Sensitivity analyses were performed, taking account of the reasonable changes in the discount rate. The results show that the recoverability of investments is not particularly sensitive to changes in this parameter.

The company prepares Group consolidated financial statements which, taking account of the investments held, are an essential document to ensure complete understanding of the activities of the Group, the Parent and its investments.

.*.*

13. Receivables from subsidiaries and other non-current financial assets

Other non-current financial assets

At 31 December 2015, non-current financial assets amounted to Euro 8,963 thousand (Euro 1,663 thousand at 31 December 2014), relating to interest-free loans granted to the subsidiary Cairo Network S.r.l. (Euro 8,950 thousand) and to security deposits (Euro 13 thousand).

________________________________________________________________________

*.*.*

14. Deferred tax assets

At 31 December 2015, deferred tax assets amounted to Euro 344 thousand (Euro 424 thousand at 31 December 2014). These assets can be analyzed as follows:

	31/12/15		31/12/14
Deferred tax assets (€ thousands)	Amount of temporary differences	Tax effect	Amount of temporary differences	Tax effect
Taxed allowance for impairment	643	157	719	199
Other temporary differences	480	131	564	157
Post-employment benefits IAS	231	56	247	68
Total deferred tax assets	1,354	344	1,530	424

Deferred tax assets relate to the recognition at 31 December 2015 of deferred tax assets on the temporary differences between the carrying amount of recognized assets and liabilities and their tax values.

15. Trade receivables

Trade receivables amounted to Euro 72 thousand, decreasing by Euro 248 thousand versus 31 December 2014. These are broken down as follows:

________________________________________________________________________

Trade receivables	31/12/15	31/12/14	Change
(€ thousands)
Trade receivables	666	990	(324)
Allowance for impairment	(594)	(670)	76
Total trade receivables	72	320	(248)

Since 2009, Cairo Communication has operated on the advertising sales market on a sub-concession basis with the subsidiary Cairo Pubblicità, which invoices directly to its customers and returns a share of the revenue to its parent. Current receivables arising from this activity accrue from the subsidiary.

The ageing of trade receivables by due date is as follows:

31 December 2015	Current	Past due	Past due	Past due	Past due	Total
(€ thousands)		between 30	between 61	between 91	over 180
		and 60 days	and 90 days	and 180 days	days
Trade receivables	54	-	-	-	612	666
Allowance for impairment	-	-	-	-	(594)	(594)
Trade receivables	54	-	-	-	18	72

31 December 2014	Current	Past due	Past due	Past due	Past due	Total
(€ thousands)		between 30	between 61	between 91	over 180
		and 60 days	and 90 days	and 180 days	days
Trade receivables	145	-	-	30	815	990
Allowance for impairment	-	-	-	-	(670)	(670)
Trade receivables	145	-	-	30	145	320

Trade receivables are shown net of allowance for impairment that has been determined taking account specific collection risks and takes into account the allocation to the Company's media clients of a percentage of losses on receivables, equal to the percentage of sales revenue allocated, pursuant to advertising space sales contracts signed between the two parties. Specifically, receivables due more than 180 days are those which arose when the Company used to operate

directly as an advertising agency. As explained, since 2009, advertising sales have been managed under a sub-concession agreement with the subsidiary Cairo Pubblicità.

________________________________________________________________________

16. Receivables from subsidiaries

These amounted to Euro 53,227 thousand, decreasing by Euro 12,248 thousand versus 31 December 2014. These are broken down as follows:

Receivables from subsidiaries (€ thousands)	31/12/15	31/12/14	Change
La7 S.p.A. (former La7 S.r.l.)	2,090	1,718	372
Cairo Editore S.p.A.	334	6,689	(6,355)
Il Trovatore S.r.l.	236	390	(154)
Cairo Publishing S.r.l.	57	199	(142)
Cairo Pubblicità S.p.A.	50,510	56,479	(5,969)
Total receivables from subsidiaries	53,227	65,475	(12,248)

Receivables from La7 S.p.A. (former La7 S.r.l.) - Euro 1,970 thousand - are mainly those from VAT payables transferred by the subsidiary as a result of the VAT grouping scheme.

In 2014, receivables from Cairo Editore included Euro 6,246 thousand for dividends to receive as resolved by the Shareholders' Meeting of the subsidiary in December 2014.

Receivables from Cairo Pubblicità S.p.A. - Euro 49,155 thousand at 31 December 2015 - are mainly those from the sub-concession contracts, and those - Euro 92 thousand - resulting from the VAT grouping scheme.

Other trade receivables from Cairo Pubblicità S.p.A., as those from Il Trovatore S.r.l., are mainly referable to centralized services provided by Cairo Communication S.p.A. to Group companies. These services are provided through annual contracts at market value, renewable year by year.

.*.*.

17. Other receivables and other current assets

These amounted to Euro 1,022 thousand, decreasing by Euro 126 thousand versus 31 December 2014, and can be analyzed as follows:

Other receivables and other current assets (€ thousands)	31/12/15	31/12/14	Change
Prepaid IRAP	10	75	(65)
Receivables from others	516	508	8
Prepayments and accrued income	496	565	(69)
Total other receivables and other current assets	1,022	1,148	(126)

Withholding and prepaid taxes are taken as a deduction from the payment of taxes to relevant authorities.

18. Cash and cash equivalents

The item coincides with the net financial position and amounted to Euro 9,039 thousand, decreasing by Euro 16,729 thousand versus 2014. It can be analyzed as follows:

Cash and cash equivalents (€ thousands)	31/12/15	31/12/14	Change
Bank and post office deposits	9,032	25,766	(16,734)
Cash and valuables on hand	7	2	5
Total	9,039	25,768	(16,729)

Cash and cash equivalents continued to be managed prudently.

.*.*.

19. Equity

At 31 December 2015, equity amounted to Euro 44,149 thousand, decreasing by Euro 13,023 thousand versus 31 December 2014, mainly as a result of the distribution of the 2014 dividend resolved by the Shareholders' Meeting of 28 April 2015 (Euro 21,152 thousand), and of the comprehensive result of 2015 (Euro 8,110 thousand).

Share capital

The share capital at 31 December 2015 was Euro 4,074 thousand, subscribed and fully paid up, comprising n. 78,343,400 ordinary shares to which no nominal amount is attributed.

Each share has the right to a proportion of the profit which has been approved for distribution and to a portion of equity on liquidation and also has the right to vote, without limits other than those as defined by the Law.

________________________________________________________________________

No securities carrying special controlling rights have been issued.

No financial instruments have been issued attributing the right to subscribe to newly-issued shares.

No share incentive plans are foreseen involving share capital increases, even on a freely allocated basis.

The reconciliation between the number of shares outstanding at 31 December 2015 and those at 31 December 2014 is as follows:

	31/12/2014	Purchase of	Disposal of	31/12/2015
		treasury shares	treasury shares
Ordinary shares issued	78,343,400		- -	78,343,400
Less: treasury shares	(779)		- -	(779)
Ordinary shares outstanding	78,342,621		- -	78,342,621

Share premium reserve

At 31 December 2015, the share premium reserve amounted to Euro 30,495 thousand.

Retained earnings

At 31 December 2015, the balance showed a positive Euro 416 thousand. The item includes the IAS first-time adoption reserve, with a negative balance of Euro 1,313 thousand.

Retained earnings
(€ thousands)	31/12/2015	31/12/2014
Retained earnings	1,729	1,710
Retained earnings – "first-time adoption" reserve	(1,313)	(1,313)
Total	416	397

Other reserves

At 31 December 2015, the item amounted to Euro 1,057 thousand, unchanged versus 2014. It can be analyzed as follows:

Other reserves	31/12/2015	31/12/2014
(€ thousands)
Legal reserve	815	815
Negative goodwill	225	225
Other reserves	17	17
Total	1,057	1,057

Treasury shares reserve

.*.*.

