METRO INTERNATIONAL S.A. ANNUAL REPORT 2008

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METRO INTERNATIONAL S.A.

ANNUAL REPORT 2008

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02 introduction

metro annual report 2008

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WE PUBLISH IN 119 CITIES^*^* – 41 OF WHICH HAVE MORE THAN 1 MILLION PEOPLE

Countries 19 Cities

^*

119 Countries 19 Cities

^*

119 Editions 58 Languages 15

Circulation 8,200,000 Readership 17,400,000

Countries 12

Editions 41

Circulation 5,200,000 Readership 12,500,000

Countries 5

Editions 14

Countries 2

Editions 3

Metro is the most read print publication amongst aﬄuent (top 13% richest) Europeans.

year-on-year readership increase for Metro.

%

times more aﬄuent (top 13% richest) Europeans read Metro than Financial Times.

is the average annual personal income of Metro readers.

SOURCE: SYNOVATE EMS 2008 WINTER (12-MONTHS)

AMSTERDAM ATHENS BOSTON BUDAPEST BUSAN CALGARY DAEGU DUBLIN EDMONTON GLASGOW GWANGJU HELSINKI HONG KONG COPENHAGEN LILLE LISBON LYON MARSEILLE MEXICO CITY MILAN MONTERREY MONTREAL

MOSCOW NEW YORK OTTAWA PARIS PHILADELPHIA PORTO PRAGUE ROME ROTTERDAM SANTIAGO SAO PAULO SEOUL ST PETERSBURG STOCKHOLM TAEJON TURIN TORONTO VALPARAÍSO VANCOUVER

EUROPEAN MEDIA AND MARKETING SURVEY

* Cities with over 100,000 inhabitants.

introduction 03

annual report 2008 metro

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annual report 2008

metro

04 innovative global campaigns

Metro International continues to deliver innovative multi-market advertising campaigns.

These are a few examples of award winning global cases.

Client

Nokia

The campaign

Nokia have launched several new handsets using Metro bespoke campaigns. The latest campaign focused in on the GPS strength of the new Nokia. The location of the lead stories featured in Sports and Entertainment were displayed in the advert using Nokia maps. For example, if Nadal was playing tennis in Roland Garros the map featured in the handset would be the exact position of the tennis court. This cleverly integrated editorial and advertising, whilst showing the key function of Nokia's latest handset.

Client

“Sex and the City”

The campaign

New Line Cinema’s phenomenally successful “Sex & The City” movie hit stores on DVD in November 2008.

To celebrate the launch, Metro chose Milan and Rome to distribute 20,000 limited edition newspapers. The coverwrap design made each Metro look like a pink crocodile skin clutch bag Carrie Bradshaw would own.

Almost 75 percent of Metro readers said the special coverwrap made the movie more appealing and 42 percent said they were highly likely to go out and buy the DVD.

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metro

innovative global campaigns 05

Client

Air Berlin

The campaign

Air Berlin came to Metro wanting readers to book more flights with incentives offered online and in the paper. Metro International designed two half page newspaper ads for Air Berlin.

These launched a competition to win a weekend away. An email weblink ad supported the campaign and was emailed out to 124,000 Metro readers linking them directly to AirBerlin’s competition page. The second in-paper insertion was a one day 2 for 1 offer, this was again backed up by a very successful email mail-out.

Client

“The Curious Case of Benjamin Button”

The campaign

Warner Brothers came together with Metro International to put together a campaign promoting their new film

“The Curious Case of Benjamin Button”. Beautifully printed booklets were designed by the creative team at Metro International and

distributed with the newspaper in Italy, France and the UK. The booklet included a detailed insight into the story and the characters, along with the exquisite imagery from the film.

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Metro Motor

metro

06 metro special products

Kenya’s Style

U.S. Presidential elections

The editorial direction of Metro is well defined. Metro has created a virtual newsroom where content is shared globally and the same stories are published on the same day

worldwide. All 19 local newspapers also contribute to the globally shared content.

When?

December, January

What?

Metro's coverage of the historic U.S. Elections, together with our exclusive CNN partner content, included exclusive original interviews with luminaries like Liberian President Ellen Johnson- Sirleaf, Archbishop Desmond Tutu and Gen. Wesley Clark; a photo essay from White House photographer Pete Souza; and reporting from the scene at the inauguration in Washington, D.C.

When?

Every week since August 2008

What?

As the global fashion editor for Metro International, Kenya Hunt gives readers a fun, inside look at the world of style.

Whether you’re a die-hard fashionista who knows your Lanvin from your Louis Vuitton or someone who just wants to find cute and affordable clothes to wear to work, she gives a behind-the-scenes look at the trends, personalities and products that drive fashion.

Global Motoring Editor Emma E Forrest shakes up the conventions of traditional car journalism with her weekly Metro Motor section, injecting it with glamour, personality and people, as well as exciting cars. Metro Motor’s imaginative mix of interviews, new car reviews and lifestyle features appeals to both petrolheads and readers who would never normally read a car page. This more accessible, flexible car content has even found itself in new areas of Metro, including consumer pages and women’s magazines.

