SanomaWSOY's net sales increased and its operating profit rose by 13%. Acquisitions and divestments had a net impact of FIM 116.9 million on net sales. The Boards proposal for dividend is EUR 1.81. The Group's key figures were as follows: ROI, 12.4% (12.3%); ROE, 9.3% (9.2%); EPS, FIM 12.68 (FIM 11.19); equity-to-assets ratio, 71.0% (69.6%); and net gearing, -24% (-40.3%). Growth during 2000 will be driven by new acquisitions and partnerships.

This release includes the same information as the Report of the Board of Directors.


- Outlook for 2000
- SanomaWSOY 1999
- Business environment
- Changes in corporate structure
- Net sales
- Consolidated result
- Balance sheet
- Financing
- Investments
- Administration
- Personnel
- Dividend policy
- Development projects
- Helsinki Media Group
- Sanoma Group
- WSOY Group
- Rautakirja Group
- Board authorisations
- Events after the financial period

Pro forma -tables
- Income statement (FIM)
- Income statement (EURO)
- Balance sheet (FIM)
- Balance sheet (EURO)
- Key indicators (FIM+EURO)
- Pro forma notes (FIM)
- Pro forma notes (EUR)
- Net sales by industry; whole year (FIM+EUR)
- Net sales by industry by 3,6,9 months (FIM)
- Net sales by industry by 3,6,9 months (EUR)
- Operating profit by industry; whole year (FIM+EUR)
- Operating profit by industry by 3,6,9 months (FIM)
- Operating profit by industry by 3,6,9 months (EUR)


The SanomaWSOY Group's consolidated net sales are projected to clearly exceed FIM 8 billion in 2000, while the Group's operating profit is expected to improve over 1999. SanomaWSOY's profit before extraordinary items is projected to remain at the 1999 level. In addition to organic growth, growth will also be sought through acquisitions and partnerships.

Net sales at Helsinki Media Group are projected to grow by over 10%, and the group's profit is expected to considerably improve. The single largest area of growth will be Channel Four Finland. Helsinki Media will focus on developing its magazine business both in Finland and internationally. In the electronic media area, the challenge will be to build market share and prepare for the start of digital TV operations and the digitalisation of the HTV cable network.

Sanoma Group's net sales are projected to grow by around 5%, and operating profit by slightly more. The group will focus on developing network services and the integrated management of its customer relationships. The continuing growth in the population of Greater Helsinki will provide a good foundation for further boosting Helsingin Sanomat's circulation. In respect of Sanoma's regional and local papers, the situation is relatively stable, both in terms of circulation and advertising. The situation on the printing market is also expected to be mainly unchanged, with price competition on the domestic market continuing to remain tough.

The decision taken in February 2000 to upgrade two of the printing machines at the Sanomala facility is part of a larger program designed to modernise Sanoma's entire production process. The investments in question will improve printing quality, cost efficiency, and productivity. They will also make it possible to increase four-colour printing in line with competitive needs.

Net sales at WSOY Group are expected to rise by around 6%, and the group's operating profit by a proportionally slightly higher figure, despite the exceptionally strong emphasis to be given during the year on publishing. A small amount of growth is expected in WSOY's bookshop sales. The major part of the group's growth, however, will be sought from book clubs, new media, and special publishing. CD-ROM production will be extended somewhat, and sales channels for these products expanded. Web publishing will be launched. The range of educational material in WSOY's offering will be expanded, and the importance of digital material will increase. Solutions making use of combinations of books, digital TV, and Web-based services will be an important focus of development work. Improving the profitability of calendar operations will also be an important challenge.

Net sales at Rautakirja Group are projected to rise by more than 6%, to nearly FIM 3.7 billion. Operating profit is expected to be at 1999 level. Growth in the retail sector is expected to continue, although at a slower pace than that seen in the mid-1990s. Private consumption is expected to grow by 4 - 4.5% and retail sales by 3 - 4%.