________________________________________________________________________

The following table shows equity items and indicates if they can be used and distributed, and tax restrictions if any:

(€ thousands)				Use over the previous three years
Amount/Description	Amount	Eligibility for use:	Available portion	To cover losses	Other (dividends)
Share capital	4,074	---	---	---	---
Treasury shares	(2)	---	---	---	---
Share premium reserve	30,495	ABC	30,495 (1)	---	(7,226)
Legal reserve	815	B	---	---	---
Other reserves	17	ABC	17	---	---
Negative goodwill	225	ABC	225	---	---
Retained earnings	416	ABC	416	---	(58,349)
Total	36,040		31,153		(65,575)

Legend:

A - for increases in share capital

(1) In accordance with art. 2431 of the Italian Civil Code, the entire amount of this reserve may be distributed provided the legal reserve has reached the limit as defined by art. 2430 of the Code

Profit for the year

Profit for the year amounted to Euro 8,110 thousand (Euro 10,586 thousand at 31 December 2014).

20. Post-employment benefits

This item amounted to Euro 1,288 thousand, with an increase by Euro 67 thousand versus 2014. The movement is analyzed below:

	Balance at	Paid during the	Financial	Accrued	Actuarial	Balance at
	31/12/2014	year	expense	during the	adjustment	31/12/2015
				year
Post	1,221	(12)	20	87	(28)	1,288
employment
benefits
Total	1,221	(12)	20	87	(28)	1,288

The change in the composition of personnel during the year is summarized as follows:

B - to cover losses

C - dividend

	Headcount at the	Changes	Headcount at year	Average headcount
	beginning of the	end
	year
Senior managers	7	1	8	8
Managers	3	(1)	2	2
Employees	18	(1)	17	17
Total	28	(1)	27	27

.*.*.

21. Provisions for risks and charges

Provisions for risks and charges amounted to Euro 164 thousand, decreasing by Euro 100 thousand versus 2014.

Provisions for risks and charges	Balance at 31/12/2014	Utilizations	Released	Accrued	Balance at 31/12/2015
(€ thousands)
Risks on investments	128	-	-	1	129
Other risks	50	(15)	-	-	35
Deferred tax provision	86	(86)	-	-	-
Grand total	264	(101)		1	164

As mentioned earlier, the "provision for risks on investments" refers entirely to Diellesei S.r.l. in liquidation, accrued during 2005/2006 as a result of the subsidiary's net deficit.

.*.*.

22. Trade payables

Trade payables amounted to Euro 2,148 thousand, basically in line with the figure at 31 December 2014.

23. Receivables from and payables to parent

Receivables from parents amounted to Euro 949 thousand, increasing by Euro 152 thousand versus 31 December 2014, and refer mainly to receivables from U.T. Communications arising from the national tax consolidation scheme. The receivables stem from the tax advance payments netted against tax liabilities for the year.

As mentioned earlier, Cairo Communication and its subsidiaries Cairo Editore S.p.A., Cairo Pubblicità S.p.A., Diellesei S.r.l. in liquidation, La7 S.p.A. (former La7 S.r.l.), Cairo Network S.r.l. and Cairo Publishing S.r.l. participate in the national tax consolidation scheme of U.T. Communications S.p.A.

The consolidation scheme, which governs the financial aspects of amounts paid or received in return for the advantages or disadvantages resulting from the tax consolidation, specifically provides that

any greater charges or minor benefits that may accrue to the company resulting from participation in the procedure, be suitably remunerated by the Parent.

________________________________________________________________________

24. Payables to subsidiaries

Payables to subsidiaries amounted to Euro 47,326 thousand, decreasing by Euro 8,190 thousand versus 31 December 2014. The following table shows the breakdown of payables to subsidiaries that relate to services received in the ordinary course of business:

Payables to subsidiaries	31/12/15	31/12/14	Change
(€ thousands)
La7 S.p.A. (former La7 S.r.l.)	46,810	52,590	(5,780)
Cairo Pubblicità S.p.A.	346	2,854	(2,508)
Cairo Publishing S.r.l.	6	6	-
Il Trovatore S.r.l.	66	66	-
Cairo Editore	1	-	1
Cairo Network S.r.l.	97	-	97
Total payables to subsidiaries	47,326	55,516	(8,190)

25. Tax liabilities

Tax liabilities amounted to Euro 339 thousand, decreasing by Euro 952 thousand versus 31 December 2014. They are broken down as follows

Tax liabilities (€ thousands)	31/12/15	31/12/14	Change
Withholding taxes on employees	166	177	(11)
Withholding taxes on contract workers	66	77	(11)
VAT payable	106	1,037	(930)
Total tax liabilities	339	1,291	(952)

As mentioned earlier, the taxable income of Cairo Communication S.p.A., for IRES purposes, has been recognized as a payable to the parent UT Communications S.p.A., in accordance with the national tax consolidation scheme.

26. Other current liabilities

Other current liabilities amounted to Euro 1,892 thousand, increasing by Euro 8 thousand versus 31 December 2014. They are broken down as follows

________________________________________________________________________

Other current liabilities	31/12/2015	31/12/2014	Change
(€ thousands)
Social security charges payable	229	215	14
Other liabilities	1,663	1,669	(6)
Deferred income		-
Total other current liabilities	1,892	1,884	8

Accrued expenses and deferred income are determined on an accruals basis.

***

27. Commitments, risks and other information

Guarantees and commitments

Main guarantees given and/or received are as follows:

Cairo Communication issued Unicredit S.p.A. a guarantee to secure the bank loan initially of Euro 25,000 thousand (Euro 20,000 thousand remaining at 31 December 2015) granted in July 2014 to the subsidiary Cairo Network for the purchase of the rights to use television frequencies; the loan agreement contains certain financial covenants, to be verified annually at Group level (consolidated financial statements): the debt cover (the net debt/EBITDA ratio) must be less than or equal to 1.75 and the leverage (the net debt/equity ratio) less than or equal to 1; breach of the commitment and/or financial covenants may result in termination of the loan agreement, pursuant to Article 1456 of the Italian Civil Code. At 31 December 2015, the covenants had been met.
Early repayment is provided for in the event of a change of control of Cairo Network S.r.l.;
other guarantees issued by bank and insurance institutes to customers, public bodies and lessors of property totaling Euro 2,862 thousand.

The agreements reached in the purchase of the entire share capital of La7 S.p.A. (former La7 S.r.l.) also included a multi-year agreement between La7 and Telecom Italia Media Broadcasting S.r.l. (TIMB) for the supply of transmission capacity that provides, among other things, the issue by

Cairo Communication of a parent company guarantee to cover the payment obligations undertaken by La7, for a maximum amount of Euro 6,558 thousand (including VAT) per year.

________________________________________________________________________

***

The contract, signed on 6 March 2013 with Telecom Italia Media for the acquisition of the entire share capital of La7 S.p.A. (former La7 S.r.l.) provided for:

the buyer's commitment, for a period of 24 months (lock-up) from the date of finalization of the acquisition, not to sell, assign, transfer, dispose of in any way, in whole or in part, the investment in La7, or the business unit owning La7;
Cairo Communication's commitment, for a period of 24 months from the date of finalization of the acquisition, to use the financial resources arising from the contribution received from Telecom Italia Media in the exclusive interest and for the restructuring of La7, and the related prohibition to engage in certain transactions specified in the contract, including of an extraordinary kind, aimed at depriving La7 of the resources from the contribution to the benefit of third parties or related parties, or to make new investments.

Both commitments expired on 30 April 2015.