When?

Every week since October 2008

What?

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metro

metro special products 07

When?

19 January

What?

We all need a boost in January -- and what better day for Metro to boost over 17 million readers than on

“Blue Monday,” January 19, which a “scientific equa- tion” has determined is the saddest day in all the year! So Metro answered the call for cheer, turned the paper yellow and spread the happy word.

Metro Happy Day

Metro is a global newspaper published locally.

As the world’s largest newspaper, Metro is in a unique position to create global events, themes and products, selecting topics that are covered globally.

International pop star, sensitive crooner and all-around heartthrob James Blunt can boast that he was Metro’s very first global guest editor — Blunt sat in on the editorial meetings, directed coverage on an organization that’s dear to him: Medicines sans Frontieres, and gave commentary on the news of the day — and it was all printed in every Metro across the world. Blunt’s reach set a new standard for guest editors. Metro is always raising the bar, pushing the envelope and trying new things.

When?

November 17, 2008

What?

Half of Metro’s readers are women, and breast cancer is a major concern for many of them, and the disease has probably touched their lives in some way. This is why Metro globally supports Breast Cancer Awareness month in October every year. In 2008, Metros across the world were printed on pink paper, and global style editor Kenya Hunt interviewed Estee Lauder’s senior vice president Evelyn Lauder, who has helped raise

US$35 million for the Breast Cancer Research Foundation, which she founded 16 years ago, and US$220 million to help finance research at medical institutions in countries including Australia, Canada, Latin America, the Middle East and Europe.

When?

October

What?

Breast Cancer Awareness

Global Guest Editor James Blunt

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48 percent of Metro readers are female

08 ceo statement

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Implementation of our strategy

I

t’s an old lesson that when times are tough, media is one of the first industries to feel the negative impact – simply because marketing and advertising is one of the easiest and fastest (yet not long-term advisable) ways for businesses to cut their cost-base. Unfortunately, cuts in advertising quickly leads to a drop in sales, which then will lead to increased advertising again. But one of the imminent reactions when economies are under pressure is simple: Cut cost-base. Now.

2008, especially the second half of the year, was such a year for Metro International, as it was for a majority of media companies. Towards the end of the year we

saw drops in sales close to 50 percent in a few markets like Spain and Portugal, and even though we adapted to this new reality relatively quickly, we could not compensate lost sales with cost cutting quickly enough to save the results. Therefore an EBIT

loss of € 20 million (before sale of shares in subsidiaries) is the poor and unsatisfactory result of 2008.

That being said, many of Metro’s operations are still showing revenue growth and positive margins. Coun- tries such as Holland, Brazil, Korea, Canada, Chile,

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ceo statement 09

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metro

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Greece, Hong Kong, Mexico, Russia and Sweden have all showed good results. For the full year 2008, 9 out of 20 operations were profitable. Countries like Sweden and Denmark benefited from market consolidation where Metro has played an active role and which is an important part of Metro’s strategy.

In May 2008, Metro divested 35 percent of Metro Sweden to Schibsted, who then decided to close their title Punkt.se. We hope to see full revenue synergies during 2009. The consolidation of the free daily newspaper market in Sweden is considered successful as Metro remains the strongest player in the market.

Metro International also divested 24.5 percent of

MetroXpress in Denmark to JP/Politiken in May 2008 in exchange for transferring 24 Timer into the Metro Group. Metro now controls two out of the three free daily newspaper titles in the market and is in a significantly stronger position than in 2007. Another action in line with the strategy of consolidation was the divestment of 60 percent of the operation in the Czech Republic to MAFRA a.s. in December 2007.

In each of these three markets, we have increased our share of readership as a result of the consolidation. We have also seen reduced competition in Boston, Finland, Hungary and the Netherlands where competitors have decided to either close down their business or shrink significantly.

In Mexico and Russia, Metro has expanded into new cities. Metro was launched in Monterrey, Mexico’s second largest city, in the autumn of 2008. We also raised our ownership to 49 percent in Mexico during the second quarter of 2008. In Russia, we launched in Moscow in March 2009 in a strong partnership with our Russian partner. We will continue our strategy of consolidating or exiting operations in the mature markets while at the same time iden- tifying profitable expansion opportunities in Latin America, Russia and Asia. I hope that we will be able to continue on this path and show new launches during 2009.

As a result of the worsening market conditions, Metro has gone through a major restructuring in order to save costs. We decided to close down Metro’s operation in Spain during January 2009. Together with the US, Spain contributed to the majority of the losses in 2008; the two countries represented an EBIT loss of

€ -10.8 million. Despite the fact that the US operations improved the results significantly over the year it was not enough to move to profitability, but Q4 did provide some encouraging results.

We have decided to relocate the main corporate functions from the London office to Stockholm, Sweden.

This will also bring the company management closer to the investor community and one of the key operating units.