SanomaWSOY's Group-level development projects will see some major investments in 2000. Given the extent of these projects, they are expected to be reflected positively in the Group's result only in two to three year's time. The first part of the Group's virtual portal Internet project, for children and young people, will be opened in autumn 2000, and will contain content and services based around products specifically tailored to a young audience. The project plan calls for the full virtual portal service to be in operation in spring 2001.

A review of advertiser sentiment in Finland in January 2000 indicated that the majority of advertisers are likely to increase their advertising expenditure in 2000. The same review forecast that daily papers and magazines would retain their current positions. Television was projected to receive a share of the predicted increase in advertising spending. Growth projections for the Internet are strong, as expected, because of the low current level of advertising in this medium. The relative share of other marketing media is expected to continue to grow. The mobile phone text message market is projected to pass the FIM 1 billion mark in 2000.


The SanomaWSOY Group comprises the parent company, Sanoma-WSOY Oyj, and four independent subsidiary groups: Helsinki Media Company Oy, Sanoma Corporation, Werner Söderström Corporation, and Rautakirja Oyj.

Sanoma-WSOY Oyj was created on May 1, 1999 through the combination merger of Werner Söderström Corporation - WSOY, Helsinki Media Company Oy, Sanoma Corporation, and Oy Devarda Ab, which is a shareholder in the latter two companies. Three new subsidiary groups were created, largely reflecting previous business activities: Helsinki Media Company Oy (Helsinki Media), Sanoma Corporation (Sanoma), and Werner Söderström Corporation (WSOY). Rautakirja Oyj is an associate company of Sanoma and WSOY. Following the merger, Rautakirja Oyj became a 54.7%-owned subsidiary of the SanomaWSOY Group, and continues as an independent publicly quoted company.

Separate swap ratios were determined for all the relevant share series as part of the merger. A detailed analysis of these can be found under Shares and Shareholdings and at SanomaWSOY's Internet site.

This Report of the Board of Directors refers to SanomaWSOY's 12-month pro forma statement of accounts for 1999 and to comparative figures for 1998, which are shown in parentheses. The figures of subsidiary groups are also pro forma. The Group's official accounting year runs from May 1 to December 31, 1999.


Developments in the Finnish economy during 1999 continued to be favourable. Gross output rose by 3.5%, which was clearly slower than the 5% recorded during 1998.

The employment situation improved, although slowly. The retail and business services sectors showed the highest increase in job numbers. Preliminary data from Statistics Finland indicates that the annual average level of unemployment was 10.2%. True household purchasing power increased, and consumer expenditure rose by 4.6%. Consumer prices rose by an average of 1.2%; prices increased slowly, with the exception of the last few months of the year.

Consumer demand focused on consumer durables. The proportion of consumer income spent on mobile telephone charges and various other services continued to rise. Sales of other services rose by 7%, which was faster than the 4% growth seen in retail sales. As of the end of the year, 65% of Finns owned a mobile phone. Net sales from mobile telecommunications are projected to be 35% up on 1998, valuing the telecommunications business at FIM 10 billion at year-end. This compares to a projected FIM 23 billion increase in GNP as a whole. The growth in the use of text messaging was a particular contributor. The research company IDC estimates that 650 million text messages were sent in Finland during 1999.

Developments in the media market tend to follow general economic trends. The growth of media advertising, a major contributor to SanomaWSOY's income, slowed from the 11% recorded in 1998 to 5.6%. Growth in TV advertising in particular was modest, despite increased audience figures. Average daily viewing rose by 7.5% over 1998, to 161 minutes a day. Television's daily coverage of the population increased from 71% to 75%.

According to preliminary data from the research company Finnish Gallup Ad Facts Ltd., media advertising in Finland totalled FIM 6 billion in 1999. Of this figure, newspapers continued to account for the largest share, with 52%, while television occupied second place, with 22%. In advertising, the Internet grew the fastest, up 69%. Newspaper and magazine advertising income rose by some 6% over 1998. Excluding advertising related to the presidential election, this figure would have been less than 5%.