In 2014, the subsidiary Cairo Network took part in the tender procedure opened by the Ministry of Economic Development for the assignment of rights to use TV frequencies for digital terrestrial broadcasting systems, submitting its binding bid and winning the rights to use a lot of frequencies ("Mux") for a period of 20 years. In January 2015, Cairo Network and EI Towers S.p.A. ("EIT") therefore entered into the agreements for the realization and subsequent long-term technical management in full service mode (hospitality, service and maintenance, use of broadcasting infrastructure, etc.) of the Mux. The agreements provide, among other things, for:

a transitional phase, which will see the realization and start-up of the MUX and the initial operations, which will run from the date the agreements were signed to 31 December 2017, and an operational phase of the Mux lasting 17 years (from 2018 to 2034);
the right to free withdrawal of Cairo Network starting from 1 January 2025;
guaranteed coverage at full performance of at least 94% of the population, in line with national Muxs with greater coverage;
consideration to EIT:
o during the transitional phase (2015-2017), amounting to a total of Euro 11.5 million for the full three-year period;

o at full performance (starting from 2018), amounting to Euro 16.3 million per year. These amounts include compensation for the availability of the transmitters;

an annual consideration from EIT to Cairo Network, starting from 2018, ranging between Euro 0 up to Euro 4 million, in the event that the available bandwidth on the Mux is not fully used by Cairo Network.

________________________________________________________________________

Deeming that the New Plan evaded the Council of State's ruling (given that it confirmed assignment to the national traditional broadcasters of numbers 0-9 in the first block of LCN numbering), Telenorba filed an appeal for compliance with ruling n. 4660/12. The appeal was upheld by the Council of State (ruling no. 6021 of 16 December 2013), which declared the New Numbering Plan void (pursuant to Resolution 237/2013) for numbers from 8 to 9, and appointed a special commissioner tasked with verifying the correct assignment of numbers from 8 to 9 within 90 days from the beginning of the proceedings, which started on 24 February 2014. However, since the partial annulment of the previous Plan initially included number 7, on initiation of the procedure, the special commissioner - inappropriately in the opinion of La7 - also referred to number 7, which instead, under the Ruling, is not subject to verification by the Commissioner. AGCOM has in the meantime re-extended the previous Plan (based on current assignments), as also suggested in the State Council's ruling, in order to avoid a regulatory void.

________________________________________________________________________

In any case, in the opinion of La7 and its legal advisers, further assessments on number 7 are unlikely to be made, nor will the allocation of this number to La7 be revoked.

2002, for which the tax claim amounts to Euro 41 thousand in addition to penalties of Euro 51 thousand, and the judgment regarding the subsequent years 2003, 2004 and 2005, for which the tax claim totals Euro 247 thousand, in addition to penalties of Euro 272 thousand and interest.

________________________________________________________________________

Immobiledit S.r.l., the subsidiary merged into Cairo Editore in 2009, is party to a lawsuit regarding a property purchase. In 2004, the Court of Milan, in the first instance, had rejected the adverse party's claims, ordering the adverse party to pay damages, to settle in separate proceedings, and to repay legal expenses. The Court of Appeal has partly reversed the ruling of first instance, ordering Immobiledit to pay for the expenses of first and second instance, rejecting the adverse party's claim for damages, which has appealed to the Court of Cassation against the rejection. Following Ruling no. 25351/14, the Court of Cassation, rejecting all the other grounds of the main appeal of Italiana Assicurazioni, granted the first ground of appeal concerning compensation for damage suffered by Italiana Assicurazioni for the fitting-out of the property covered by the preliminary contract; the Court referred the case to the Court of Appeal of Milan, in a different formation, which will be called to review the issue of compensation for damage only on the point above; the request for compensation by Italiana Assicurazioni regarding the plea granted by the Court of Cassation amounts to approximately Euro 319 thousand, plus interest and monetary revaluation. With a notice served on 25 May 2015, Reale Immobili (as transferee of the company) and Italiana Assicurazioni continued proceedings, following the ruling of the Court of Cassation, before the Court of Appeal of Milan. At the hearing on 29 October 2015, the Board postponed to the hearing for closing arguments set on 14 July 2016.

It is also noted that:

the financial statements at 31 December 2015 do not include any receivables or payables with a residual term exceeding five years.

________________________________________________________________________

The financial statements at 31 December 2015 do not include the capitalization of borrowing costs.

28. Related party transactions

In 2015, transactions carried out by Cairo Communication with related parties and the effect on the financial statements can be shown as follows:

Receivables and financial assets (Euro/000)	Trade receivables Other receivables			Intra-group	Other current
			and current assets	financial assets	financial assets
Parent UT Communications	59	890		-	-
Subsidiaries of Cairo Communication
Group
Cairo Pubblicità S.p.A.	50,418		92	-	-
Cairo Editore S.p.A.	334		-	-	-
Cairo Publishing S.r.l.	57		-	-
Il Trovatore S.r.l.	236		-	-	-
La 7 S.r.l.	120		1,970	-	-
Associates of UT Communications Group
Torino FC S.p.A.	31		-	-	-
Total	51,255		2,952		-
Payables and financial liabilities	Trade payables Other payables and			Intra-group	Other financial
(Euro/000)			current liabilities	financial payables	liabilities
Parent UT Communications	-		-	-	-
Subsidiaries of Cairo Communication
Group
Cairo Pubblicità S.p.A.	346		-	-	-
Cairo Editore S.p.A.	1		-	-	-
La 7 S.r.l.	46,810		-	-	-
Cairo Publishing S.r.l.	6		-	-	-
Il Trovatore S.r.l.	66		-	-	-
Cairo Network S.r.l.		-	97	-	-
Associates of UT Communications Group	47,229		97	-	-
Torino FC S.p.A.	17			-	-
Total	47,246		97	-	-
Income and expense	Operating	Operating	Financial	Financial	(Expense)/
(Euro/000)	revenue	costs	income	expense	Income from investments
Parent UT Communications	-	-	-	-	-
Subsidiaries of Cairo Communication Group
Cairo Pubblicità S.p.A.	105,456	-		- -	-
Cairo Editore S.p.A.	480	-		- -	7,465
La 7 S.r.l.	170	(94,760)		- -	-
Cairo Publishing S.r.l.	-			- -	(247)
Il Trovatore S.r.l.	22	(108)		- -	-
Associates of UT Communications Group
Torino FC S.p.A.	100	-		- -	-
Total	106,228	(94,868)		-	7,218

Revenue and costs	Cairo	Cairo	Cairo	La7	Il Trovatore	Torino FC
(Euro/000)	Editore	Pubblicità	Publishing

INCOME

Sub-concession payment	-	102,389	-	-	-	-
Administrative services and use of	480	3,000	-	-	22	100
serviced space
Recharged costs	-	67	-	170	-	-
Sale of advertising space	-	-	-	-	-	-
Interest income	-	-	-	-	-	-
Dividends	7,465	-	-	-	-	-
Total	7,945	105,456	-	170	22	100
	Cairo Editore	Cairo Pubblicità	Cairo Publishing	La7	Il Trovatore	Torino FC
EXPENSE
Internet services	-	-	-	-	(108)	-
Publishers' fees				(94,760)	-	-
Impairment losses on equity	-	-	(247)	-	-	-
investments
Total	-	-	(247)	(94,760)	(108)	-

Cairo Communication supplies a range of services to some of its subsidiaries and associates, mainly relating to management accounting software, use of serviced spaces, administration, finance, treasury, management control, credit management and marketing activities, to allow the individual companies to benefit from economies of scale and more efficient management.

In 2015, Cairo Pubblicità S.p.A. worked for Cairo Communication:

as sub-lessee of Cairo Communication for TV advertising sales (La7 and theme channels under concession Cartoon Network, Boomerang, and CNN) and Internet advertising sales,
as sub-lessee for print media advertising sales only for the magazines of Editoriale Genesis.

Under these agreements, Cairo Pubblicità directly invoices customers and returns a percentage of proceeds to the sub-lessor.

In 2015, the concession contract for advertising sales with La7 S.p.A. (former La7 srl) " continued. In 2015, there were no transactions with the parent (U.T. Communications) or with subsidiaries of the latter, except for the contract with Torino F.C. for the provision of administrative services such as bookkeeping; the agreement sets an annual fee of Euro 100 thousand.