The strategy going forward is very similar to that presented at the beginning of June 2008:

• Strong cost control in all parts of the business, reducing cost in HQ significantly

• Seek consolidation in mature markets, mainly in Europe

• Expand in Russia, Asia and Latin America

• Expand by diversifying the business into on-line, mobile and other printed outlets

• Improve the brand perception by improving editorial quality, communication and PR

We have seen further proof that today’s media consumers expect content to be free. Metro has a very strong position within its key target group and through talented staff the company can show creative solutions. The key challenge, especially under these economic conditions, is to capitalize on all the experience, best practices and strong examples from around the world and pursue a zero-toler- ance strategy towards loss-making operations, as was the example in Spain. At the same time we will continue to build the strength of the brand and thereby making it logical and profitable to

move to other platforms as well.

During the beginning of 2009, we asked our shareholders for new capital in order to be able to fund activities and further expansion. Kinnevik, our largest shareholder, has agreed to underwrite the full amount, which shows their long-term belief in the company. I strongly believe that Metro is on the right path and by continuing to implement the company’s strategy Metro will be in a better position at the end of 2009.

Per Mikael Jensen President & Chief Executive Officer

“One of the imminent reactions when economies are under pressure is

simple: Cut cost-base.

Now.” Per Mikael Jensen

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metro

ceo statement 11

69 percent of Metro readers are 40 years old and under

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12 cfo statement

46 percent of Metro readers went to University

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Preparing for a tough year ahead

D

uring 2008, Metro International has continued implementing its strategy, having an active role in consolidating the markets and expanding operations in selected growth markets. Many of our operations are showing good results but due to the general market climate and performance in some local countries Metro International had, as a whole, a tough year in 2008. The economic downturn in 2008 has affected most European and North American markets since the second quarter and Latin America and Asia more towards the latter part of the year. The economic downturn and subsequent dramatic slowdown of the advertising market in Southern Europe and the US has resulted in a shortfall in the 2008 sales budget.

Total net sales decreased year-on-year by 11 percent to

€ 295.5 million for the full year (2007: € 331.1 million).

Sales declined by 5 percent excluding closed and divested operations (Stockholm Bostad and Czech Republic) and including adjustments for the operations that did not publish during July and/or August 2008 (Sweden, Denmark and Spain). Compared to 2007, Spain, Portugal and Denmark (excluding 24 Timer) were the worst performers with sales down circa 20 percent respectively. Regionally, sales in Southern Europe were down by € 12.0 million, US by

€ 3.1 million, Northern Europe by € 12.2 million and Sweden by € 9.4 million.

Growth areas

However, we still see a healthy development in Latin America and Russia. Metro Chile reported a sales increase of 9 percent for the full year. Sales in SUBTV, TV in Santiago’s subway in which Metro acquired 35 percent in May 2008, more than doubled year-on-year in the fourth quarter of 2008. Moreover, the financial performance in Diario Pyme, a B2B online company, has significantly improved since Metro Chile entered as a shareholder in September 2008.

Metro Mexico, in which Metro International holds a 49 percent equity interest, continued to enjoy strong sales growth with a 98 percent increase for the full year. Publimetro reported a profit for the full year. In November 2008, Metro in Mexico launched an additional edition in Monterrey, Mexico's second largest city, with an initial daily circulation of 60,000 copies.

Metro in Brazil, where Metro has a 30 percent interest, reported a 67 percent growth for the full year as well as an operating profit.

The Group's franchise operation in St. Petersburg,

Russia, increased its full year sales by 21 percent. The sales increase was translated into operating profit growth. In December 2008, Metro International entered into a Franchise Agreement with Gazeta Metro, the third most read newspaper in Moscow.

Metro International will provide support to Gazeta Metro to relaunch and re-brand it during the next few months to make it consistent with Metro's global free newspaper concept. Synergies between Gazeta Metro and Metro St. Petersburg, as advertising packages and sharing of editorial content, are to be realised during 2009.

Actions taken

Group EBIT loss for 2008 was at € 20.0 million (2007:

€ 18.6 million), excluding the effect of sale of subsidiaries. As a result of continued losses, Metro International’s management implemented a restructuring plan in order to save further costs. Cost saving measures have been implemented in most of Metro International’s operations during the fourth quarter 2008. These savings have resulted in restructuring costs amounting to € 3.8 million for the full year. The restructuring costs in 2008 should result in estimated annual savings of € 4.0 to € 5.0 million in 2009.

In order to save further costs but also to be closer to the investor community, the Group decided in January 2009 that it will be moving most of the divisions in its London offices to Stockholm by the end of 2009 at the latest. The cost of this relocation is estimated at € 0.5 million and the annual savings in 2010 have been estimated at € 2.0 million. The Group has also announced the suspension of its fully owned Spanish operations due to poor financial results experienced in 2008, coupled with stiff competition and the expected continued weakening of the advertising market in Spain. The closure is expected to give rise to a loss of

€ 5.0 to € 6.0 million including non-cash items.

We will hopefully see a positive impact in 2009 due to a falling paper price. Following a year of increasing paper prices we have, during January 2009, recorded price decreases in certain markets. We are expecting prices to continue to decline throughout 2009 however at a slightly slower pace. Metro has decided to extend its contract with Holmen Paper AB when the existing contract expires in March 2009. Metro has thereby secured its required paper volumes in Europe for another two years in order to reduce price risk.