Home use of the Internet grew strongly during the year. Figures from MDC Gallup Web Ltd show that 1.2 million Finns (900,000) over the age of 15 accessed the Web from home between August and October.

Printing industry exports fell back by a quarter, or nearly FIM 500 million, between January and November. Exports to Russia for 1999 as a whole are expected to be below FIM 400 million (FIM 956 million). This drop in exports related in increase in competition on the domestic market.

Book publishing in Finland had a positive year, and the upward trend in bookshop sales continued. Bookshop sales increased by 9%, book club sales by 4%, and educational material sales by 2%.


A number of structural changes took place in SanomaWSOY Group companies during the year, complicating comparability between the figures for 1999 and 1998. A major part of the Group's real estate and investment portfolio remained a Parent Company asset as part of the merger, thereby changing the balance sheet structure and income of Group subsidiaries.

WSOY transferred its newspaper and magazine printing operations to Acta Print Oy, a 50/50 company owned in association with Kustannusosakeyhtiö Otava, in May 1998. In accordance with an agreement signed between the two owners, WSOY sold all its associated companies owned on a 50/50 basis with Otava to the latter in August 1998. The companies concerned were Yhtyneet Kuvalehdet Oy, Suuri Suomalainen Kirjakerho Oy, and Acta Print Oy. WSOY sold the businesses of its reproduction company, Kiviranta Oy, in August 1999.

Helsinki Media transferred all of its printing activities to a new associate company, Hansaprint Oy, in January 1999. In the same month, Helsinki Televisio Oy's audio-visual activities were transferred to WSOY's Tuotantotalo Werne Oy, which became a Helsinki Media subsidiary as part of the merger. In December, Helsinki Media sold a proportion of its shares in Suomen Urheilutelevio Oy to Veikkaus Oy(national lottery), Finnish Sports Federation, and Suomen Hippos ry, in accordance with a shareholder agreement. As a result, Helsinki Media's holding in the company dropped to 35%.

The Group acquired a number of new subsidiaries during the year. Sanoma increased its holding in Kymen Lehtimedia Oy, a publisher of regional and local papers, to 100% in the spring. Also in the spring, Sanoma subsidiary Startel Oy acquired all the shares of Esmerk Oy, a provider of news analyses and follow-up services. In May, WSOY acquired 80% of the shares of the digital printing house Tummavuoren Kirjapaino Oy, and the businesses of Mikkelin koulukanava (digital educational services) in November. Rautakirja's subsidiary Finnkino Oy acquired 90% of the shares of AS MPDE, an Estonian film distributor and cinema owner. Rautakirja acquired 80% of the shares of Veikkausrasti Oy, a retail gaming chain, in October.

The following became associated Group companies during the year under review: A-pressen ASA of Norway (Sanoma-WSOY Oyj holding: 27.5%); the Polish multimedia company Young Digital Poland (WSOY: 27.8%); and the licensing company Pro Licensing Nordic (Helsinki Media: 20%). Rautakirja's new associated companies were Jokerit HC Oyj (21.1%), Narvesen Baltija SIA, a Latvian company in the kiosk, retail cosmetics and coffee shop business (35.1%), and Kirjavälitys, a book logistics and wholesale company (20.1%).

In December, Startel Oy established a new company, Onbusiness Oy, in association with Oy Radiolinja Ab, a subsidiary of Helsinki Telephone Corporation (now Elisa Communications), with 60% of the company in Startel ownership. In the same month, Startel also set up a marketplace for shares in mutual funds known as Online Funds Oy, together with Evli Asset Management Ltd, Gyllenberg Funds Ltd, and Alfred Berg Rahastoyhtiö Oy (Alfred Berg funds), with 25% of the company in Startel ownership.

Helsinki Media acquired VBH Television Oy's 10.99% holding in Oy Ruutunelonen Ab in December, thereby raising its stake in the latter from 50.02% to 61.01%.


