ANNUAL REPORT & ACCOUNTS - inmplc.com

1 Independent House27-32 Talbot StreetDublin 1 IrelandTel +353 1 466 3200 Fax +353 1 466 3222 Email REPORT & ACCOUNTSINDEPENDENT NEWS & MEDIA PLC ANNUAL REPORT & ACCOUNTS 2016 STRATEGIC REPORT OVERVIEW Basic Earnings Per Share growth of to ; Net increase in cash and cash equivalents of , with a resulting net cash position of up from in 2015; and INM net assets of at year end 2016, compared with net assets of at year OF THE YEAR* Total revenue of , up on the prior year, driven by digital revenue growth of andincreased revenue from distribution; Profit before tax growth of to (including a 53rd week) driven by the strong digitalrevenue growth, a significant reduction in pre-distribution costs and a year on year improvement innet interest costs; Operating margin increasing by 60bps to ;* All references to Profit before tax , Operating margin and Basic earnings per share included in the Strategic REPORT are statedpre-exceptional.

2 Results to 31 December 2016 include an extra (53rd) week and exclude the results of APN - sold in H1 before tax 60 Cash (debt) cent Assets :Designed by:Creativerin DesignPhotography by:Crazy Pixels Photographypage 7: Samuel Beckett Bridgeby LunaseeStudios / 13: Titanic Belfastby Atmosphere1 / by:Colorman Ireland LtdIndependent News & Media PLCSTRATEGIC REPORT1 ContentsSTRATEGIC REPORTH ighlights of the yeariINM at a glance1 Chairman s Message2 Chief Executive s Review6 Strategy10 Operating Review14 Financial Review18 Business Model23 Risk Report24 Corporate Social Responsibility34 GOVERNANCEC hairman s Introduction39 Board of Directors41 Corporate Governance Statement44 Audit and Risk Committee Report53 Remuneration Committee Report65 Nomination and Corporate GovernanceCommittee Report87 REPORT of the Directors92 FINANCIAL STATEMENTSS tatement of Directors Responsibilities99 REPORT of the Independent Auditor101 Financial Statements106 INDEPENDENT NEWS & MEDIA PLC AT A GLANCEI ndependent News & Media PLC( INM )

3 Is a market-leadingmedia Group in the Republic ofIreland and Northern Ireland,with a strong newspaper anddigital is the largest newspaper contract printer, leadingonline news publisher and wholesale newspaperdistributor on the island of Ireland. It manages grossassets of and employs approximately company is headquartered in Dublin, Ireland and itsshares are listed on the Irish and London And Accounts2016 STRATEGIC REPORT2 Dear ShareholderResults and financial performanceI am pleased to REPORT that the Group performedstrongly in 2016. Profit before tax increased significantlyby Overall revenue increased by and it isimportant to note that the previous year saw the firstrevenue increase in eight years. This is a modestincrease, but within the context of the consistentlychallenged sector in which we operate, it is a key drivers of the increase in revenue were growthin digital advertising and in our distribution has been further enhanced by a significantdecrease in pre-distribution operating is satisfying to REPORT that the Group again concludedthe year with a strengthened balance sheet.

4 The cashbalance has risen to , up is now in an optimum position to look toopportunities that will create a positive future for thecompany and deliver shareholder number of measures have been taken to manage thecost in the business and going forward, INM will look tocontinually monitor cost efficiency across the Group. Thisis essential to successfully operate in a sector that iscontinually will note that the Company has been addressing thematter of pensions in an era when the defined benefitmodel is no longer working for the vast majority ofcompanies and their employees. At the time of writing,the Group is involved in ongoing discussions with theTrustees of two of its Republic of Ireland definedpension schemes with a view to achieving sustainablepension arrangements for their will also have noted that the Company hasestablished a formal independent review to examineand inquire into matters concerning the possibleacquisition of Newstalk and related matters.