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cfo statement 13

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There are still some factors which however could alter the 2009 results. As reported in the 2007 Annual Report, Metro Sweden has contested the view of the Swedish Administrative Court of Appeal regarding the advertising tax being imposed on Metro Sweden. After the verdict in July 2008 and the subsequent appeal in August 2008, the Tax Authority has granted a deferral.

It has not been communicated when a final decision will be made, although a decision is expected in 2009.

New funding

Due to the downturn in the global economy and its impact on the advertising market, Metro International was unable to meet a break-even operating result for 2008. This resulted in non-compliance with one of the key covenants of the multi-currency revolving bank facility, triggering the requirement to raise funds to repay the outstanding bank loans of € 28.7 million.

Further, the Board of Directors assessed that the Group does not have sufficient working capital to continue the operations, execute the Metro Interna- tional’s strategy and implement cost saving measures to increase shareholder value.

The Board of Directors of Metro International called for a general meeting of shareholders to authorise a new issue of subordinated debentures and warrants totalling approximately SEK 550 million with prefer- ential rights for existing holders of series A and B SDRs over Metro International´s shares. This was later approved by the shareholders at the extraordinary general meeting held on 24 February 2009. The Group’s largest shareholder Investment AB Kinnevik representing 44 percent of the capital and 39 percent of the votes in the Group has agreed to fully underwrite the contemplated transaction.

The total number of issued and outstanding shares as at 31 December 2008 was 527,812,591.

Cash Flow and Balance sheet

From January to December 2008, cash and cash equivalents have decreased by € 3.4 million to € 19.7 million. Reported net cash used by operations totalled € 25.4 million for the full year (2007: € 9.6 million). The sale of shares in Metro Sweden and Metro Denmark generated a positive net cash inflow of € 35.4 million and € 3.6 million respectively.

Group net debt amounted to € 17.6 million as at 31 December 2008 (2007:

€ 27.1 million) and comprised cash and cash equivalents of € 19.7 million, € 28.7 million drawn under the Group’s multi- currency revolving credit facility, € 6.1 million of loans payable to minority shareholders and other short-term bank loans totalling € 2.6 million.

The net change in working capital for the year ended at € 3.5 million. Group capital expenditure on machinery and equipment amounted to € 1.9 million in 2008 (2007: € 3.0 million) and investment in intan- gible assets – development of the interactive platform and integrated publishing system – aggregated to € 1.7 million (2007: € 3.7 million).

The Group continues to have a strong focus on its liquidity position with close monitoring of cash projec- tions through the year with weekly 12-week rolling cashflow forecasting and quarterly yearly forecasts.

The Company believes that the Group’s own cash flow and the proceeds from the issue of subordinated debentures and warrants will secure the Company’s financing needs for the foreseeable future.

Trade receivables account for the majority of the Company’s credit risk. To maintain a controlled level of credit risk, the process of issuing credit is supported

by a credit policy as well as credit instructions.

The Group’s net deferred tax asset as at 31 December 2008 stands at € 4.1 million (2007:

€ 13.5 million) and the net result for the year 2008 attributable to minority shareholders was a loss of € 4.6 million.

Summary

Even though the economic climate has been difficult, and the outlook for 2009 is unclear, we believe that Metro International will stand stronger in 2009. With our strategy in place and with actions taken to improve profitability, we believe the company should be able to generate growth and healthy margins in the long term and with additional funding we will be well prepared for a tough year ahead.

Anders Kronborg Chief Financial Officer

metro

14 cfo statement

“Even though the

economic climate has been difficult and the

outlook for 2009 is unclear, we believe that Metro

International will stand stronger in 2009.”

Anders Kronborg

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metro

cfo statement 15

72 percent of Metro readers are employed

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2.1 The Company

Metro International S.A is a Luxembourg public limited liability company (Société Anonyme) listed on the Stockholm Stock Exchange.

Corporate governance within Metro International is based on Luxembourg legislation, the listing requirements of the OMX Nordic Exchange Stockholm and the Swedish Code of Corporate Governance (the ‘Code’) which the Company applies. Metro International applies the Code in accordance with the ‘comply or explain’ principle, meaning that deviations from the Code are permissible but must be explained. The company reports its results in EUR and uses the English language as the Company operates in 19 countries, and English is the most widely understood language within the group. The corporate governance report has not been audited by the company’s external auditors.

2.2 Annual General Meeting

Shareholders’ rights to decide on the affairs of Metro International are exercised at the Annual General Meeting. Shareholders recorded in the share register on the nominated day and who have notified their intention to attend may take part in the Meeting, either in person or via a proxy.

Decisions at the Annual General Meeting are normally taken by simple majority. However, on certain matters the Luxembourg legal requirements or Metro International’s Articles of Association prescribe that proposals should be supported by a higher proportion of the shares represented or votes cast at the Meeting. The Annual General Meeting must be held within six months of the end of the company’s financial year. Matters considered at the Annual General Meeting include dividends, approval of the income statement and balance sheet, discharge from liability of the Board of Directors and the CEO, the election of Board members, the Nomination Committee and, where applicable, auditors, and the fixing of remuneration for the Board and auditors.