SanomaWSOY's net sales during 1999 rose by more than 5% to stand at FIM 7,851.7 million (FIM 7,442.6 million). Acquisitions and divestments had a net impact on the growth of net sales of FIM 116.9 million, which translates into a comparable year-on-year growth of net sales of some 4%.

Sanoma Corporation's new subsidiary, Kymen Lehtimedia Oy, with net sales of FIM 389.2 million, contributed the largest increase to the Group's net sales. Divestments reduced consolidated net sales by FIM 347.5 million compared to 1998.


SanomaWSOY's profit before extraordinary items rose by 13% over 1998, largely as a result of positive developments in asset management and totalled FIM 656.4 million (FIM 580.9 million). The Group's operating profit remained at 1998 levels, totalling FIM 426.2 million (FIM 423.5 million). The Group's restructuring had a positive impact of FIM 9 million on operating profit. Operating- and product-related development costs booked as expenses reduced the Group's operating profit by FIM 72.3 million.

The Group's return on investment was 12.4% (12.3 %), and its return on equity 9.3% (9.2%). The Group's earnings per share were FIM 12.68 (FIM 11.19).


The Group's balance sheet increased by slightly under FIM 500 million to FIM 7,866.9 million (FIM 7,370.4 million) at year-end. The Group's shareholders' equity totalled FIM 4,674.1 million (FIM 4,326.0 million), or FIM 135.15 per share (FIM 126.53). The Group's equity-to-assets ratio continued to strengthen, reaching 71.0% (69.6%). The Group's net gearing was -24.0% (-40.3%).


SanomaWSOY's financing position remains good. The book value of financial assets in the form of securities, monies, and bank receivables totalled FIM 1,909.8 million (FIM 2,574.9 million), and their market value FIM 2,750.1 million (FIM 2,880.0 million). Interest-bearing payables totalled FIM 619.7 million (FIM 596.4 million) as of the end of the year. Favourable development in the financial market and a growth in reinvested assets from business divestments contributed to an increase in financial income.


SanomaWSOY's gross investments during 1999 totalled FIM 1,663.1 million (FIM 883.9 million). Over half of these were associated with Sanoma projects, such as the new Sanoma House in Helsinki completed in the autumn, and purchases of shares in Kymen Lehtimedia and other companies in Sanoma's field of business. Sanoma also invested in modernising mailing equipment at the Sanomala and Varkaus printing plants, and extending four-colour printing capabilities at the Forssa unit. Modernised equipment at Varkaus was commissioned in autumn 1999. Modernisation work at Forssa will be completed in autumn 2000, and at Sanomala in 2001.

The Group also focused on acquiring shares in companies in its various areas of businesses and on normal replacement investments related to fixed assets. In July, SanomaWSOY increased its holding in A-pressen ASA of Norway to 27.5%.

A list of the Group's major investments can be found in the Notes to the Accounts. A total of FIM 58.7 million was generated by sales of fixed assets; and FIM 72.3 million was booked as direct expenditure related to development projects.


SanomaWSOY's Board of Directors comprises Aatos Erkko (Chairman), Esko Koivusalo (Vice Chairman), Jane Erkko, Marjukka af Heurlin, Paavo Hohti, L.J. Jouhki, Kyösti Järvinen, Robin Langenskiöld, Rafaela Seppälä, Jaakko Rauramo, and Antero Siljola.

President and CEO Jaakko Rauramo serves as Chairman of the Group's Management Group, and Antero Siljola as Vice Chairman. The Management Group's other members are Aarno Heinonen, Nils Ittonen, Tapio Kallioja, Seppo Kievari, Kerstin Rinne, and Hannu Syrjänen.

The Company's auditors are Pekka Nikula, APA, and Authorised Public Accountants SVH Pricewaterhouse Coopers Ltd., Tauno Haataja, APA, as responsible auditor.


