Left to Right: E.T. Meredith III - Chairman of the Executive Committee
of the Board of Directors; Jack D. Rehm - Chairman of the Board;
William T. Kerr - President and Chief Executive Officer

To Our Shareholders:
We are delighted to report that fiscal 1997 marked our fourth consecutive year of record earnings from continuing operations. The performance of all three of our business segments - publishing, broadcasting and real estate - fueled a 34 percent year-over-year increase in earnings per share before special items. Our comparable earnings of $67.6 million, or $1.22 per share, on revenues of $855.2 million, were driven by our Publishing and Broadcasting groups, which reported their highest operating profits ever. Our Real Estate Group its second most profitable year on record.

Our earnings before interest, taxes, depreciation and amortization (EBITDA) reflect our outstanding year. EBITDA grew 12 percent from $122.6 million in fiscal 1996 to $137.7 million in fiscal 1997.

Our year-end return on equity (ROE) grew from 19.6 percent in fiscal 1996 to 20.7 percent this year. By contrast, in fiscal 1994 our ROE was 8.9 percent.

Revenues declined by 1 percent in fiscal 1997, reflecting actions taken during the prior year that helped form a more profitable company. These steps included reducing the rate base at Ladies Home Journal magazine, selling our book clubs, closing two smaller magazines and reducing the number of issues published by Country America magazine. Excluding their impact, comparable revenues grew 4 percent over fiscal 1996.

Strateg ic Focus
As shown on the cover of the annual report, our clear focus on three key strategies has been instrumental in our ongoing success. These strategies include:

• Further developing our fundamental commitment to home and family publishing;

• Increasing our involvement in television broadcasting;

• Developing new revenue and profit streams consistent with our home and family heritage.

Key Developments
A number of recent developments emphasize the importance of our commitment to these strategies for growth. In January, we agreed to acquire four broadcast television stations from First Media Television, L.P.:

• KPDX-TV (FOX) in Portland, Ore.;

• WHNS-TV (FOX) in Greenville, S.C.;

• KFXO-LP (FOX) in Bend, Ore.;

• WCPX-TV (CBS) in Orlando, Fla.

We closed on the purchase of KDPX, WHNS and KFXO on July 1, 1997. Because we owned WOFL-TV in Orlando when we agreed to purchase WCPX in the same market, Federal Communications Commission regulations required us to dispose of one of the stations. We subsequently exchanged WCPX for Post-Newsweek's CBS affiliate, WFSB-TV in Hartford/New Haven, Conn. We also received $60 million in cash as part of the trade. With this transaction, which closed on September 4, 1997, the purchase price for our four new stations totaled $375 million, or approximately 10 times their estimated fiscal 1998 broadcasting cash flow.

These acquisitions enhance our geographic diversity by adding strong markets to our group. Our reach has increased as well - from nearly 5 percent to approximately 8 percent of U.S. television households.

We currently expect these acquisitions to dilute earnings per share by 8 to 10 cents in fiscal 1998. We anticipate little to no dilution in fiscal 1999 and believe there will be additive to earnings per share in fiscal 2000. We entered into a credit agreement to finance the acquisitions. As of September 4, our debt under this agreement totaled $270 million at an effective annual borrowing cost of 6.75 percent.

In our Publishing Group, Better Homes and Gardens and Ladies Home Journal magazines continued to lead the competitive women's service field in ad revenue market share. Their combined share for the fiscal year ending June 30, 1997, reached its highest level ever at 38.3 percent.

Better Homes and Gardens magazine, our largest profit center, recorded a 36 percent year-over-year operating profit increase. Since its launch 75 years ago, it has been the foundation for many new products and services, including our array of Better Homes and Gardens Special Interest Publications sold primarily at newsstands, books carrying the Better Homes and Gardens name, licensing relationships, new media products, custom publishing activities, and the Better Homes and Gardens Real Estate Service. We also have created Traditional Home, Country Home and WOOD magazines along with several craft titles, under the Better Homes and Gardens name. For every dollar of revenue produced by Better Homes and Gardens magazines today, another 90 cents is generated by products and services formed under its umbrella.

The latest start-up under the Better Homes and Gardens name is Family Money magazine, a quarterly publication launched in August 1997. It provides financial advice specifically for families, which differentiates it from existing personal finance publications. We're also testing reader and advertiser acceptance of a new magazine, more, which appeared on newsstands in April 1997. Developed by the editors of Ladies' Home Journal magazine, it provides beauty, fashion, health and lifestyle information on women over 45. Our Publishing Group growth objectives include the launch or rollout of one or two new magazines per year.

We've begun to explore network television programming based on our magazine franchises. The Better Homes and Gardens television show, which made its debut in September 1997, features the expert home and family content our readers rely on. A 30-minute program, it reached more than 90 percent of U.S. television households every week.

Ladies' Home Journal magazine is also developing television programming. In December 1996 we aired Ladies' Home Journal Most Fascinating Women on CBS. Sponsored by Bristol-Meyers Squibb, it achieved strong ratings. We're planning another television special later this year. Such programming strengthens our brand recognition and provides new sources of revenue.

As part of our strategy to generate new revenue and profit streams, we've formed partnerships with many of the country's most respected marketers. We began producing a bi-monthly magazine for Lutheran Brotherhood this year, we're creating a series of targeted magazines for Nestlé and we continue to expand our relationship with The Home Depot. In addition to creating books and other joint projects, we are involved in managing the in-store magazine and book displays for a significant portion of Home Depot stores in North America. Also in fiscal 1997, we entered into an agreement to produce and market Ortho retail books.

Consumers enjoy even broader access to our products and services through Meredith New Media. Our publishing, broadcasting, and real estate operations are represented on the Internet. You'll find their online addresses on page 50 of Meredith Corporation's Annual Report. In addition, we created nine new CD-ROM products during fiscal 1997.

We've streamlined our company over the last several years in order to concentrate more fully on our three key growth strategies. As part of this process, we exited the cable business in October 1996 by selling our interest in a Minneapolis/St. Paul area system. We recorded a net gain of $27.7 million, or 50 cents per share, on the sale.

On November 11, 1996, our board re-elected Jack D. Rehm, formerly chairman and chief executive officer. The changes took effect January 1, 1997.

Shareholder Value
Our stock price grew 39 percent for the fiscal year, from $20.87 on June 30, 1996, to $29.00 on June 30, 1997. These prices have been adjusted to reflect a March 1997 two-for-one stock split in the form of a stock dividend, approved by our board of directors in February. At the same meeting, our board increased the quarterly cash dividend by 18 percent, resulting in a current annualized dividend rate of 26 cents per share. We repurchased 1.2 million shares in fiscal 1997. We plan to continue our buyback program, as we believe our stock is under valued.

Other Developments