2.2.1 The 2008 Annual General Meeting

At the Annual General Meeting held on 27 May 2008, the following resolutions were approved:

a) Approval of the annual accounts and the consolidated accounts for the financial year ended 31 December 2007;

b) Allocation of the results as of 31 December 2007;

c) Discharge of the liability of the members of the board of directors of Metro International, and in connection with, the financial year ended 31 December 2007;

d) Appointment of the members of the board of directors;

e) Appointment of the external auditor;

f) Determination of director’s fees;

g) Approval of guidelines on the remuneration for senior executives;

h) Approval of the procedure of the Nomination Committee for the election of members of the Board and external auditor at the AGM to be held in 2009.

2.2.2 Nomination Committee

A Nomination Committee of the major shareholders in Metro Interna- tional has been formed in accordance with the resolution of the 2008 AGM. The Nomination Committee is comprised of Mikael Holmberg on behalf of Investment AB Kinnevik and Emesco AB, Annika Andersson on behalf of the Swedish national pension fund, 4th AP- Fund, and Ole E. Dahl on behalf of Orkla ASA who together represent more than 50 percent of the voting rights in Metro International.

The composition of the Nomination Committee may be changed to reflect any changes in the shareholdings of the major shareholders during the nomination process. The Nomination Committee will submit a proposal for the composition of the Board of Directors, remuneration for the Board of Directors and the auditor and proposal on the Chairman of the 2009 AGM that will be presented to the 2009 AGM for approval.

2.3 Board of Directors

Metro International’s Board of Directors are elected every year by the shareholders at the AGM. According to Metro International’s Articles of Association, the Board shall consist of a minimum of three members. The members are elected each year at the AGM for the period up to the end of the next AGM.

The Board of Directors of the company comprises seven non- executive Directors. The members of the Board of Directors are:

Mia Brunell Livfors (1965)

Chairman of the Board of Directors

Mia was elected Chairman of the Board at the AGM held on the 27th May 2008 and has served as a non-executive Director of Metro Inter- national since May 2006. Mia is President and CEO of Investment AB Kinnevik and has extensive financial and operating experience from having also held several positions at Modern Times Group MTG AB (an international media company and founder of Metro International) and becoming its CFO in 2001. Mia is a Board member of Modern Times Group MTG AB, Millicom International Cellular S.A., Tele2 AB, Transcom Worldwide S.A, and H & M Hennes & Mauritz AB.

Shareholdings: Nil

Board independece Member Independent in relation to the Independent in relation to major share-

Board Member since Function company and its management holders (>10percent of voting rights or capial)

Mia Brunell Livfors May 2006 Chairman of the Board of Directors Yes No

Member of the Remuneration Committee

Cristina Stenbeck Feb 2003 Non-executive Director Yes No

Member of the Remuneration Committee

Joshua A. Berger May 2005 Non-executive Director Yes Yes

Henry Guy May 2004 Non-executive Director Yes Yes

Member of the Audit Committee

Paddy Byng Feb 2003 Non-executive Director Yes Yes

Chairman of the Remuneration Committee

Nigel Cooper May 2008 Non-executive Director Yes Yes

Chairman of the Audit Committee

Mario Queiroz May 2008 Non-executive Director Yes Yes

Member of the Audit Committee

Dennis Malamatinas May 2004 Previously chairman of the Board of Directors Yes Yes

Resigned May 2007 Previously member of the Audit Committee

Christine Ockrent May 2006 Previously non-executive Director No Yes

Resigned May 2007

Board of Directors

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Cristina Stenbeck (1977)

Non-executive Director

Cristina has served as a non-executive Director of Metro International since February 2003. Cristina is Chairman of Investment AB Kinnevik.

She is a non-executive Director of Modern Times Group AB, Tele2 AB and Transcom Wordwide S.A. Shareholdings: Nil

Josh Berger (1966)

Josh has served as a non-executive Director of Metro International since May 2005. He is President and Managing Director of Warner Bros. Entertainment UK. Limited, a position he has held since February 2002. In this role he is responsible for all of Warner Bros.

Entertainments business activities in the United Kingdom and Ireland, namely overseeing Warner Bros. Pictures, Home Entertainment/DVD, Digital Distribution, Television, Consumer Products and New &

Emerging Media and Interactive Games. Shareholdings: Nil

Paddy Byng (1965)

Paddy has served as a non-executive Director of Metro International since February 2003 and is CEO of Smythson. He was formally Global Marketing Director of Alfred Dunhill Limited. Before that he was Senior Vice President of International Marketing and Business Devel- opment at the Polo Ralph Lauren Corporation.

Shareholdings: 22,223 A shares, 22,223 B shares

Henry Guy (1968)

Henry has served as a non-executive Director of Metro International since May 2004. He is the President and Chief Executive Officer of Modern Holdings Inc., which is a US investment company with assets in the telecommunications, media and financial services industries.

He previously served as Chief Financial Officer at a software firm, ISIS 2000, and as an Officer in the United States Navy.

