new relevant, innovative products that readers will find appealing. • Harlequin successfully launched three new innovative imprints – HQN, LUNA and Steeple Hill Café – as well as an exciting new series, Silhouette Bombshell. • Harlequin increased the number of books published in hardcover and trade paperback by 60 per cent over 2003, from 65 to 104 titles.  • Harlequin also successfully tested a new Direct-To- Consumer program focusing on the large print niche.  • Harlequin will launch a number of product initiatives in 2005, including: Next, a new contemporary women’s fiction series; Love Inspired Suspense; the addition of two new titles each month to the Blaze series; and the development of an African American romance imprint. Harlequin continually reviews its product mix and discontinues underperforming lines. • Harlequin will focus on expanding beyond the mass-market paperback format into more hardcover and trade paperback titles in 2005.  4. Investing in its brands Harlequin excels in developing publishing and promoting both imprint and author brands.  • Harlequin spent close to $25 million on retail advertising and promotion to support its brands and authors, creating more than 750 million media impressions.  • Harlequin will invest significantly more in promoting and developing Harlequin’s brands and authors, including advertising promotion and sampling efforts.  • Harlequin also plans to place more emphasis on breakout, bestseller editorial. Unlike most other publishers, Harlequin leverages both the direct-to-consumer and Overseas channels in addition to North American Retail to drive sales. Harlequin is continuously improving and expanding its channels to sell more books to more women. • Harlequin launched new single title businesses in  France and Holland, which gives Harlequin an entry into the bookstore channel in those markets. • Harlequin has aggressive plans to broaden its distribution into the bookstore channel around the world.  • The company plans to expand geographically through the launch of a new business in Brazil in partnership with the second largest consumer trade publisher in Brazil. • Harlequin also plans to enhance e-commerce distribution through eHarlequin and other online channels. Harlequin has industry leading profit margins reflecting its efforts to produce high quality books efficiently and ensure a cost-conscious organization.  • Harlequin focused on organizational effectiveness as a goal and reduced its cost base during 2004 by $2.8 million in payroll and other costs. • Harlequin plans to maintain its excellent cost management practices in all areas of the business. Harlequin believes it is critical to identify and explore high-growth niches in consumer book publishing that will position the company well for the future. • Harlequin began exploring potential high-growth niches to expand into through both organic start-ups and acquisitions.  • Through increased corporate development efforts, Harlequin will focus on identifying new product, demographic, and format niches as well as geographic expansion opportunities.  Harlequin’s focus on the women’s fiction segment positions it in one of the most resilient book publishing categories, as women buy more books than men. Furthermore, Harlequin will focus on other high-growth niches in publishing. 2005 will be a year of investing in the Harlequin business to further its long-term strategy of being a leading global publisher of women’s fiction and building the long-term health and growth of the franchise. 2004 Accomplishments 2005 Initiatives 2005 Initiatives 6. Managing and reducing costs 2004 Accomplishments 2005 Initiatives 7. Expanding into high-growth niches 2004 Accomplishments  2004 Accomplishments 2005 Initiatives 2005 Initiatives Future outlook  5. Broadening and enhancing its channels 2004 Accomplishments 16 TORSTAR 2004