As mentioned earlier, Cairo Communication and its subsidiaries Cairo Editore S.p.A., Cairo Pubblicità S.p.A., Diellesei S.r.l. in liquidation, La7 S.p.a. (former La7 S.r.l.), Cairo Publishing S.r.l., and Cairo Network S.r.l. (former Cairo Sport S.r.l.) participate in the national tax consolidation scheme of U.T. Communications S.p.A.

Fees paid to the directors in 2015 are analyzed in Note 30 "Board of Directors' and Board of Statutory Auditors' fees" and in the Remuneration Report, prepared pursuant to art. 123 ter of the TUF.

In 2015, Studio Magnocavallo e Associati, of which lawyer Antonio Magnocavallo, director of Cairo Communication, is a partner, earned fees for professional services provided to companies of the Cairo Communication Group for approximately Euro 214 thousand.

________________________________________________________________________

During the year, no transactions were concluded with members of the Board of Directors, general managers and/or with key management personnel, members of the Board of Statutory Auditors, and the financial reporting manager, further than fees paid and as already shown in this Note.

29. Risk management

Liquidity risk

Cairo Communication is not exposed to liquidity risk, in that on one hand, significant financial resources are held with a net available positive financial position of Euro 9 million, while on the other, it attempts to ensure that an appropriate ability to generate cash is maintained, even under the current market conditions.

It is Group policy to invest available cash in on-demand or very short-term bank deposits, properly spreading the investments, essentially in banking products, with the prime objective of maintaining a ready liquidity of the said investments. Counterparties are selected on the basis of their credit rating, their reliability and the quality of the service rendered.

Currency and interest rate risks

Cairo Communication is not exposed to these risks, in that on one hand, there is no loan finance, whilst on the other hand operations are carried out exclusively in Italy, and revenue is generated entirely in the country and main costs are incurred in Euro.

Interest rate risk only affects the yield on available cash. Specifically, with reference to the net financial position at 31 December 2015, a one percentage point reduction in the interest rate would result in a reduction in annual financial income of approximately Euro 0.1 million.

Movements in the cash flow and the liquidity of the Company are centrally monitored and managed by Group Treasury in order to guarantee effective and efficient management of financial resources. Given the limited exposure to both interest rate and FOREX risk, the Company does not use financial derivative and/or hedging instruments.

Credit risk

Cairo Communication is exposed to credit risk, primarily in relation to its advertising sales activities. This risk is however mitigated by the fact that exposure is divided across a large number of customers and that credit monitoring and control procedures are in place.

________________________________________________________________________

It is of course possible that the financial crisis and the uncertainty factors in the short and medium term could deteriorate, along with the resulting credit squeeze, and negatively impact on the quality of credit and on general payment terms.

30. Board of Directors' and Board of Statutory Auditors' fees

Name	Position	Term of office	Term expiry date	Fees *	Benefits in kind	Bonuses and other incentives	Other fees**
Urbano R. Cairo	Chairman of the Board	Jan-Dec 2015 31/12/2016		500	16	-	510
Uberto Fornara	CEO	Jan-Dec 2015 31/12/2016		240	5	-	510
Maria Laura Cairo	Director	Jan-Dec 2015 31/12/2016		20	-	-	-
Stefania Petruccioli	Director	Jan-Dec 2015 31/12/2016		32	-	-	-
Roberto Cairo	Director	Jan-Dec 2015 31/12/2016		20	-	-	-
Marco Janni	Director	Jan-Dec 2015 31/12/2016		28	-	-	-
Antonio Magnocavallo	Director	Jan-Dec 2015 31/12/2016		34	-	-	-
Marco Pompignoli	Director	Jan-Dec 2015 31/12/2016		350	5	-	300
Roberto Rezzonico	Director	Jan-Dec 2015 31/12/2016		34	-	-	-
Mauro Sala		Director Jan-Dec 2015 31/12/2016		32	-	-	-
Key management personnel	N/A	Jan-Dec 2015	N/A	-	15	-	1,242
Marco Moroni	Chairman Board of Statutory Auditors	Jan-Dec 2015	31/12/2016	30	-	-	25
Mariapia Maspes	Standing auditor	Jan-Dec 2015	31/12/2016	20	-	-	17
Marco Giuliani	Standing auditor	Jan-Dec 2015	31/12/2016	20	-	-	-

* Other fees, in addition to fees for the role of director (Euro 20 thousand), refer to:

• Urbano Cairo: fees pursuant to art. 2389, paragraph 3, Italian Civil Code (Euro 480 thousand);

• Uberto Fornara: fees pursuant to art. 2389, paragraph 3, Italian Civil Code (Euro 220 thousand);

Marco Janni: fees for attendance in meetings of the Related Party Committee (Euro 8 thousand);
Antonio Magnocavallo: fees for attendance in meetings of the Remuneration Committee and the Control and Risk Committee (Euro 14 thousand);
Marco Pompignoli: fees pursuant to art. 2389, paragraph 3, Italian Civil Code (Euro 330 thousand);
Roberto Rezzonico: fees for attendance in meetings of the Remuneration Committee and Control and Risk Committee (Euro 14 thousand);
Mauro Sala: fees for attendance in meetings of the Risk and Control Committee and the Related Party Committee (Euro 12 thousand)
** Other fees refer to:
Urbano Cairo: fees for his duties performed for Cairo Editore (Euro 500 thousand) and other companies of the Group (Euro 10 thousand).
Uberto Fornara: gross fees as senior manager payable by Cairo Communication (Euro 300 thousand), remuneration from the noncompete agreement (Euro 100 thousand), fees for his duties performed for Cairo Pubblicità (Euro 100 thousand) and other companies of the Group (Euro 10 thousand).
Marco Pompignoli: gross fees as senior manager payable by Cairo Communication (Euro 200 thousand), and fees for his duties performed for Cairo Pubblicità (Euro 90 thousand) and other companies of the Group (Euro 10 thousand).
Key management personnel: gross fixed annual Group fees for a total of Euro 1,010 thousand (comprising gross remuneration as manager) and variable incentive components amounting to Euro 232 thousand.

Moreover, under Consob Communication n. DEM/11012984 of 24 February 2011, point 2.3, letters

(a) and (f), it should be noted that:

there are no agreements in place between the Parent and the directors for any indemnity in the event of resignation or unjust dismissal, or in the event their employment relationship ceases following a takeover bid;
there are agreements in place between the Parent and Uberto Fornara, subject to noncompetition commitments for 18 months following termination of his management relationship with the Parent, for payment during his relationship of a gross annual fee of Euro 100 thousand. In the event of termination of employment before payment, as remuneration for the noncompetition agreement, as of May 2014, of the total sum of Euro 450,000, to be considered a minimum consideration of the agreement, the Company will pay the manager the difference between such minimum amount and the amount paid until then as remuneration for the agreement.

Moreover, there are no succession plans regarding executive directors.

At 31 December 2015, key management personnel of the Cairo Communication Group was composed of:

Giuseppe Ferrauto (Director, General Manager and manager of Cairo Editore);
Giuliano Cesari (executive director and General Manager of Cairo Pubblicità) and manager of Cairo Communication;
Marco Ghigliani (CEO, General Manager and manager of La7).

To date, Cairo Communication has no stock option plans in place.

31. Transactions deriving from atypical and/or unusual or non-recurring transactions

Pursuant to Consob Communication of 28 July 2006 no. DEM/6064296, it should be noted that in 2015 the Cairo Communication Group did not engage in any atypical and/or unusual transactions, which, by their nature or size, were considered to be non-recurring by the above Communication.