Shareholdings: 1,000 B shares

Nigel Cooper (1949)

Nigel was elected as a non-executive Director of Metro International in May 2008. Until he left in 2005, Nigel spent 33 years in the accounting profession, including 21 years as a partner with KPMG in Milan and London. Between 1998 and 2005, Nigel was lead audit advisory partner in KPMG’s Information, Communications and Entertainment group based in London, specialising in advising leading global companies across the media sector. Until 31 March 2009 Nigel was a non-executive director of Rightmove Group PLC, the UK’s leading property website which listed on the London Stock Exchange in 2006.

Mario Queiroz (1966)

Mario was also elected as a non-executive Director of Metro International in May 2008. Mario has significant experience of the new media sector with considerable expertise in the development and delivery of new strategies on a global scale. He is the London-based Vice President of Product Management for Europe, Africa, Middle East and Latin America at Google, responsible for product strategy and

implementation in these geographies as well as for the design of search, advertisement and application products across 14 of Google’s

international R&D centres. Mario joined Google in 2005 and initially led the company’s global IT product strategy and development. Prior to Google, Mario was with Hewlett-Packard for 16 years. In his final position at HP, he was Vice-President of Operations for key elements of HP’s global IT infrastructure. This followed marketing, operations and R&D management positions in HP’s PC and printing businesses in the United States and Europe. Mario holds a Bachelor of Science and Master of Science Electrical Engineering degrees from Stanford University.

As at the 1 January 2008, Metro International’s Board of Directors comprised Dennis Malamatinas, Cristina Stenbeck, Josh Berger, Mia Brunell Livfors, Paddy Byng, Henry Guy and Christine Okrent. The Company’s shareholders at the May 2008 AGM re-elected Cristina Sten- beck, Josh Berger, Mia Brunell Livfors, Paddy Byng and Henry Guy as members of the Board of Directors and elected Nigel Cooper and Mario Queiroz as new members. Dennis Malamatinas and Christine Okrent resigned as members of the Board of Directors prior to the 2008 AGM.

Biographical information on each Director is provided on the Company’s website at www.metro.lu.

Top, left to right: Mia Brunell Livfors, Cristina Stenbeck, Josh Berger, Paddy Byng.

Bottom, left to right:

Henry Guy, Nigel Cooper, Mario Queiroz.

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2.3.1 The Board’s responsibility and work during 2008

The Board of Directors is constituted in order to review and decide upon the Company’s strategic development, as well as to provide support to, and control and supervision over, the activities of the executive management of the Company. The Board is also authorised to issue new shares within the limits of the existing authorised capital of Metro International S.A.

The Board of Directors has adopted working procedures for its internal activities that include rules pertaining to the number of Board of Directors meetings to be held, the matters to be handled at such regular meetings, and the duties of the Chairman.

In order to carry out its work more effectively, the Board of Directors has appointed a Remuneration Committee and an Audit Committee. These committees handle business within their respective areas and present recommendations and reports on which the Board of Directors may base its decisions and actions. However, all members of the Board of Directors have the same responsibility for all decisions made, irrespective of whether the issue in question has been reviewed by a committee. During 2008, the Board also appointed a Finance Committee comprising of Mia Brunell Livfors, Nigel Cooper, Henry Guy, Mario Queiroz, Per Mikael Jensen and Anders Kronborg. The Finance Committee meets on a monthly basis in between Board and Audit Committee meetings, to monitor results, discuss potential investments and any other significant items which may have financial implications.

The Board of Directors has also adopted procedures for instructions and mandates issued to the Chief Executive Officer and senior management. These procedures include the requirement that the Board of Directors approve all significant transactions including new edition launches, acquisitions and closures or disposal of businesses and significant capital expenditure programmes. In addition, the Board of Directors has also issued written instructions specifying when and how information, which is required in order to enable the Board of Directors to evaluate the Company and its subsidiaries’ financial positions, should be reported to the Board of Directors.

The Board of Directors convened for nine full meetings in 2008, of which five were face to face meetings and four were telephone confer- ence calls, in order to discuss and decide upon all current material operating issues, to review the latest financial results, to review investment proposals and to consider opportunities for the further development of the Company’s business. One of the face to face meetings was a two day session specifically focused on strategy. In addition to the board meetings undertaken, one board circular resolution was passed.

Table of attendance

Main Audit Remuneration Number of meetings in the year Board Committee Committee

Mia Brunell Livfors 9 2 5

Cristina Stenbeck 7 4

Joshua A. Berger 7

Paddy Byng 8 5

Henry Guy 9 7

Nigel Cooper (since May 2008) 4 5

Mario Queiroz (since May 2008) 3 5

Dennis Malamatinas 1 1

Christine Ockrent 2

2.3.2 Remuneration committee

Paddy Byng is Chairman of the Remuneration Committee and Cristina Stenbeck and Mia Brunell Livfors are members thereof.

The Board of Directors commissions the work of the Remuneration Committee. The responsibilities of the Remuneration Committee includes issues regarding salaries, pension plans, bonus programmes and other employment terms for the Chief Executive Officer and senior management. The Remuneration Committee also advises the Board of Directors on the development and implementation of long term incen- tive plans.