The number of personnel in salaried employment in Group companies totalled an average of 12,629 (11,900) in 1999. Translated into full-time equivalent positions, the average number of personnel totalled 9,816 (9,329). Salaries and wages paid totalled FIM 1,604.4 million (FIM 1,510.1 million), including bonuses. Profit sharing sums totalling FIM 31.7 million (FIM 23.9 million) were paid to Sanoma's and Helsinki Media's Personnel Funds.


SanomaWSOY pursues an active dividend policy, based on the principle of distributing at least one-third of the Group's profit for the year in the form of a dividend.

Under the shareholder agreement made at the time of the merger, the Company's main shareholders have agreed to propose and support a policy under which a dividend at least equal to WSOY's dividend for 1997, FIM 5.25, increased by 10% annually, and in addition to that an average of FIM 5 per share, will be distributed for the first three years of the Company's existence (1999 - 2001). In practice, this will mean a dividend of at least FIM 10 - 11 (EUR 1.68 - 1.86) per share for each of the years in question.


SanomaWSOY operates in virtually all areas of modern communications. In addition to being a provider of traditional, established media products and services, SanomaWSOY is also Finland's leading developer of new media. Development activities are an integral part of all the Group's businesses, while the Parent Company's Development Unit coordinates major, Group-wide development projects, including the virtual portal (Lumeveräjä) Internet project, projects related to mobile portal (WAP), and digital cable TV and Internet activities, as well as integrating customer management systems.

The virtual portal Internet project, announced in October 1999, is designed to standardise all the technical environments of the Group's Internet services in terms of systems for content production, customer management advertising, and marketplace management. This will enable SanomaWSOY to serve its advertising and consumer customers more efficiently. As of the end of 1999, the Group's 20 publicly measurable Internet sites received over 600,000 hits a week.

The Group's Internet projects also include Onbusiness Oy, a company set up by Startel and Radiolinja to provide business information services for mobile telephone network users, including WAP-based phones, and fixed-line Internet network users. Online Funds Oy, set up by Startel and three finance companies, offers an electronic marketplace for trading in mutual funds on the Internet.

The Council of State awarded Channel Four Finland a digital TV operating license on June 23, 1999, and digital licenses for a movie channel to Helsinki Media and an educational channel to WSOY. A similar license was also awarded to Helsinki Media's associated company, Suomen Urheilutelevisio Oy. The holders of the licenses, which are valid for 10 years, have agreed to start full digital services on August 27, 2001.

A significant input in the Group's joint customer management system project was made in 1999, and the first part of the project is due to be completed in autumn 2000. The goal of the project is to create an extensive integrated system over the next couple of years. After individual customer systems have been integrated into a single, joint database, it will be possible to update address and contact information on a centralised basis, thereby offering advertising customers a significant measure of added value.


Helsinki Media recorded net sales of FIM 1,214.2 million during 1999 (FIM 1,226.8 million). Net sales were reduced by FIM 181.9 million as a result of restructuring, which saw printing operations, for example, transferred to a new associated company, Hansaprint Oy, at the start of the year.

Helsinki Media recorded an operating profit of FIM -79.8 million (FIM -63.8 million), slightly better than the comparable figure for 1998. Profit performance was impacted by heavy investments in five new titles, a book club, and developing Channel Four Finland's programming. Net sales at Channel Four grew faster than market growth, and market share rose in line with expectations. Profit performance was also negatively impacted by the slow growth of TV advertising and a substantial increase in operating license fee. The increase in Channel Four's net sales, together with changes in the fee basis, raised the licence fee from FIM 12.6 million to FIM 40.8 million.

Helsinki Media's investments totalled FIM 219.4 million and were mainly focused on restructuring.


Net sales at Sanoma Group rose as a result of various developments, including the acquisition of all the shares in Kymen Lehtimedia, to FIM 2,563.6 million (FIM 2,075.9 million). Restructuring accounted for FIM 403.5 million of the increase in net sales, and growth compared to 1998 was 23.5%. Sanoma's operating profit was FIM 285.8 million (FIM 234.2 million). As a result of restructuring it increased by FIM 31.2 million.

