Iervolino & Lady Bacardi Entertainment S p A : Group Consolidated Annual Financial Report 2021

Iervolino & Lady Bacardi Entertainment Group Consolidated Annual Financial Report as at 31 December 2021

Parent Company: IERVOLINO & LADY BACARDI ENTERTAINMENT S.P.A.

Registered Office: Via Barberini n. 29 - 00187 - ROME

Registered in the Register of Companies of: ROME Fiscal code and VAT number: 11,636,381,003 Registered at the R.E.A. of ROME no. RM-1318599 Subscribed capital Euro: 1,400,644.00 fully paid up 1

ILBE GROUP MANAGEMENT REPORT FOR THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 31

DECEMBER 2021

1.

Introduction

• 2. The macroeconomic context and the 'Media & Entertainment' reference industry

• 3. The ILBE Group's business model

• 4. Activities carried out in 2021

• 5. Backlog and projects in development

• 6. Summary data and alternative performance indicators (APIs)

• 7. Transactions with related parties

• 8. Human Resources

• 9. Research and development

• 10. Disclosure of principal risks and uncertainties

• 11. Issue of a bond for Euro 10,000,000

• 12. Significant events occurring after the end of the financial year

• 13. Management Outlook

CONSOLIDATED FINANCIAL STATEMENTS AT 31 December 2021

Statement of the consolidated financial position

Consolidated statement of comprehensive income for the year

Consolidated statement of changes in shareholder's equity

Consolidated cash flow statement

• 1. Company information

• 2. Main accounting principles

• 3. Main changes in the scope of consolidation

• 4. Operating sectors: Disclosure

• 5. Notes to the accounts

REPORT OF THE AUDITORS EY SPA

ILBE GROUP MANAGEMENT REPORT FOR THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2021

1. Introduction

The consolidated financial statements as at 31 December 2021 of the Iervolino & Lady Bacardi Entertainment Group (hereinafter also referred to as the ILBE Group or the Group) represent the second consolidated financial statements and include the parent company Iervolino & Lady Bacardi Entertainment S.p.A. (formerly Iervolino Entertainment S.p.A.) and the investments in Arte Video S.r.l., Arte Video Llc, R.E.D. Carpet S.r.l., Wepost (formerly IExchange) S.r.l. and Iervolino Studios d.o.o. with a minimal change (Arte Video Llc) compared to last year.

Following the shareholders' meeting resolution of June 23rd, the Parent Company changed the company name to 'Iervolino & Lady Bacardi Entertainment S.p.A.', abbreviated to 'ILBE S.p.A. 'to focus more attention on foreign markets. Within this framework, the decision was made to include the name of Lady Monika Bacardi, an important international name: a woman entrepreneur, our largest shareholder and producer of all our projects, who has always believed strongly in the Company and the Group.

This was followed by a real rebranding process, which saw the birth of a new logo inspired by the structural elements of the film reel: a harmonious system of letters, of geometries that dialogue by means of joints and links, to evoke the connection, the union, the compactness of ideas, of people, of society.

ILBE's revamped brand expresses both the plurality and dynamism of the international company: the brand has been designed in a 'reassuring' cage that makes the graphics stable and solid but at the same time dynamic through the changing content.

The consolidated financial statements for the year ended 31 December 2021 closed with total revenue of Euro 152,319 thousand, an increase of Euro 31,584 thousand compared to 2020 (+26%).

EBIT for the 2021 financial year, before certain non-recurring expenses of Euro 941 thousand, was Euro 24,443 thousand, up Euro 1,662 thousand compared to the same period in 2020 (+7%).

These brilliant results are the result of the strategic choices of:

(i) (ii)Investing in quality Intellectual Properties; essentially international market choice and, predominantly, aimed at a streaming audience;

(iii) (iv)

Prioritise growth and value creation over time over short-term profitability; Investment and growth in the context of financial balance.

The success of the 'Actic-Friends' and 'Puffins' collections on Apple TV and Amazon Prime Video in terms of audience ratings confirms the validity of the choices made. Recently, there has also been an agreement for the sale of programming rights for the animated series'Puffins' with

KidsMe, the Children Content Factory Gruppo De Agostini Editore, specialised in the development, production and distribution of Italian and European content dedicated to the Kids and Family target audience.

On the other hand, the effects of the Covid-19 pandemic were limited and essentially referred to (i) an increase in non-recurring charges for production in 'smart-working' mode equal to approximately 941 thousand of the 2021 financial year (741 thousand in the 2020 financial year) (ii) a cascade postponement of the production of films and (iii) of the related deliveries, to which the Group responded as from the financial year 2020 by bringing forward certain productions of the web series 'Actic-Friends' and 'Puffins' and revising the financial plans.

2. The macroeconomic context and the 'Media & Entertainment' reference industry

Some preliminary considerations on future market trends related to the evolution of the COVID-19 Pandemic

The restriction and subsequent relaxation of certain activities of daily life adopted by governments in most countries to contain the pandemic have led to changes in the behaviour, activities and desires of the community, some of which are probably destined to last because they are the result of an acceleration of dynamics that were already in progress.

Therefore, we are talking about those trends that, unlike momentary ones, foreshadow the future. Among those most analysed by scholars and experts, although it must be said that these dynamics are still developing and not consolidated, it is worth mentioning the following:

• ✓ the new frontiers of healthcare;

• ✓ the mentality of the new generations;

• ✓ the centrality of the ESG (Environmental, Social and Governance) factor.

The new frontiers of healthcare are likely to be shaped by a regulatory reorganisation of risk protection and risk-taking. Regulations along these lines could give a boost to the development of new drugs, but also genomics and precision medicine. In contrast, new rules aimed at risk protection could drive new technologies capable of ensuring greater preparedness for health systems.

The new generation's mindset is to adopt an online approach in all fields, from e-commerce to entertainment and e-learning. Here again, it is reasonable to think that we are in the presence of a trend projected well beyond the pandemic and that, from an investor's point of view, will reward companies with a solid digital footprint.

Finally, the commitment and consideration of environmental, social and governance aspects to promote a more sustainable society and economy are at the top of the agendas of global society and economy actors.

The importance of these factors can be found in the ever-increasing importance of non-financial sustainability reporting (the so-called social report), which, together with an adequate communication policy in compliance with the principle of accountability, constitutes an irreplaceable means of corporate characterisation that is recognised globally.

The macroeconomic and market context: an industry undergoing global restructuring

The year 2021 presented itself for media and entertainment market players with a landscape permanently changed by the pandemic. Consumers have adopted new habits and preferences,