2.3.3 Audit Committee

Nigel Cooper is Chairman of the Audit Committee and Henry Guy and Mario Queiroz are members thereof. The Board of Directors commissions the work of the Audit Committee.

The Audit Committee is responsible for reviewing the Company’s internal controls, implementing and reviewing the Company’s internal audit processes, considering and advising on financial risks,

determining the consistency of the company’s accounting policies and evaluating management’s estimates and assumptions in the prepara- tion of the Company’s consolidated financial statements.

The Audit Committee also maintains the working relationship with the Company’s internal and external auditors and ensures the qualifi- cation and independence of these, the Company’s adherence to prevailing rules and regulations and, where applicable, reviews transactions between the Company and related parties.

2.3.4 Remuneration of the Board

Remuneration of the Board is in accordance with decisions taken at the Annual General Meeting. The 2008 Annual General Meeting decided that fees paid to the Board should comprise a sum of €287,500. The Chairman of the Board was allocated €65,000 (whereof €32,500 in cash and €32,500 in shares) with each other member allocated €32,500 (whereof €16,250 in cash and €16,250 in shares). In regards to the Audit Committee, €9,000 was allocated to the Chairman and €4,500 to each of the other members. In regards to the Remuneration

Committee, €4,500 was allocated to the Chairman and €2,500 to each of the other members.

The share-based compensation will take the form of fully paid-up shares of Metro International common stock to be issued within Metro International’s authorised share capital to the members of the board of directors. The shares shall be issued in equal number of Class A and Class B shares and will be subject to a one-year lock up period as of their respective date of issue.

2.3.5 Evaluation of the Board

The Chairman of the Board makes sure that an annual evaluation of the Board’s work is performed where the board members are given the opportunity to share their views on working methods, board material, their own and other board member’s work as well as the extent of their assignment. The evaluation of the Board elected at the 2008 AGM was carried out in December 2008 by using a written questionnaire that was presented to all Board members and facilitated by the Chairman of the Board.

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2.4 The Executive Management team

As at the 31 December 2008, the following executive management team was in place:

Per Mikael Jensen (1962)

President and Chief Executive Officer

Per Mikael holds a degree in journalism from the Denmark School of Journalism. He has had a 21 year career in the media industry including management positions with the Danish newspapers Politiken, Jyllandsposten and MetroXpress (subsidiary of Metro Inter- national), as well as Global Editor-In-Chief of Metro International, Managing Director of Metro New York and CEO of TV2 Denmark. Per Mikael is the Chairman of an independent TV/Film production company in Denmark, and Board member of an independent book- publishing company also in Denmark.

Shareholdings: 12,500 A shares, 12,500 B shares

Anders Kronborg (1964)

Chief Financial Officer

Anders joined Metro International in late 2007 as Executive Vice President responsible for headquarter functions as well as organisational and business development. In October 2008, Anders was appointed Chief Financial Officer for the group but also continued with his responsibilities as Chief of Staff. He has 11 years experience in the media sector working as Chief Financial Officer, Chief Executive Officer and Chief Operating Officer in the biggest national TV and newspaper companies in Denmark. Prior to this he spent 10 years in the Danish Ministry of Finance. Shareholdings: Nil

Robert Patterson (1968)

Executive Vice President

Robert is responsible for Metro International’s operations in the US, Hong Kong, Chile, Brazil, Mexico and all of Metro International’s franchise operations. Robert previously worked for Invensys, holding a number of financial management positions at the corporate headquar- ters and abroad. Prior to this, Robert qualified as a chartered

accountant before becoming Corporate Finance Associate at a leading

international investment bank. Robert joined Metro International at the end of 2001 and was Metro International’s Chief Financial Officer until 2006. Shareholdings: 46,512 A shares, 46,512 B shares; Options on 150,606 shares.

Silvio de Groot (1970)

Silvio is responsible for Metro International’s operations in Holland, Italy and Greece. Silvio joined the company as the Managing Director of Metro Holland in January 2002, a position he still holds. Silvio started his career at Bertelsman and was founder and Managing Director of its search engine Lycos in the Netherlands.

Shareholdings: 16,666 A shares, 16,666 B shares;

Options on 156,716 shares

Martin Alsander (1971)

Martin is responsible for Metro International’s operations in Sweden, Spain, Portugal, France and Hungary. Martin is also a Board member of Metro Czech Republic. Martin has previously been Regional Managing Director as well as Managing Director for different Metro operations around the world and has also been involved in setting up the businesses in France and Portugal. Before joining Metro International in 2001, Martin worked for Unilever in Sweden. Shareholdings: 37,072 A shares, 37,051 B shares; Options on 149,946 shares.

Sakari Pitkänen (1956)

Vice President Metro Interactive

Sakari has been with Metro since 1995 and has been Global Editor-In- Chief since 2006. Prior to this, he was Editor-In-Chief in Metro Sweden.