Investments totalled FIM 844.4 million. Shares in a number of companies were acquired during the year. In addition to Kymen Lehtimedia, Esmerk Oy became a wholly owned subsidiary. Arnedo Oy, a 60%-owned Sanoma Corporation subsidiary, acquired an approximately 34% holding in Ilkka-Yhtymä Oyj and 9% of votes. This move was made to promote cooperation between newspaper companies in Central Finland, which, as it progresses, will see Sanoma reduce its holding in Arnedo.

In addition to acquisitions, Sanoma's largest investment was the Sanoma House in Helsinki, which has been home to Helsingin Sanomat, Ilta-Sanomat, Taloussanomat, and Sanoma Corporation's management since autumn 1999. The building's official opening was held on November 16, the 110th anniversary of the newspaper Päivälehti-Helsingin Sanomat.


Net sales at WSOY Group totalled FIM 1,151.7 million (FIM 1,248.7 million), and the group's operating profit FIM 128.3 million (FIM 210.0 million). The drop in both net sales and operating profit was largely the result of restructuring, which reduced net sales by FIM 95.2 million and operating profit by FIM 77.6 million compared to 1998. The profitability of WSOY's calendar operations also weakened.

Sales of WSOY's publications followed general market trends. WSOY's retail sales rose by 8.2%, book club sales by 6.4%, and educational material sales by 2%. No significant changes took place in fiction, non-fiction, and educational material market shares.

Following the granted digital TV operating license decision for an educational channel, WSOY has carried out extensive studies on learning-related issues, particularly in the area of learning in a digital environment.

WSOY announced in November 1999 that it would spin off its book printing operations into a separate company. A separate industry was created covering the WSOY Book Printing Division, Lönnberg Painot Oy, and Tummavuoren Kirjapaino Oy. Parallel to this, a separate industry was created for calendar operations.

WSOY's investments totalled FIM 125 million, and mainly took the form of replacement investments. Investments in the group's book club, new media, and map businesses impacted WSOY's operating profit for the year. Calendar operations turned in a loss as a result of unsatisfactory performance at the group's Norwegian subsidiary. Corrective actions to improve the situation in Norway have been initiated.


Total pre-tax sales at Rautakirja during 1999 totalled FIM 5.9 billion (FIM 5.8 billion), an increase of 1.5% over 1998. Restructuring had a net negative impact of FIM -23.2 million on net sales. Net sales totalled FIM 3,478.3 million (FIM 3,422.9 million). Operating profit totalled FIM 198.5 million (FIM 182.8 million), an 8.6% improvement on 1998. Higher sales towards the end of the year, good Christmas sales, and cost savings contributed to the improved result. Rautakirja's profit before extraordinary items, FIM 221.1 million (FIM 204.0 million), was the group's best ever.

Various acquisitions and investments in developing the group's cinema chain raised Rautakirja's total investments to FIM 428.6 million. Rautakirja expanded operations into the Baltic region and into new areas supporting its Finnish operations. In addition to new associated companies, Rautakirja also acquired a 10% holding in the Norwegian publicly quoted company, Narvesen ASA.

Rautakirja Oyj published its own year-end statement on March 3, 2000.


As of the end of the year, the SanomaWSOY Board of Directors did not have any authorisation to acquire or surrender Company shares, make share issues, or issue convertible bonds or bonds with warrants.


WSOY founded Finland's first Internet-only book club, Bookmark, in January. The new club has received a positive response from consumers.

In February, the Board of Directors of SanomaWSOY decided to replace two printing machines at the Sanomala unit. The total value of this investment, including ancillary equipment, will be FIM 456 million.

The operations of the WSOY Book Printing Division will be transferred as of April 1, 2000 to a new company, WS Bookwell Oy.

SanomaWSOY is widening the distribution of its services developed for Internet applications to mobile networks. A new company has been established to create an open mobile portal, and is due to submit an operating notification to the Ministry of Transport and Communications in March. The first version of the portal is expected to be ready for trial operation in summer 2000.

Board of Directors

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