5 CHAIRMAN S MESSAGE INM is now in anoptimum position to lookto opportunities that willcreate a positive futurefor the company anddeliver shareholdervalue. Independent News & Media PLCSTRATEGIC REPORT3 Looking to the FutureA key issue facing the newspaper sector in Ireland andabroad is the sustained decline in circulation andreadership, resulting in reduced sales and advertisingrevenues. INM is the best-performing printed newspublisher in Ireland, yet it too is impacted by circulationand advertising decreases. It is an inevitable reality thatnewspapers will continue to this backdrop, innovation and investment indigital is essential to help to mitigate the Companyagainst the losses in , digital alone is not sufficient. The fact is thatthe increases experienced in digital do not bridge thedeficit caused by the decline in print circulation andadvertising is essential, therefore, that there is greater co-operation within the sector that will optimise theopportunity that exists to maintain the strong traditionof news-publishing in Ireland.

6 To this end, INM hasworked with some of its main competitors in the areasof distribution and printing and this is in the interest ofall concerned. Such initiatives will serve to protect thegreat legacy of printed newspapers into the future, andmost importantly, the jobs that go with are a part of who we are; they form part ofboth our national and local identity. They make animmeasurable positive contribution to communitiesacross the towns and villages of Ireland. Newspapersremain a central pillar of any democratic society. We allhave a responsibility to do what is right in protecting theprinted word. To this end, INM is ready to assist in anyway it can and to fulfil its role in the ever-changinglandscape of media, to ensure that newspapers remainpart of the addition, the Company has been notified by the Officeof the Director of Corporate Enforcement ( ODCE ) toproduce certain records identified by the ODCE.

7 TheCompany is taking appropriate steps to comply with theODCE request which is a procedural matter and does notinvolve any conclusion that there has been breach oflaw by the Company or its officers. See page 39 forfurther strategy for INM is threefold and encompasses:maintaining the Group s strong position in the print andnews publishing sector in Ireland; developing INM sdigital offering to position the Group in order togenerate strong revenue streams and profit growth; andutilising our considerably strengthened balance sheet toacquire new businesses that will provide for furthergrowth and diversification of the Group s with the major financial restructuring thatwas very necessary for the business, and continuedmanagement of cost, this strategy has brought INM to amuch improved position.

8 The financial performance ofthe business has been significantly enhanced and thecompany has cash reserves to enable it to look foropportunities to successfully grow the aim of the Board is the continued successful deliveryof the Group s strategy that will result in the creation ofshareholder value. The Company s print and distributionoperations are important to the strategy and INM isfocused on maximising the return from this cornerstoneof the business, thus ensuring that it continues tocontribute to overall Group results. Producing greatnewspapers is at the core of what we pursuing acquisitions, the Company will continue tocarefully analyse suitable opportunities that fit with theCompany strategy, grow the business and add shareholdervalue. Looking at suitable acquisitions for the business isessential against the backdrop of the consistent,continued decline in the news publishing sector.

9 REPORT And Accounts2016 STRATEGIC REPORT4 Our PeopleOn behalf of the Board, I would like to sincerely thankeach employee in INM for their huge contribution to thesuccessful outcome for 2016. Their continuingcommitment is an essential ingredient as the Groupprogresses, in a challenged sector, with theimplementation of its BoardI would like to thank the Board for its continued strongsupport for the business and for its consistent hard workand commitment to the success of the INM the year, the Board members served INM overand above what can normally be expected and I wouldlike to thank each of them very sincerely for this efforton behalf of the s Message- continuedIndependent News & Media PLCSTRATEGIC REPORT5 OutlookWhile the business environment in the print andpublishing industry will continue to remain challenged.

10 The Company strategy will be pursued with the simpleand clear objective of delivering shareholder progress has been made but there is a lot todo to secure a positive future for would like to thank you, our shareholders, for yourcontinued BuckleyChairman27 April 2017 Chairman s Message- continuedReport And Accounts2016 STRATEGIC REPORT6 The results delivered in 2016 are due to the hard work,creativity and dedication of all colleagues in the INMG roup. The second year of revenue growth and a strongperformance in Profit before Tax are a testament to saw the challenges faced by our industryaccelerate, particularly with declines in print advertisingand in circulation. The challenges we face, as thecustomer moves from a printed newspaper towardsspending more time consuming content on a digitaldevice, were accentuated by the impact of events suchas Brexit.