During this tenure, Metro became the most read daily newspaper in Sweden and is now a national daily with four editions. Since January 2009, Sakari has held the position of Vice President of Metro’s Interac- tive division. Sakari has been involved in most launches of Metro around the world. Shareholdings: 5,081 A shares, 5,081 B shares;

Options on 11,564 shares

Top, left to right:

Per Mikael Jensen, Anders Kronborg, Robert Patterson, Silvio de Groot.

Bottom, left to right:

Martin Alsander, Sakari Pitkänen.

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Steve R. Nylund (1968)

Executive Vice President – Head of Corporate Development

Steve served as administrative assistance to the President and CEO of Kinnevik Media from 1993, was appointed as Managing Director of MTG Radio in 1994 and also served as Vice President of the premium pay-TV broadcaster TV1000 Sweden and Group Head of Corporate Development and Negotiations for Modern Times Group, before joining Metro International in 2000. Shareholdings: 44,571 A shares, 44,318 B shares; Options on 234,360 shares.

Simon Simmons (1967)

Global Logistics Director

Simon joined Metro International in September 2006 as Global Logis- tics Director. Simon has been in the newspaper business for over 23 years and has worked in every department from Editorial, Display &

Classified Sales, Circulation, through to Distribution. He joined Metro International from Associated Newspapers where his final position was Head of Operations for the Evening Standard. Shareholdings: Nil

Alistair Ballantyne (1975)

Global Sales Director

Alistair joined Metro International in May 2006 to head up the Global Sales Team where he oversees all multi market international campaigns. From 2000 to 2006 Alistair worked at Time Warner where he held a number of senior international advertising positions. Prior to this, he worked at EMAP and Attic Futura. Shareholdings: Nil

Michael Mendoza (1975)

Global IT Manager, Head of Production

Michael joined Metro International in September 2005 after selling a technology company he co-founded in the CRM sector. He is responsible for Global IT and Pre-Press Production for all Metro International operations. While at Metro International, Michael has built one of the most efficient Sales, Booking and Editorial systems in the industry.

This system has established Metro International as a world leader in multi-channel publishing systems. Shareholdings: Nil

2.5 External auditors

Metro International’s external auditors are elected at the AGM of the Company for a period of one year. The current auditors, KPMG were re-elected at the 2008 meeting. The next election of the external auditor will take place at the 2009 AGM. KPMG has been the Company’s external auditor since Metro International’s IPO in August 2000. Thierry Ravasio, Luxembourg, and Anders Malmeby, Stockholm, have been the lead audit partners since 2006.

The external auditors report their findings to the shareholders by means of the Auditors’ report, which is presented to the relevant AGM. In addition, the Auditors’ report detailed findings at each of the ordinary meetings of the Audit Committee.

The audit assignment has involved the examination of the Annual Report, a review of the interim report for the third quarter 2008, other tasks related to the duties of a company auditor and consultation or other services that may result from observations noted during such examination or implementation of other tasks.

2.6 Internal control

According to the Swedish Companies Act and the Swedish Code of Corporate Governance the Board is responsible for internal control.

This report has been prepared according to the Swedish Code of Corporate Governance and is accordingly limited to internal control over financial reporting. This report is not part of the formal financial statements and has not been audited.

2.6.1 Description of internal control 2.6.1.1 Control environment

In order to ensure efficient management of Metro International’s business risk, the Board has specified a set of instructions and plan of work regarding the roles and responsibilities of the Chief Executive Officer and the Board committees.

The Board also has a number of established guidelines, which are central to its work on internal control activities. This includes monitoring performance against plans and prior years. The senior management team regularly reports to the Board according to established routines and in addition to the Audit Committee’s report. The senior management is however responsible for internal controls being in place to manage the risks of Metro International’s daily business operations. Guidelines for other employees are also distributed so that they may understand and appreciate the importance of their respective roles, and in order to maintain properly functioning internal controls.

Left to right: Steve R. Nylund, Simon Simmons, Alistair Ballantyne, Michael Mendoza.

Executive management Continuing

METRO INTERNATIONAL S.A. ANNUAL REPORT 2008

Table of contents

02 introduction

Countries 19 Cities

119 Countries 19 Cities

119

Editions 58 Languages 15

Circulation 8,200,000 Readership 17,400,000

%

introduction 03

04 innovative global campaigns

Nokia

“Sex and the City”

innovative global campaigns 05

Air Berlin

“The Curious Case of Benjamin Button”

Metro Motor

06 metro special products

Kenya’s Style

U.S. Presidential elections

metro special products 07

Metro Happy Day

Breast Cancer Awareness

Global Guest Editor James Blunt

08 ceo statement

Implementation of our strategy

I

ceo statement 09

10 ceo statement

“One of the imminent reactions when economies are under pressure is

simple: Cut cost-base.

Now.” Per Mikael Jensen

ceo statement 11

12 cfo statement

Preparing for a tough year ahead

D

cfo statement 13

14 cfo statement

“Even though the

economic climate has been difficult and the

outlook for 2009 is unclear, we believe that Metro

International will stand stronger in 2009.”

Anders Kronborg

cfo statement 15

Board of Directors

16 corporate governance

corporate governance 17

18 corporate governance

corporate governance 19

Executive Management

20 corporate governance