________________________________________________________________________

For the Board of Directors Chairman Urbano R. Cairo

Cairo Communication S.p.A. Financial statements at 31 December 2015 – Annexes and Appendix

___________________________________________________________

________________________________________________________________________

List of investments in subsidiaries and associates

SUBSIDIARIES:

Company name:	Cairo Editore S.p.A.
Registered office:	Milan – Corso Magenta, 55
Share capital:	1,043,256
Equity at 31/12/2014:	9,533,578
Profit at 31/12/2014:	7,469,101
Equity as per draft financial statements at 31/12/2015:	10,290,651
Profit as per draft financial statements at 31/12/2015:	8,226,174
Ownership:	99.95%

Company name:	La7 S.p.A. (former La7 S.r.l.)
Registered office:	Rome – Via della Pineta Sacchetti 229
Share capital:	1,020,000
Equity at 31/12/2014:	112,658,454
Loss at 31/12/2014:	(9,652,127)
Equity as per draft financial statements at 31/12/2015:	104,898,574
Loss as per draft financial statements at 31/12/2015:	(7,759,880)
Ownership:	100%

Company name:	Il Trovatore S.r.l.
Registered office:	Milan – Via Tucidide, 56
Share capital:	25,000
Equity at 31/12/2014:	182,845
Profit at 31/12/2014:	119,536
Equity as per draft financial statements at 31/12/2015:	270,432
Profit as per draft financial statements at 31/12/2015:	87,589
Ownership:	80%

Company name:	Cairo Pubblicità S.p.A.
Registered office:	Milan – Via Tucidide, 56
Share capital:	2,818,400
Equity at 31/12/2014:	3,109,675
Loss at 31/12/2014:	(885,918)
Equity as per draft financial statements at 31/12/2015:	2,250,490
Loss at 31/12/15:	(859,185)
Ownership:	100%

Company name:	Diellesei S.r.l. in liquidation
Registered office:	Milan – Via Tucidide, 56
Share capital:	10,000
Equity deficit at 31/12/2014:	(128,122)
Loss at 31/12/2014:	(656)
Equity deficit as per draft financial statements at 31/12/2015:	(128,758)
Loss as per draft financial statements at 31/12/2015:	(636)
Ownership	60%

Company name:	Cairo Publishing S.r.l.
Registered office:	Milan – Corso Magenta, 55
Share capital:	10,000
Equity at 31/12/2014:	52,491
Loss at 31/12/2014:	(208,154)
Equity as per draft financial statements at 31/12/2015:	(44,596)
Loss as per draft financial statements 31/12/2015:	(247,088)
Ownership:	100%

Company name:	Cairo Network S.r.l. (former Cairo Sport S.r.l.)
Registered office:	Milan – Via Tucidide, 56
Share capital:	5,500,000
Equity at 31/12/2014:	5,515,210
Loss at 31/12/2014:	(4,790)
Equity as per draft financial statements at 31/12/2015:	5,439,776
Loss as per draft financial statements 31/12/2015:	(75,435)
Ownership:	100%

INDIRECT SUBSIDIARIES

Company name:	Edizioni Anabasi S.r.l.
Registered office:	Milan – Corso Magenta, 55
Share capital:	10,200
Equity at 31/12/2014:	9,208
Loss at 31/12/2014:	(1,557)
Equity as per draft financial statements at 31/12/2015:	10,711
Loss as per draft financial statements 31/12/2015:	(497)
Ownership:	100%

Summary figures of draft financial statements of subsidiaries in the advertising segment, il Trovatore and discontinued operations at 31 December 2015

	Cairo Pubblicità	Il Trovatore	Diellesei S.r.l. in liquidation
	Financial statements at	Financial statements at
	31.12.15	31.12.15	Financial statements at 31.12.15

Assets
A) Share capital proceeds to be received	0	0	0
B) Intangible fixed assets	110	0	0
Tangible fixed assets	37,567	104	0
Tangible financial assets	27	0	0
Total non-current assets	37,704	104	0
C) Inventories	0	0	0
Receivables	72,996,123	703,159	95,986
Current financial assets	0	0	0
Liquid funds	4,845,783	33,113	61,129
Total current assets	77,841,906	736,272	157,115
D) Prepayments and accrued income	194,854	426	62
Total assets	78,074,464	736,802	157,177
Liabilities
A) Share capital	2,818,400	25,000	10,000
Income-related and other reserves	281,550	5,000	0
Shareholders' contributions to cover losses	9,725	0	61,000
Retained earnings/(losses carried forward)	0	152,843	(199,122)
Net profit/ (loss) for the year	(859,185)	87,589	(636)
Total equity	2,250,490	270,432	(128,758)
B) Provisions for risks and charges	1,318,300	0	63,219
C) Post-employment benefits	1,154,927	15,753	0
D) Payables	73,207,609	450,618	222,717
E) Accrued expenses and deferred income	143,138	0	0
Total liabilities	78,074,464	736,802	157,177
Income statement
A) Production revenue	145,263,091	895,582	0
B) Production costs	(146,216,423)	(760,796)	(673)
Difference between operating revenue and operating expenses	(953,332)	134,786	(673)
C) Net financial income / (expense)	69,570	3,766	(187)
D) Adjustments to financial assets	0	0	0
E) Extraordinary income / (expenses)	0	0	0
Pre-tax profit	(883,762)	138,552	(860)
Income tax	24,577	(50,962)	224
Net profit/ (loss) for the year	(859,185)	87,589	(636)

Summary figures of the draft financial statements of subsidiaries in the publishing and network operator segments at 31 December 2015.

	Cairo Editore	Cairo Publishing	Edizioni	LA7	Cairo Network
			Anabasi
	Financial statements at 31.12.15	Financial statements at 31.12.15	Financial statements at 31.12.15	Financial statements at 31.12.15	Financial statements at 31.12.15
Assets
A) Share capital proceeds to be received	0	0	0	0	0
B) Intangible fixed assets	10,658,485	5,100	0	21,812,872	35,009,344
Tangible fixed assets	2,008,921	105	0	4,175,615	383
Tangible financial assets	66,264	0	0	285,580	2582
Total non-current assets	12,733,670	5,205	0	26,274,067	35,012,309
C) Inventories	2,704,957	135,756	0	299,826	0
Receivables	21,439,732	2,414,912	7,925	51,614,642	249,932
Current financial assets	0	0	0	0	0
Liquid funds	7,399,877	126,835	12,740	104,089,721	167,860
Total current assets	31,544,566	2,677,503	20,666	156,004,189	417,792
D) Prepayments and accrued income	325,005	2,238		488,247
Total assets	44,603,241	2,684,946	20,666	182,766,503	35,430,101
Liabilities
A) Share capital	1,043,256	10,000	10,200	1,020,000	5,500,000
Income-related and other reserves	1,021,221	5,000	129	111,621,609	15,211
Shareholders' contributions	0	150,000	879	0	0
Retained earnings/(losses carried forward)	0	37,492	0	16,845	0
Net profit/ (loss) for the year	8,226,174	(247,088)	(497)	(7,759,880)	(75,435)
Total equity	10,290,651	(44,596)	10,711	104,898,574	5,439,776
B) Provisions for risks and charges	1,991,026	420,227	0	8,388,685	0
C) Post-employment benefits	2,149,151	197,406	0	7,876,258	5,433
D) Payables	30,135,826	2,111,909	9,954	61,460,026	29,984,892
E) Accrued expenses and deferred income	36,587	0	0	142,960	0
Total liabilities	44,603,241	2,684,946	20,666	182,766,503	35,430,101
Income statement
A) Production revenue	96,026,088	1,259,125	1,000	108,352,667	152,714
B) Production costs	(83,243,386)	(1,510,579)	(1,568)	(123,318,478)	(256,224)
Difference between operating revenue and operating expenses 12,782,702		(251,454)	(568)	(14,965,811)	(103,510)
C) Net financial income / (expense)	19,887	(1,793)	71	753,609	(400)
D) Adjustments to financial assets	0	0	0	0	0
E) Extraordinary income / (expenses)	0	0	0		0
Pre-tax profit	12,802,589	(253,246)	(497)	(14,212,202)	(103,910)
Income tax	(4,576,415)	6,159	0	6,452,322	28,475.00
Net profit/ (loss) for the year	8,226,174	(247,088)	(497)	(7,759,880)	(75,435)

Summary figures of the most recently approved financial statements of the subsidiaries in the advertising segment, il Trovatore and discontinued operations (31 December 2014)

	Cairo Pubblicità	Il Trovatore	Diellesei S.r.l. in liquidation
	Financial statements at	Financial statements at
	31.12.14	31.12.14	Financial statements at 31.12.14
Assets
A) Share capital proceeds to be received	0	0	0
B) Intangible fixed assets	189	0	0
Tangible fixed assets	45,566	122	0
Tangible financial assets	1,827	3,873	0
Total non-current assets	47,582	3,995	0
C) Inventories	0	0	0
Receivables	81,031,391	747,895	96,061
Current financial assets	0	0	0
Liquid funds	8,884,899	115,079	128,353
Total current assets	89,916,290	862,974	224,414
D) Prepayments and accrued income	67,156	468	249
Total assets	90,031,028	867,438	224,663
Liabilities
A) Share capital	2,818,400	25,000	10,000
Income-related and other reserves	1,167,468	2,674	0
Shareholders' contributions to cover losses	9,394	0	61,000
Retained earnings/(losses carried forward)	331	35,635	(198,465)
Net profit/ (loss) for the year	(885,918)	119,536	(656)
Total equity	3,109,675	182,845	(128,122)
B) Provisions for risks and charges	1,376,600	0	63,494
C) Post-employment benefits	1,005,889	12,020	0
D) Payables	84,350,941	672,574	289,291
E) Accrued expenses and deferred income	187,923	0	0
Total liabilities	90,031,028	867,438	224,663
Income statement
A) Production revenue	156,216,323	896,290	0
B) Production costs	(157,261,590)	(715,247)	(848)
Difference between operating revenue and operating expenses (1,045,267)		181,043	(848)
C) Net financial income / (expense)	56,104	(775)	(35)
D) Adjustments to financial assets	0	0	0
E) Extraordinary income / (expenses)	0	0	0
Pre-tax profit	(989,163)	180,269	(883)
Income tax	103,245	(60,733)	227
Net profit/ (loss) for the year	(885,918)	119,536	(656)

Summary figures of the most recently approved financial statements of the subsidiaries in the publishing segment (31 December 2014).

	Cairo Editore	Cairo Publishing	Edizioni	LA7	Cairo Network
			Anabasi
	Financial statements at 31.12.14	Financial statements at 31.12.14	Financial statements at 31.12.14	Financial statements at 31.12.14	Financial statements at 31.12.14
Assets
A) Share capital proceeds to be received	0	0	0	0	0
B) Intangible fixed assets	11,607,289	9,338	0	26,364,514	33,019,834
Tangible fixed assets	1,948,350	244	0	6,349,095	0
Tangible financial assets	64,264	0	0	356,860	0
Total non-current assets	13,619,903	9,582	0	33,070,468	33,019,834
C) Inventories	3,043,591	121,281	0	131,433	0
Receivables	25,415,311	1,891,006	7,907	61,329,958	33,271
Current financial assets	0	0	0	0	0
Liquid funds	6,951,318	632,634	11,756	106,518,096	50,363
Total current assets	35,410,220	2,644,921	19,663	167,979,487	83,634
D) Prepayments and accrued income	283,574	1,615	0	475,276	22
Total assets	49,313,695	2,656,118	19,663	201,525,231	33,103,490
Liabilities
A) Share capital	1,043,256	10,000	10,200	1,020,000	5,500,000
Income-related and other reserves	1,021,221	5,000	129	175,892,924	20,000
Shareholders' contributions	0	0	436	0	0
Retained earnings/(losses carried forward)	0	245,645	0	(54,602,342)	0
Net profit/ (loss) for the year	7,469,101	(208,154)	(1,557)	(9,652,127)	(4,790)
Total equity	9,533,578	52,491	9,208	112,658,454	5,515,210
B) Provisions for risks and charges	2,161,176	390,749	0	9,135,578	0
C) Post-employment benefits	2,239,166	175,134	0	8,098,971	0
D) Payables	35,151,686	2,037,744	10,454	71,279,878	27,588,280
E) Accrued expenses and deferred income	228,089	0	0	352,350	0
Total liabilities	49,313,695	2,656,118	19,663	201,525,231	33,103,490
Income statement
A) Production revenue	97,086,783	1,283,909	0	116,435,175	1,833
B) Production costs	(85,215,861)	(1,550,613)	(1,634)	(133,088,041)	(8,058)
Difference between operating revenue and operating expenses 11,870,922		(266,704)	(1,634)	(16,652,866)	(6,225)
C) Net financial income / (expense)	82,575	1,859	78	1,646,594	(285)
D) Adjustments to financial assets	0	0	0	0	0
E) Extraordinary income / (expenses)	0	0	0		0
Pre-tax profit	11,953,497	(264,845)	(1,557)	(15,006,272)	(6,510)
Income tax	(4,484,396)	56,692	0	5,354,145	1720
Net profit/ (loss) for the year	7,469,101	(208,154)	(1,557)	(9,652,127)	(4,790)

APPENDIX

Information pursuant to Article 149-duodecies of Consob's Issuer Regulations

The following summary, prepared pursuant to art. 149-xii of Consob Issuer Regulations, shows the fees for the current period for auditing services and for non-audit services provided by the Audit Firm.

Euro/000	Services provided by	Fees for the year
Audit
Parent - Cairo Communication S.p.A.
	KPMG S.p.A.	75
Subsidiaries
- Cairo Pubblicità S.p.A.	KPMG S.p.A.	35
- Cairo Editore S.p.A.	KPMG S.p.A.	60
- La7 S.p.A. (former La7 S.r.l.)	KPMG S.p.A.	75
- Cairo Network S.r.l.	KPMG S.p.A.	17

Report of the Board of Statutory Auditors to the Shareholders' Meeting of Cairo Communication S.p.A., pursuant to art. 153 of Legislative Decree 58/1998 and to art. 2429 of the Italian Civil Code

Shareholders,

The above being stated, these are the results of the prescribed oversight duties performed during the year:

we attended the Shareholders' Meetings and those of the Board of Directors held during the year, receiving from the Directors, in accordance with their obligations to report to the Board of Statutory Auditors, under art. 150, par. 1, of Legislative Decree n. 58/1998, timely and appropriate information on the overall business performance and outlook, and the most relevant transactions, in terms of size and nature, made by the Company and its subsidiaries;
to the extent of our responsibilities, we gathered information on compliance with the law and bylaws, and oversaw compliance with the principles of proper governance and appropriateness of the Company's organizational structure, through direct observation, through information gathered from the managers of the departments involved, through regular exchange of information with the Audit Firm tasked with the statutory audit of the separate and consolidated financial statements, and by attending the meetings of the Control and Risk Committee, the Related Party Committee (through the Chairman), and the meetings with the Supervisory Body with all members of the Board attending;
we oversaw the operation and effectiveness of the internal control systems and the adequacy of the administrative-accounting system and, specifically, its reliability to

properly illustrate operational events;

pursuant to art. 19 of Legislative Decree n. 39/2010, which has assigned the Board of Statutory Auditors the role of "Internal Control and Audit Committee", we conducted oversight duties provided therein on: a) the disclosure of financial information; b) effectiveness of the internal control, internal audit and risk management systems; c) the statutory audit of the separate and consolidated financial statements; d) independence of the Audit Firm, through direct observation, information gathered from the managers of the departments involved, and by analyzing the results of the work performed by the Audit Firm. In such context, we took note of the quarterly audits performed by the Audit Firm to ensure that the accounts were kept on a regular basis; we received from the Audit Firm the Reports prescribed by art. 14 and by art. 19, par. 3, of Legislative Decree n 39/2010, as well as the "Annual confirmation of independence", pursuant to art. 17, par. 9, lett. a) of the above Decree; we analyzed, again pursuant to art. 17, par. 9, lett. a) of the above Decree, the risks regarding the independence of the Audit Firm and the measures it adopted to constrain such risks;
we controlled the proper operation of the audit system on Group companies and the appropriateness of instructions given to them, pursuant also to art. 114, par. 2, of Legislative Decree n. 58/1998;
we took note of the preparation of the Remuneration Report, pursuant to art. 123 ter of Legislative Decree n. 58 of 24 February 1998, and to art. 84 quater of CONSOB Regulations 11971/1999 ("Issuer Regulations"), with no particular issues to report;
we controlled the actual implementation of corporate governance rules provided by the Corporate Governance Code for Listed Companies issued by Borsa Italiana S.p.A., as adopted by the Company;
we oversaw compliance of the internal procedure referred to related-party transactions with the principles contained in the Regulations approved by CONSOB through resolution n. 17221 of 12 March 2010 and subsequent amendments, and compliance with the above Regulations, pursuant to art. 4, par. 6;
we verified compliance with the laws and regulations on the preparation and layout of the separate and consolidated financial statements, as well as the documents attached thereto. Specifically, the separate and consolidated financial statements are accompanied by the prescribed statements of conformity signed by the Chairman of the Board of Directors and by the Financial Reporting Manager, pursuant to art. 81-

ter of CONSOB Regulations n. 11971 of 14 May 1999 and subsequent amendments and supplements;

The specific indications to provide with this Report are listed below, in accordance with the provisions of CONSOB Communication n. DEM/1025564 of 6 April 2001 and subsequent amendments:

We gathered information on the transactions of major equity and financial relevance made during the period, also through subsidiaries, to verify that they were made in compliance with the law and bylaws and that they were neither imprudent or such as to jeopardize the integrity of corporate assets.

The procedures adopted by the Company for related party transactions are illustrated in section 12 "Related party transactions" of the "Report on corporate governance and ownership structure" contained in the Directors' Report for the financial statements and consolidated financial statements for the year ended 31 December 2015.

i) compliance of the procedures adopted by the Company with the principles contained in the above regulations and their observance;
ii) fairness and correspondence of intra-group and related-party transactions with the interests of the Company.
1. In our view, the information provided by the Directors in their Report, pursuant to art. 2428 of the Italian Civil Code (Directors' Report), regarding atypical and/or unusual transactions and ordinary transactions, under the previous point, is to be considered exhaustive and complete.
1. KPMG S.p.A., the Audit Firm tasked with performing statutory audit, with which we held regular meetings during the year, today (5 April 2016) issued the Reports under art. 14 of Legislative Decree n. 39/2010, certifying that the separate and consolidated financial statements for the year ended 31 December 2015 are drawn up clearly and give a true and fair view of assets, liabilities, financial position, results of operations and other components of comprehensive income, changes in equity and cash flows of the Company and the Group, and certifying that the Directors' Report and the disclosures under art. 123-bis, par. 4, of Legislative Decree n. 58/1998 are consistent with the separate financial statements of the Company and with the consolidated financial statements of the Group. These reports do not contain any issues of note or explanatory comments.
1. In 2015, the Board received no complaints, pursuant to art. 2408 of the Italian Civil Code.
1. In 2015, the Board received no complaints from third parties.
1. In 2015, the Company did not assign KPMG S.p.A. additional non-recurring tasks.
1. There are no reports of tasks assigned to subjects that are part of the "network" of the Audit Firm KPMG S.p.A.
1. In 2015, the Board issued its opinion as prescribed by law on the determination of compensation to managers holding strategic responsibilities, as established by the Board of Directors on the proposal of the Remuneration Committee.
1. In 2015, the Board of Directors met five times, the Control and Risk Committee four times and the Board of Statutory Auditors four times. The Remuneration Committee met twice in 2015, while the Related Party Committee met only once.
1. The Board of Statutory Auditors acquired knowledge and oversaw compliance with the law and bylaws and observance of the principles of proper governance, ensuring that actions decided and taken by the Directors complied with the law and bylaws, and were made in a perspective of profitability, and that they were neither imprudent nor reckless, or in potential conflict of interest or in contrast with the resolutions adopted by the Shareholders' Meeting, or such as to jeopardize the integrity of corporate assets.
1. With regard to the adequacy of the organizational structure of the Company and of the Group, the oversight duties of the Board of Statutory Auditors were performed by acquiring knowledge of the organizational structure through information gathered from each area, through meetings with the managers of the various departments and with the Audit Firm as part of a regular exchange of data and information.
1. The Board acquired knowledge and oversaw the adequacy and effectiveness of the internal control system, pursuant also to art. 19 of Legislative Decree 39/2010, through regular meetings with the Director in charge of the internal control system and with the internal audit manager, and through the presence of the Chairman of the Board of Statutory Auditors at the meetings of the Control and Risk Committee, the Remuneration Committee, the Related Party Committee, and of all the members of the Board at the meetings with the Model 231/2001 Supervisory Body.
1. The Board also oversaw the adequacy and reliability of the administrativeaccounting system to properly illustrate operational events, through direct observation, through information received by the managers of the departments involved, by examining company documents and by analyzing the results of the work performed by the Audit Firm.
1. The Board controlled the operation of the control system over subsidiaries and the adequacy of the instructions given to the subsidiaries by the Company, pursuant to art. 114, par. 2, of Legislative Decree n. 58/98, in order for the Group companies to provide the required information to comply with statutory disclosure obligations. No exceptions were reported in this regard.
1. During the regular meetings held by the Board of Statutory Auditors with the Audit Firm, pursuant to art. 150, par. 3, of Legislative Decree n. 58/1998, no relevant issues emerged that need to be mentioned in this Report.
1. The Board also controlled the actual implementation of corporate governance rules provided by the Corporate Governance Code for Listed Companies issued by Borsa Italiana S.p.A., as adopted by the Company.
1. With regard to the oversight duties performed as mentioned above, there were no omissions, reprehensible facts or irregularities reportable to the competent authorities and/or the supervisory boards, or worthy of mention in this Report.
1. Finally, the Board of Statutory Auditors performed its own assessments on compliance with the rules of law regarding the preparation of the draft separate financial statements and consolidated financial statements of the Group for the year ended 31 December 2015, of the relating explanatory notes and the Directors' Report attached thereto, either directly, assisted by department managers or through information received from the Audit Firm.

Milan, 5 April 2016

Board of Statutory Auditors

Marco Moroni (Chairman)

Marco Giuliani

Maria Pia Maspes

The following pages provide a list of the positions of administration and supervision held by

the members of the Board of Statutory Auditors in other companies as at the issue date of

the Report (Annex pursuant to art. 144 quinquiedecies of the Issuer Regulations).

ANNEX TO THE REPORT OF THE BOARD OF STATUTORY AUDITORS OF CAIRO COMMUNICATION SPA DRAWN UP PURSUANT TO ART. 153 OF LEGISLATIVE DECREE 58/98

List of positions held in Companies as per Book V, Title V, Chapters V, VI and VII of the Italian Civil Code as at the issue date of the Report (art. 144-quinquiesdecies Consob Regulations 11971/99)

N.	Company Name	Position	Until approval of the financial statements
	Marco Moroni (Chairman of the Board of Statutory Auditors)
1	Aromatagroup Srl	Sole Auditor	31/12/2017
2	Asscom Spa	Standing Auditor	31/12/2016
3	Betfair Italia Srl	Standing Auditor	30/04/2018
4	Cairo Communication Spa	Chairman of the Board of Statutory Auditors	31/12/2016
5	Cairo Editore Spa	Chairman of the Board of Statutory Auditors	31/12/2016
6	Cairo Pubblicità Spa	Chairman of the Board of Statutory Auditors	31/12/2015
7	Caseificio del Cigno Spa	Standing Auditor	31/12/2017
8	Elettrodelta Spa in liquidation	Standing Auditor	31/12/2017
9	Fratelli Giacomel Spa	Standing Auditor	31/12/2016
10	Giacomel Group Srl	Standing Auditor	31/12/2016
11	La7 Spa	Chairman of the Board of Statutory Auditors	31/12/2018
12	Locauto Rent Spa	Standing Auditor	31/12/2015
13	Locauto Spa	Standing Auditor	31/12/2015
14	Ostello Bello Spa	Chairman of the Board of Statutory Auditors	31/12/2017
15	Publicitas International Spa	Standing Auditor	31/12/2015
16	Revicom Srl	Chairman of the Board of Directors	Until revocation
17	SCF Consorzio Fonografici	Standing Auditor	31/12/2016
18	Sony Music Entertainment Italy Spa	Standing Auditor	31/03/2016
19	Ut Communications Spa	Chairman of the Board of Statutory Auditors	31/12/2016
	Number of positions held in issuing companies	1
	Total number of positions held	19

N.	Company Name	Position	Until approval of the financial statements
	Maria Pia Maspes (Standing Auditor)
1	Cairo Communication Spa	Standing Auditor	31/12/2016
2	Cairo Pubblicità Spa	Standing Auditor	31/12/2015
3	Cairo Editore Spa	Standing Auditor	31/12/2016
4	UT Communications Spa	Standing Auditor	31/12/2016
5	Torino FC Spa	Standing Auditor	31/12/2016
6	La7 Spa	Standing Auditor	31/12/2018
7	G.B.H Spa	Standing Auditor	31/12/2015
8	Alto Partners SGR Spa	Standing Auditor	31/12/2018
9	Italholding Spa	Standing Auditor	31/12/2015
10	Eurofly services	Standing Auditor	31/12/2016
11	Kelly service Spa	Standing Auditor	31/12/2017
12	Aliserio Srl	Standing Auditor	31/12/2017
	Number of positions held in issuing companies		1
	Total number of positions held		12

N.	Company Name	Position	Until approval of the financial statements
	Marco Giuliani (Standing Auditor)
1	Space 2 Spa	Standing Auditor	31/12/2017
2	Banca Mediolanum Spa	Standing Auditor	31/12/2017
3	Mediolanum Gestione Fondi Sgr P.A.	Standing Auditor	31/12/2017
4	Banca Esperia Spa	Standing Auditor	31/12/2017
5	2I Rete Gas Spa	Standing Auditor	31/12/2017
6	Yara Italia Spa	Standing Auditor	31/12/2017
7	Huntsman P&A Srl	Standing Auditor	31/12/2017
8	Rothschild Spa	Standing Auditor	31/03/2016
9	Hotel Splendido Srl	Standing Auditor	31/12/2016
10	Cairo Communication Spa	Standing Auditor	31/12/2016
	Number of positions held in issuing companies		3

Total number of positions held 10

CERTIFICATION OF THE SEPARATE FINANCIAL STATEMENTS PURSUANT TO ARTICLE 81 (TER) OF CONSOB REGULATION 11971 OF 14 MAY 1999 AND SUBSEQUENT MODIFICATIONS AND AMENDMENTS

________________________________________________________________________

• the adequacy of the characteristics of the company and

• the effective application of administrative and accounting procedures for the preparation of the 2015 financial statements.

2. We also certify that

2.1 the separate financial statements at 31 December 2015:

a) have been prepared in compliance with International Financial Reporting Standards endorsed by the European Union, pursuant to EEC Regulation 1606/2002 of the European Parliament and Council, of 19 July 2002,

b) are consistent with the accounting records and books of the Company,

c) give a true and fair view of the financial position and results of operations of the Issuer;

2.2 the Directors' Report contains a reliable analysis on performance and operating results, as well as on the position of the Issuer, together with a description of the principal risks and uncertainties to which it is exposed.

Milan, 14 March 2016

Chairman ………………………………………….

For the Board of Directors Financial Reporting Manager

…………………………………………… (Urbano Roberto Cairo) (Marco Pompignoli)

AI assistant

Cairo Communication — Annual Report 2015

4351_10-k-afs_2016-04-27_b6ab6bb5-871f-4af1-80ef-9679064ac500.pdf

_________________________________________________________ Annual Financial Report at 31 December 2015

Governance

Board of Statutory Auditors

Audit Firm

3

DIRECTORS' REPORT

Separate and consolidated financial statements at 31 December 2015

PERFORMANCE

Cairo Communication Group – Consolidated figures

Gross operating revenue in 2015, split up by main business segment, can be analyzed as follows versus the amounts of 2014:

Cairo Communication S.p.A. – Parent performance

Statement of reconciliation of the Parent's equity and profit and Group equity and profit

Main business segment operating results and related risk factors and

strategic opportunities

PRINT MEDIA PUBLISHING

CAIRO EDITORE - CAIRO PUBLISHING

ADVERTISING

TV PUBLISHING (La7)

IL TROVATORE

NETWORK OPERATOR (CAIRO NETWORK)

Alternative performance indicators

Profit from continuing operations, pre tax

EBITDA – Operating profit, before amortization, depreciation, write-downs and impairment losses

Transactions with parents, subsidiaries and associates

Main risks and uncertainties to which Cairo Communication S.p.A. and its Group are exposed

Risks associated with the general economic climate

Risks associated with advertising and publishing market trends

Advertising

Distribution

Risks associated with extraordinary transactions

Risks associated with developments in the media segment

Risks associated with Management and "key staff"

Risks associated with retaining the value of the brands of the Group titles and TV programmes

Risks associated with business with suppliers

Risks associated with legal and regulatory developments

Liquidity risk

Interest rate and currency risk

Credit risks

Risks associated with litigation

Report on corporate governance and ownership structure

1 Issuer profile

2 Information on ownership structure (pursuant to art. 123 bis, paragraph 1 of the Consolidated Finance Act – TUF) at 14 March 2016

b) Restrictions on transfer (pursuant to art. 123 bis, paragraph 1, letter b), T.U.F.) There are no restrictions on the transfer of securities, except as required by the provisions of representation, legitimization, circulation of the company investment required for securities

c) Significant shareholdings (pursuant to art. 123 bis, paragraph 1, letter c), T.U.F.) At 14 March 2016, based on the information received pursuant to art. 120 of the T.U.F. and the update of the shareholders' register, the principal shareholders in Cairo Communication S.p.A. were as follows:

d) Securities carrying special rights (pursuant to art. 123 bis, paragraph 1, letter d), T.U.F.)

e) Employee shareholdings: voting right procedures (pursuant to art. 123 bis, paragraph 1, letter e), T.U.F.)

l) Management and coordination

3 Compliance (pursuant to art. 123 bis, paragraph 2, letter a), T.U.F.)

4 Board of Directors

4.1 Appointment and replacement of directors and changes to the bylaws (pursuant to art. 123 bis, paragraph 1, letter h), T.U.F.)

Succession planning

4.2 Composition (pursuant to art. 123 bis, paragraph 2, letter d), T.U.F.)

4.3 Role of the Board of Directors (art. 123 bis, paragraph 2, letter d), T.U.F.)

4.4 Executive directors

4.5 Other executive directors

4.6 Independent directors

4.7 Lead Independent Director

5 Treatment of privileged information

6 Board of Directors' Committees

7 Appointment Committee

8 Remuneration Committee

9. Directors' Fees

10 Control and Risk Committee

11. Internal control and risk management system

Purposes and objectives

Main characteristics of existing risk management and internal control system in relation to the financial reporting process (pursuant to art. 123 bis, paragraph 2, letter b), T.U.F.)

Stages of the existing system of risk management and internal control system in relation to the financial reporting process

Roles and functions

Overall evaluation of the appropriateness of the internal control and risk management system

11.1 Executive director in charge of the internal control and risk management system

11.2 Internal audit manager

11.3 Organizational Model pursuant to Legislative Decree 231/2001

11.4 Audit Firm

11.5 Financial Reporting Manager

11.6 Coordination among parties in the internal control and risk management system

12 Related party transactions

13 Appointment of the Board of Statutory Auditors

Cairo Communication Annual Report 2015